Bank of Portugal revises 2026 deficit down to 0.2%, inflation surges to 3.1%

(1) The Bank of Portugal on Monday maintained its economic growth forecast for 2026 at 1.8%, which is lower than the 1.9% projected for 2025. It also expects the economic growth rate to slow to 1.6% in 2027 and rebound to 1.8% in 2028. (2) The Bank downgraded its forecast for the 2026 budget deficit from 0.4% to 0.2%, projected a 0.7% budget surplus for 2025, and expects deficits of 0.5% of GDP in both 2027 and 2028. (3) In terms of inflation, the Bank of Portugal expects the EU harmonized inflation rate to rise sharply to 3.1% in 2026 from 2.2% last year.