Bank of Portugal lifts 2026 and 2027 growth forecasts

Portugal’s central bank has raised its growth forecasts for the next two years, projecting GDP expansion of 2.3% in 2026 and 1.8% in 2027, according to its October Economic Bulletin published on Wednesday. The new 2026 forecast is above the Portuguese government’s 2% estimate and points to stronger near-term domestic demand.

Banco de Portugal said the new projections represent an upward revision of 0.5 percentage points for 2026 and 0.2 points for 2027 compared with its June bulletin. It said this year’s stronger outlook is mainly driven by the rollout of funds under Portugal’s Recovery and Resilience Plan, as well as recently announced budget measures, including an extraordinary pension supplement and a cut in personal income tax.

The central bank also expects private consumption to show “stronger momentum” at the end of this year and in early 2027, while exports should perform better after a loss of market share in 2025. It forecasts investment growth of 5.6% in 2026, slowing to 1% in 2027 before recovering to 3.3% in 2028, with public investment rising 24.3% in 2026 as Recovery and Resilience Plan spending is concentrated around the completion of milestones and targets.

At the same time, Banco de Portugal warned that the international backdrop remains affected by the energy shock linked to the conflict in the Middle East, which has pushed up energy commodity prices, increased geopolitical uncertainty and worsened financial conditions. It said risks to the outlook remain tilted to weaker activity and higher inflation, especially if the conflict intensifies or lasts longer.

Originally published at Eco.pt