IMF Executive Board Concludes 2026 Article IV Consultation with Portugal

IMF News, June 24, 2026

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The Executive Board concluded the Article IV consultation with Portugal and commended Portugal’s strong economic performance, with growth above the euro area average and inflation declining toward target.
The baseline outlook is favorable but growth is expected to moderate and significant risks—mostly from an uncertain external environment, population aging, and low productivity growth—could push growth further down and inflation up.
Directors called for policies and reforms to strengthen resilience and enhance productivity and potential growth.

After a remarkable post-pandemic recovery, Portugal’s economy has been growing strongly, faster than the euro area average.
The budget recorded a surplus for the third consecutive year in 2025, bringing public debt just below 90 percent of GDP, down from the 2020 peak of 134 percent of GDP.
Inflation has declined and is close to target, though volatile.
Despite weak external demand, strong tourism inflows supported a current account surplus.
Banking system stability indicators improved further and systemic risks remain moderate.

Fiscal policy should continue focusing on debt reduction while reorienting public spending toward higher investment.
Efforts should rely on tax reform, improved efficiency of spending, and measures to contain spending pressures from aging.
Directors underscored the importance of additional measures to ensure broadly balanced fiscal positions, while prioritizing public investment.
In 2026, significant EU funds inflows could compound the inflationary impact of higher energy prices and may require tightening fiscal policy.
The fuel excise tax reduction implemented in response to the energy shock should be replaced by targeted support to lower-income households and viable firms under strain in energy-intensive sectors.
Directors encouraged further saving measures to achieve medium-term targets, including reducing tax expenditures, increasing spending efficiency, and further reforming the pension system.

Directors welcomed that the banking sector is resilient to severe adverse macro-financial conditions.
Importance of preserving financial sector stability and resilience by strengthening the financial policy framework, in line with FSAP recommendations.
Given sizable exposures, Directors urged vigilance on housing-market risks and sovereign exposure.
Reducing real-estate market imbalances will require supply-side measures, while reversing misdirected demand-support measures.
Directors welcomed the introduction of a positive neutral countercyclical capital buffer and saw merit in further strengthening the macroprudential toolkit.
Emphasis on developing the financial sector beyond banks to expand savings and investment channels; fostering the growth of the NBFI sector is key.
Closely monitoring the real estate market and reinforcing the macroprudential policy toolkit were highlighted as priorities.

Higher medium-term growth requires productivity-enhancing reforms, including measures to support innovation and firm growth.
Suggested reforms include streamlined bureaucracy, product and labor market reforms, and continued improvement in education.
Need to reduce skill mismatches, prepare for AI diffusion, and increase labor market flexibility to improve resource allocation.
Working with EU partners, Portugal stands to gain from a deeper common market, the savings and investment union, and greater energy market integration.

Real GDP: 2024: 2.2; 2025: 1.9; 2026: 1.7; 2027: 1.6; 2028: 1.8
Private consumption: 2024: 3.0; 2025: 3.5; 2026: 2.1
Public consumption: 2024: 1.5; 2025: 2.0; 2026: 0.0; 2027: 0.1
Gross fixed investment: 2024: 4.3; 2025: 8.1; 2026: -2.5; 2027: 2.3
Exports: 2024: 3.2; 2025: 0.4; 2026: 1.0; 2027: 3.8
Imports: 2024: 4.7; 2025: 4.2; 2026: 4.0
Contribution to Growth — Total domestic demand: 2024: 2.9; 2025: 3.7; 2026: 0.8
Contribution to Growth — Foreign balance: 2024: -0.7; 2025: -1.8; 2026: -1.5; 2027: -0.1
Resource utilization — Employment: 2024: 1.3; 2025: 0.9
Unemployment rate (percent, average): 2024: 6.5; 2025: 6.0; 2026: 5.9; 2027: 5.8
Prices — GDP deflator: 2024: 4.9; 2025: 3.9; 2026: 2.4
Prices — Consumer prices (HICP, average): 2024: 2.7; 2025: 3.4
Fiscal indicators (percent of GDP) — General government balance: 2024: 0.6; 2025: 0.7; 2026: -0.2
Fiscal indicators (percent of GDP) — Primary government balance: 2024: 2.5
Fiscal indicators (percent of GDP) — General government debt: 2024: 93.5; 2025: 89.7; 2026: 85.6; 2027: 82.3; 2028: 79.2
Current account balance: 2024: 1.2; 2025: 0.5
Net international investment position: 2024: -58.9; 2025: -50.2; 2026: -45.2; 2027: -41.4; 2028: -37.5
Nominal GDP (billions of Euros): 2024: 289.8; 2025: 306.7; 2026: 322.0; 2027: 334.7; 2028: 348.9

IMF Communications Department, Press Release No. 26/220, June 24, 2026.