Portugal’s Fiscal Resilience Continues to Strengthen: Country Expected to Avoid Budget Deficit in 2026
The Portuguese government expects that, despite rising global economic uncertainty and ongoing tensions in the Middle East, the country will still be able to maintain a near-balanced fiscal position this year and avoid falling back into a budget deficit.
Portuguese Finance Minister Joaquim Miranda Sarmento recently stated that the government expects the budget balance at the end of 2026 to remain “close to zero,” highlighting that Portugal’s improving fiscal performance in recent years has strengthened the country’s ability to withstand external shocks.
“Against many expectations, Portugal achieved a fiscal surplus equivalent to 0.7% of GDP in 2025, and it is precisely this result that allows us to better face the impact of the storm and the conflict in the Middle East,” the finance minister said during a public-sector management training event held in Lisbon.
Fiscal Position Shows Clear Improvement
Portugal’s fiscal performance has steadily improved over the past few years.
Data shows that in 2023, Portugal recorded a fiscal surplus of approximately 1.2% of GDP; In 2024, the surplus remained around 0.7%; And according to the latest Annual Progress Report (APR) submitted to the European Commission, the budget balance for 2026 is expected to remain close to 0%.
Compared with previous years, when Portugal spent long periods running fiscal deficits, the country is now regarded as one of the more fiscally stable economies within the eurozone.
Notably, the finance minister had acknowledged as recently as March this year that a “small deficit” in 2026 was still possible. The government’s revised expectations now suggest that fiscal revenues and economic performance have been stronger than previously anticipated.
A Sign of Stability Amid High Rates and Global Risks
Analysts believe that maintaining fiscal balance under conditions of slowing European economic growth, still-elevated interest rates, and ongoing geopolitical risks is itself an important signal.
In recent years, Portugal has benefited from growth in tourism, stronger export performance, and a stable labour market, all of which have contributed to rising tax revenues. At the same time, the government has maintained relatively cautious control over public spending.
However, markets continue to monitor future pressure on public finances, particularly in areas such as housing, public services, and infrastructure investment, which could create new challenges for fiscal stability.
Even so, compared with many European countries that are once again facing widening deficits, Portugal’s current fiscal trajectory is widely viewed as positive and may continue to strengthen international investor confidence in the country’s economic stability.
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