Portugal’s Economy Accelerates to 2.3% in 2026—What It Means for Your Wallet

Portugal’s economy looks set to pick up speed after a lukewarm 2025. A new note from the Forum for Competitiveness – an influential Lisbon-based think-tank – projects headline GDP growth of 2 % – 2.3 % in 2026, comfortably above last year’s 1.9 %. Extra money from the final stretch of the Plano de Recuperação e Resiliência (PRR), firmer pay packets and a still-resilient job market underpin the rosier outlook, even as policymakers keep one eye on cooling global demand and stubbornly weak productivity.

Quick takeaways at a glance

• Acceleration ahead: Growth seen climbing to 2 %–2.3 % next year after 1.9 % in 2025.

• PRR wind-down: The stimulus from EU funds remains a key pillar, but fades after 2026.

• Jobs picture: Unemployment expected to hold between 6 % and 7 %, though hiring momentum slows.

• External headwinds: Geopolitical uncertainty, a potential AI investment bubble and France’s budget row top the risk list.

Momentum builds into 2026

The think-tank argues that the macro backdrop is “generically favourable”, citing a rare budget surplus, benign financial conditions and upbeat household sentiment. With energy bills retreating and wages finally outpacing inflation, private consumption – roughly two-thirds of the economy – should remain the lead engine. Meanwhile, companies are dusting off cap-ex plans previously shelved during the rate-hike cycle.

Where the growth will come from

Household spending: Rising real incomes could push retail sales up another 3 % on average, according to the Bank of Portugal’s latest dashboard.

Public and private investment: The tail-end of the €16.6 B PRR is funnelled into rail, digital and housing projects. Central bankers expect investment to reach 3.7 % of GDP in 2026, the highest share since 2010.

Metal-mechanic exports: One of the few sectors bucking the export slowdown, shipments rose 2.3 % through mid-2025 and look set for a fresh record.

Tourism’s staying power: The WTTC calculates that travel & hospitality will add €62.7 B – over 21 % of GDP – this year, keeping airports and Algarve resorts busy well beyond the summer peak.

How Lisbon’s forecast compares with Brussels and Frankfurt

The Forum’s central band is broadly in line with other forecasters: the government and the Bank of Portugal both aim for 2.3 %, while the European Commission sits at 2.2 %. That still outpaces the euro-area average of just 1.2 %, underscoring Portugal’s relative resilience. The cushion matters for residents, because stronger domestic growth helps shield jobs if Germany or Italy wobble.

Underlying risks nobody should ignore

Despite the upbeat headline, analysts flag three warning lights:

• Productivity conundrum: Output per worker barely rises 0.4 % a year, capping the income ceiling.

• Immigration rule changes: Tighter visa requirements could blunt labour-force expansion just as construction firms scramble for staff.

• Speculative tech boom: A sudden reversal in AI-related equity valuations might ripple through pension funds and corporate funding costs.

What it means for wages, jobs and your wallet

A stable labour market translates into modest but real pay gains for most households. Salary agreements in manufacturing and hospitality already point to 3 %–4 % nominal increases, outstripping the Bank of Portugal’s 2 % inflation call for 2026. Mortgage holders may also get relief: money-market futures imply the ECB will keep rates near the current plateau before edging lower, easing pressure on spread-linked home-loan payments popular in Portugal.

The bigger picture: cracking the productivity puzzle

Business groups stress that sustained growth above 2 % is impossible without tackling red tape and low capital intensity. The Forum urges a push for deferimento tácito (automatic licence approvals) and clearer VAT rules on construction – reforms that could shorten project lead times and lift investment efficiency.

Looking beyond the PRR sunset

With EU funds tapering after 2026, policymakers face a new question: can the economy motor on its own steam? A synchronised effort – faster digital adoption, up-skilled labour and higher private R&D spend – will be needed to prevent the growth engine from sputtering. For now, though, Portuguese households and businesses enter 2026 with a rare tailwind: solid demand at home and enough fiscal headroom to cushion any external shock.