Bank of Portugal worsens 2026 deficit forecast to 1.3%
In its December, the central bank had forecast a deficit of 0.1% of GDP this year, a forecast it maintains, but now worsens the outlook for the 2026 budget balance from 1% to 1.3%.
The Bank of Portugal (BdP) continues to predict a return to negative budget balances this year, having worsened its deficit forecast for 2026 to 1.3% of Gross Domestic Product (GDP), according to the Economic Bulletin released on Friday.
In its December bulletin, the last to include budget projections, the central bank had forecast a deficit of 0.1% of GDP this year, a forecast it maintains, but now worsens the outlook for the 2026 budget balance from 1% to 1.3%.
For 2027, the central bank’s outlook remains a budget deficit of 0.9%.
The BdP justifies these projections with the “pro-cyclical expansionary policies” that are being implemented.
The government, meanwhile, expects a surplus of 0.3% of GDP, according to forecasts included in the State Budget for 2025 and confirmed in the Annual Progress Report submitted to the European Commission.
The body also has projections for the public debt ratio, which should continue to decline over the projection horizon, from 94.9% in 2024 to 85.8% in 2027, albeit at a slower pace than in recent years.
In its June Economic Bulletin, the institution led by Mário Centeno warned that “although Portugal’s position remains favourable in the context of the euro, it is essential to contain fiscal deterioration, ensuring compliance with European fiscal rules”.
“High public debt remains a vulnerability,” warned the BdP, saying that “Portugal will have to maintain a path of sustained debt reduction, bearing in mind the structural challenges that will continue to mark the near future: public investment, especially in the areas of climate transition, digitalisation and defence, and the budgetary consequences associated with the ageing population”.