Summer Rebound: Portugal’s Economy Picks Up, Opening Doors for Expats

After a shaky start to the year, Portugal’s economy found fresh momentum in early summer. National statisticians report that output expanded 0.6% between April and June and 1.9% over the past 12 months, easing fears of a prolonged slowdown. For foreigners eyeing jobs, housing or new investments, the latest data signal that Portugal remains one of the sturdier growth stories in Southern Europe—though the road ahead is not free of potholes.

A rebound after spring’s stumble

The second-quarter upswing follows a -0.4% contraction in the opening months of 2025, a dip later revised to show it was less severe than first thought. Analysts credit the turnaround to revived household spending, an ever-resilient services sector and the first clear signs that tourism is stabilising after last year’s record surge. While Portuguese families loosened their wallets, the negative drag from net exports narrowed, allowing total output to climb despite still-soft global demand.

Domestic wallets are doing the heavy lifting

Within Portugal’s borders, three forces stood out. First, private consumption—from cafés in Porto to clothing shops along Lisbon’s Avenida da Liberdade—rose as wage gains outpaced inflation for the first time in 18 months. Second, an uptick in bank lending to households unlocked long-delayed purchases of cars and appliances. Finally, public investment linked to the Plano de Recuperação e Resiliência channelled fresh funds into rail upgrades and energy retrofits, cushioning the impact of a slowdown in corporate capital spending. Together, these strands turned domestic demand into the main growth engine, offsetting a dip in construction and a lull in tech sector hiring.

Exports perk up but clouds hover offshore

Goods shipments remained lacklustre, hit by lingering trade tensions between the EU, the US and China. Yet services exports, above all tourism and business consultancy, regained speed. Arrivals at Faro Airport broke a June record, and international events such as Web Summit’s regional spin-offs drove business travel receipts higher. Even so, Portugal is not immune to rising freight costs, a potential headwind if global shipping routes stay disrupted. Economists warn that a stronger euro, should it persist, would further erode manufacturers’ price competitiveness in the year ahead.

Standing tall against European peers

In quarter-on-quarter terms, Portugal posted the second-best performance in the euro area, trailing only Spain’s 0.7%. On an annual basis, its 1.9% pace beat the euro-zone average of 1.4% and the broader EU’s 1.5%. The edge matters: it underpins Lisbon’s argument in Brussels that the country can keep whittling down its debt ratio, now at 98.1% of GDP, without imposing harsh austerity. For expatriates used to bigger swings in their home economies, the modest but steady Portuguese rhythm offers a measure of predictability in everything from salary negotiations to rent negotiations.

What the numbers mean for international residents

A brisker economy translates into firmer job prospects in multilingual customer-service hubs and tech start-ups that rely on international talent. Rising consumption also supports retail and hospitality jobs, sectors where language skills are prized. On the flip side, stronger demand feeds into higher housing costs, particularly in Lisbon, Porto and the Algarve. While headline inflation is retreating toward 2%, rents rose roughly 7% year-on-year in major cities. Newcomers should budget for steeper deposits and consider emerging hotspots such as Braga or Setúbal, where supply-demand imbalances are less acute.

Forecasts: cautious optimism with familiar risks

Lisbon’s finance ministry still targets 2% growth for 2025, a goal echoed by the IMF even as the Banco de Portugal trims its outlook to 1.6%. Shared among forecasters is the view that European recovery funds and still-strong tourism can keep Portugal above the continental average. Yet risks abound: a flare-up in geopolitical tensions, sluggish German demand for auto components, or delays in rolling out EU-financed projects could clip growth. For now, though, Portugal’s mid-year scorecard suggests the country remains on a path of measured expansion, offering expatriates both opportunity and a reminder to stay nimble in a small, open economy.