Bank of Portugal keeps growth view, lifts inflation outlook

Portugal’s central bank kept its 2026 economic growth forecast at 1.8% in its June bulletin, but raised its inflation estimate to 3.1%, as the war in Iran adds uncertainty to the outlook. The update points to higher price pressures in Portugal even as the economy remains relatively resilient.

Bank of Portugal also published three alternative scenarios alongside its base case. In the most severe scenario, GDP growth would slow to 1.6% in 2026, while inflation would rise to 3.8%. The central bank still sees growth at 1.6% in 2027 and 1.8% in 2028 in its base case, and said domestic demand and exports for 2026 were revised up from its March projections.

The inflation revision largely reflects higher oil prices linked to the conflict in Iran, according to the central bank. Governor Álvaro Santos Pereira said the economy “continues to be quite resilient to all the shocks that have happened” but that inflation was revised higher because of growing price pressures in energy goods and services.

Under the adverse scenario, annual GDP growth would be 0.1 percentage points lower in 2026, 0.2 points lower in 2027 and 0.1 points lower in 2028 than in the base case. Inflation would run 0.2 points above the base case in 2026, 0.6 points in 2027 and 0.4 points in 2028. In the moderate scenario, the bank said growth would remain very close to its June forecast, with slightly lower inflation over the projection horizon.

Originally published at Eco.pt