In the report accompanying the proposed State Budget for 2026 (OE2026) submitted to Parliament, the Government projects that the economy will grow by 2% this year and 2.3% in 2026.
This year’s forecast marks a downward revision from the executive’s previous estimates. In the 2025 State Budget, the Government had forecasted a growth of 2.1%, which was later revised to 2.4% in the report submitted to Brussels in April.
The Government details in the OE2026 report that “for the year 2025, the Ministry of Finance’s estimate for GDP growth is near the upper limit of the range of estimates by other institutions, matching the forecast of the International Monetary Fund.”
Indeed, both the Government and the IMF estimate a 2% growth for this year, although it is noteworthy that the institution led by Kristalina Georgieva will release an update of the World Economic Outlook on October 14th.
Meanwhile, the Bank of Portugal, the Public Finance Council, and the OECD all estimate a 1.9% growth for this year, whereas the European Commission projects a GDP growth of 1.8%.
And for the next year?
For 2026, “the forecast of 2.3% is 0.1 percentage points above the upper limit,” the Government admits in the OE2026 report.
This makes it the most optimistic, followed by the Bank of Portugal and the European Commission, which forecast a growth of 2.2%. The OECD estimates 1.9%, the Public Finance Council 1.8%, and the IMF 1.7%.
The Finance team explains that forecasts for components related to external demand are within the limits of other institutions, demonstrating “a more cautious position amid high uncertainty, marked by trade and geopolitical tensions.”
However, in terms of domestic demand, particularly private and public consumption, there are more deviations in the projections, thus providing more impetus to the economy in the Government’s calculations.
“These differences are justified by the policy measures already adopted, such as the reduction of personal income tax and the extraordinary pension supplement, which should stimulate private consumption as early as 2025, alongside other measures in the 2026 State Budget that most other institutions have not yet incorporated,” the executive points out.
In the labor market, the Government holds “a more optimistic stance regarding the economy’s development, bolstered by the latest labor market indicators, which indicate continued high resilience with ongoing job creation.”
The Government submitted the OE2026 to Parliament today, one day before the deadline and three days before Sunday’s municipal elections.
The executive aims to achieve surpluses of 0.3% of GDP in 2025 and 0.1% in 2026. Regarding the debt ratio, it estimates a reduction to 90.2% of GDP in 2025 and 87.8% in 2026.
The proposal will be discussed and voted on in general terms between October 27 and 28. The final overall vote is scheduled for November 27, following the specialized debate process.
