Macroeconomic forecasts underlying the 2026 Draft State Budget

This Opinion examines the macroeconomic forecasts underlying the Draft State Budget for 2026 (DSB/2026), and is framed by “the Memorandum of Understanding between the Ministry of Finance and the Portuguese Public Finance Council on the preparation of an opinion on the macroeconomic forecasts underlying the Stability Programme and the Draft State Budget”, signed on 6 February 2015.

Key Considerations

This Opinion has been prepared at a time of high uncertainty in the macroeconomic outlook. In its latest projections, the CFP noted that the global economy continues to be affected by high levels of uncertainty, exacerbated by the unpredictability of the US administration's trade policy and escalating geopolitical tensions.

Taking the risks into account, the macroeconomic scenario underlying the DSB/2026 appears to be statistically probable overall. Nevertheless, it should be noted that there are predominantly downside risks, as highlighted in this Opinion, particularly with regard to real GDP growth, which would warrant a greater degree of caution and should be taken into particular consideration when monitoring the economic situation in 2026.

• In 2025, the forecast growth is based on an expectation of export growth in the second half of 2025 that appears difficult to achieve and on lower import growth, despite more significant growth in all components of demand with high import content.
• The macroeconomic scenario for 2026 points to real growth in the Portuguese economy higher than anticipated in the most recent projections presented by other leading institutions. The analysis also confirmed that the real growth forecasts of 2.3% are not within the 30% confidence interval when weighted by past forecasting errors inherent in the projections.
• In 2026, the acceleration in real GDP growth is influenced by the expectation of higher intra-annual growth in household consumption than in 2025. This expectation by the MF is not justified by the size and nature of the policy measures that were communicated to the CFP. The analysis reinforced that the forecast for private consumption is the furthest from the most recent projections of other institutions and does not fall within the most likely range when weighted by past forecast errors inherent in the projections.
• Nevertheless, the analysis confirmed that the nominal growth forecast by the MF for 2025 and 2026 is in line with the latest independent projections available. This is due to a forecast for the GDP deflator in both years that is considered prudent and plausible.
• Finally, the forecast for growth in compensation per employee for 2026, which is close to that expected for 2025, does not fit within the forecast presented for inflation and productivity and is also significantly higher when compared to known independent projections.

Conclusion

The conclusion of this analysis by the Portuguese Public Finance Council takes into account the principles of Article 8 of the Budgetary Framework Law (Law No. 151/2015 of 11 September, in its current wording): ‘The budgetary projections underlying budgetary planning documents shall be based on the most likely macroeconomic scenario or on a more prudent scenario.’ This same guiding principle of using realistic forecasts for the conduct of budgetary policies is also enshrined in European legislation, in particular in the Stability and Growth Pact and in Council Directive No. 2011/85/EU of 8 November 2011 (revised), which lays down the requirements applicable to Member States' budgetary frameworks.

In accordance with Article 4(4) of Regulation No 473/2013 of the European Parliament and of the Council of 21 May 2013, as a result of the analysis of the macroeconomic forecasts underlying the Draft State Budget for 2026 of the XXV Constitutional Government, based on the information currently available and considering the risks identified, the Portuguese Public Finance Council endorses the macroeconomic forecasts presented, with the reservation of a possible overestimation of the actual performance of the economy for 2026, whose components (internal and external) are subject to various unfavourable risks, as noted in this opinion. In this regard, there is a need to ensure greater prudence in the budgetary projections underlying the State Budget for 2026.

Date of last update: 09/10/2025