IMF raises Portugal's 2026 growth forecast to 2.1%, still below government's 2.3%

IMF raises Portugal's growth forecast

The International Monetary Fund now expects Portugal's economy to grow 2.1% in 2026 and 1.9% in 2027, up from 1.7% and 1.6% in its June estimates, according to its Article IV report. The new projections were published on Tuesday, 13 October, in Bangkok, as part of the IMF's World Economic Outlook. Even with the upgrade, the fund's figures sit below the government's draft 2027 State Budget (Orçamento do Estado), which projects growth of 2.3% in 2026 and 2.1% in 2027. The fund's weaker starting point is also less favourable for the government's planned budget surplus of 0.1% of GDP in 2027.

Inflation and unemployment

The IMF expects inflation in Portugal to accelerate to 3.2% in 2026 before easing to 3% in 2027. The government's projection for average inflation, measured by the harmonised consumer price index (HICP), is 2.9% for 2026, falling to 2.3% in 2027. On unemployment, the fund sees the rate falling from 6% to 5.9% in both 2026 and 2027, while the government calculates 5.8% for 2026. For 2027, the IMF's unemployment figure is two tenths of a point below the figure set by the Finance Ministry, led by Joaquim Miranda Sarmento.

PCP will vote against the 2027 budget

The Portuguese Communist Party (PCP) will vote against the 2027 State Budget, a decision its secretary-general Paulo Raimundo had already announced. The party's parliamentary leader Paula Santos repeated the criticism at a press conference at the Assembleia da República on Monday, 12 October, calling the budget a 'disaster for the country' that could push thousands of Portuguese into poverty. She said the real risk is not a deficit overrun but poverty for thousands of people. She rejected the idea that the end of the Recovery and Resilience Plan (PRR) alone explains the drop in investment.

The country cannot accept a brutal cut of more than 30% in public investment, which could be even greater if the low levels of execution of recent years are maintained.

The Socialist Party (PS), led by José Luís Carneiro, is expected to abstain in the final vote. Santos argued that enabling the budget for a third consecutive year makes the PS complicit in what she called a national policy of disaster. She also accused Chega and IL of pretending to oppose a policy they are committed to. About two weeks earlier, PSD, CDS-PP and Chega approved in general a new rental law that the PS has criticised, and the socialists have demanded that the government drop its agreement with Chega.

Azores regional budget vote in November

In the Azores, the PS regional president Francisco César said his party's vote on the 2027 regional plan and budget depends on the regional government's conduct and its answers on the cost of living and economic growth. Speaking to journalists in Ponta Delgada after meeting business and tourism associations, he said the party will wait for the debate before taking a position. He also rejected the idea of 'red lines' for the budget.

Everything will depend on the attitude of the Regional Government, on its willingness to negotiate and, above all, on the answers given to the problems related to the cost of living and economic growth.

The draft 2027 regional plan foresees total investment of 1,057 million euros, of which 650 million is the direct responsibility of the regional government. Tourism funding would rise by 17.2 million euros, and health receives a reinforcement of 270 million euros, bringing the total to 760 million. The plan will be debated and voted in November in the Regional Legislative Assembly in Horta, on the island of Faial. The 2026 plan was approved in November 2025 with votes from PSD, CDS-PP and PPM, while PS and Chega abstained.