Portugal's economy stays resilient despite storm costs and slower growth ahead
Portugal's economic outlook remains stable despite some challenges ahead. Credit ratings agency Fitch has revised its forecasts, highlighting a mix of fiscal discipline and external pressures. The country's budget performance and debt levels are expected to improve over the next few years.
Fitch predicts Portugal will achieve a budget surplus of 0.4% of GDP in 2025. This positive result reflects the government's fiscal prudence and strong budgetary control. The agency also notes that persistent current account surpluses have bolstered economic resilience.
Looking further ahead, growth is set to slow to 1.8% by 2027 as support from the Recovery and Resilience Plan (RRP) winds down. Meanwhile, the deficit is projected to narrow to 0.5% of GDP in 2027, once temporary spending pressures ease.
For 2026, however, Fitch anticipates a deficit of 0.8% due to storm-related costs, peak expenditure, and tax reductions. The exact financial impact of recent storms remains uncertain, adding risk to next year's budget. Despite this, public debt as a share of GDP is expected to fall significantly between 2026 and 2029.
Separately, S&P's latest review in February 2026 kept Portugal's rating at A+ with a Stable outlook, unchanged from previous assessments. Fitch's own rating stands at A (Senior A+) with a Stable prognosis, as of August 2025.
Portugal's economic path appears steady, with debt levels set to decline and deficits shrinking after 2026. While storm-related expenses and slower growth pose short-term challenges, the country's fiscal policies continue to support stability. Both Fitch and S&P maintain their current credit ratings without immediate adjustments.
