Fitch forecasts Portugal's deficit of 0.7% in 2026

Fitch forecasts a deficit of around 0.7% of GDP in 2026 but says it believes in the "strong commitment to fiscal prudence." The government forecasts a surplus of 0.1% next year.

In the credit rating agency's view, "the increased borrowing under the Recovery and Resilience Plan (RRP), additional tax cuts, and increased public investment will boost the budget deficit," says analyst Utku Bora Geyikci.

Still, the analyst told Lusa news agency that "even with a deficit of 0.7%, Fitch sees a strong commitment to budgetary prudence, with the deficit well below the median expected for an A rating, of around 3%, in 2026."

To achieve a surplus, he adds, “stronger revenue performance and/or tighter expenditure control than in the baseline scenario, or a more favorable macroeconomic environment” would be required.

In September, Fitch raised Portugal's rating from A- to A, with a stable outlook, a decision that, according to the analyst, was based on “medium-term credit fundamentals and the political framework, not on an annual result”.

Thus, a “clear consolidation plan provides directional support, but reinforcement depends on effective implementation and sustained delivery that meets or exceeds the assumptions,” he explained.

The Government submitted the 2026 State Budget to Parliament, which forecasts that the Gross Domestic Product (GDP) will grow 2% this year and 2.3% in 2026.

The executive aims to achieve surpluses of 0.3% of GDP in 2025 and 0.1% in 2026. As for the debt ratio, it estimates a reduction to 90.2% of GDP in 2025 and 87.8% in 2026.