Portugal set to outpace EU growth as Bank of Portugal lifts 2025 forecast

Portugal’s economy is on track to outperform much of Europe next year after the Bank of Portugal raised its 2025 growth forecast to 1.9%, up from 1.6% predicted in June.

The revision reflects stronger-than-expected household spending and a more robust outlook for the second half of the year, signalling renewed confidence in the country’s economic momentum.

The central bank said the upgrade was supported by fresh national accounts data pointing to “higher projected growth for the second half of the year”.

Private consumption, which typically accounts for over 60% of Portugal’s GDP, is now expected to rise by 3.3% in 2025, compared to 3% in 2024.

Rising wages are fuelling this surge, along with tax reductions on labour income and pensions, plus overall improvements in disposable household income.

Portugal’s outlook stands out when set against the broader European picture. The European Union’s average GDP growth forecast is just 1.1% for 2025 and 1.5% for 2026, placing Portugal comfortably ahead of the bloc’s pace.

For 2026 and 2027, the Bank of Portugal maintained its projections at 2.2% and 1.7% respectively, underscoring steady and sustained expansion that exceeds the EU average.

Paul Stannard, Chairman and Founder of Portugal Pathways and the Portugal Investment Owners Club, said: “With private consumption accelerating, greater purchasing power in households, and the efficient deployment of EU recovery funds, Portugal is continuing to deliver above-average growth in the EU.

“That’s making the country ever more attractive to foreign direct investment — investors want to be where the potential upside is clear.”

Portugal’s fiscal and structural outlook also supports optimism. The European Commission projects the country’s debt-to-GDP ratio will fall from 94.9% in 2024 to 91.7% in 2025 and 89.7% in 2026, reflecting continued fiscal discipline.

The ongoing implementation of the Recovery and Resilience Plan (RRP), funded by the EU’s Next Generation programme, is expected to further bolster investment and consumption, particularly in infrastructure, digitalisation, and the green transition.

Tourism, a vital pillar of the economy, continues to perform strongly. International visitor spending is projected to reach €33.1 billion in 2025, while domestic tourism should generate €22.9 billion, both well above pre-pandemic levels.

This steady inflow of revenue not only supports the services sector but also reinforces consumer confidence and employment.

Portugal’s improving fundamentals have also drawn recognition from credit agencies. In August, S&P Global Ratings upgraded Portugal’s credit rating to A+, citing the country’s “economic resilience” and steady progress in reducing external vulnerabilities — a signal of international confidence in the government’s financial management.

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