Portugal's Central Bank Edges Up 2025 Growth to 1.9 Percent

Banco de Portugal has quietly set a new tone for the coming year, lifting its forecast for economic growth in 2025 to 1.9%. The change may look modest on paper, yet it sends a clear signal to households and business owners who have spent months searching for clues about the direction of the economy. Behind the headline figure lie new data revisions, shifting policy choices, and a cautiously brighter reading of Portugal’s internal momentum.

A different set of numbers is now on the table

The October Boletim Económico was the first to land under incoming governor Álvaro Santos Pereira, and it rewrites recent history. By incorporating stronger national accounts for 2023 and 2024, the bank added 0.3 percentage points to next year’s outlook. That shift reflects a better-than-expected first quarter, a second quarter that overshot June’s projections, and a view that GDP will accelerate again as summer 2025 fades into autumn. The updated profile effectively narrows the gap between Portugal and the euro-area average, which the European Central Bank pegs near 1.5% for the same period.

What is powering the brighter picture

A reinvigorated internal demand story sits at the heart of the revision. Private consumption gets an extra push from recent IRS cuts, while pensioners feel the lift of a one-off supplement ordered in September. At the same time, public investment linked to EU funds is gathering pace in transport, healthcare, and construction, and fresh capital spending by companies is expected to crest in the second half of 2025. Lower borrowing costs across the eurozone—thanks to the ECB’s gradual rate trimming—should reinforce that tail-wind, making credit more affordable for households and firms alike.

How Lisbon’s call compares with Brussels and Washington

In the forecasting league table, Portugal’s central bank now stands shoulder-to-shoulder with the OCDE (1.9%) and only a hair above the Comissão Europeia (1.8%). The FMI, meanwhile, is still pointing to 2.0%. Such proximity offers welcome alignment, bolstering credibility at a moment when investors are scrutinising the gap between Lisbon, Brussels, and Washington. The consensus also lowers the risk of market surprises—bad or good—once hard data for the first half of next year start appearing.

Clouds that could still spoil the forecast

The central bank’s optimism is not a promise. Geopolitical tensions continue to sway energy prices, the stance of ECB policy remains data-dependent, and underlying inflation may prove stickier than today’s models assume. On top of that, the Portuguese tourism engine—so pivotal in recent recoveries—could stall if external demand weakens. Credit conditions for smaller firms, a tight housing market, and fragile global trade also sit high on the risk dashboard.

Beyond the horizon: what to watch after 2025

For now, the bank keeps its medium-term track intact: 2.2% in 2026 before settling to 1.7% in 2027. That scenario anticipates an employment slowdown but only a mild rise in joblessness, with unemployment stable around 6.3%. Price pressures are seen drifting toward the ECB’s 2% inflation target, though progress will hinge on structural reforms that lift productivity, sustain the digital transition, and unlock new green investment streams linked to EU climate funds. If those reforms gain traction, next year’s quiet upgrade could be more than just another decimal point.