Portugal's Economy Rebounds Strongly in Q2

Portugal's economy expanded by 0.8% in the second quarter of 2026, accelerating from an upwardly revised 0.1% growth in the previous quarter, according to preliminary estimates. The rebound was driven by a positive contribution from net exports and stronger private consumption, although investment declined. The recovery followed a weak first quarter, when severe storms disrupted activity in central Portugal, while a surge in energy prices linked to the conflict in Iran weighed on growth. On an annual basis, GDP growth edged up to 2.5% from a revised 2.4% in the previous quarter. The government expects the economy to expand by 2.0% this year, while the Bank of Portugal projects slightly slower growth of 1.8%, following 1.9% growth in 2025.

Portugal’s economy stalled in the first quarter of 2026, marking a sharp slowdown from the 0.9% growth recorded in the previous period, particularly driven by extreme weather, including Storm Kristin and heavy rainfall, which damaged infrastructure, agriculture, and buildings, particularly in the Central region, as well as the adverse effects of the Middle East conflict. The slowdown also reflected the fading impact of government measures that had boosted household income in the second half of 2025. Household consumption growth plummeted to 0.1% in Q1 2026 from 0.9%, while government spending rose by 0.3%, down from 0.4%. Net external demand weighed on GDP, as exports grew by 2.1% but imports surged at a faster pace of 5.4%. On a positive note, fixed investment increased by 1.9%, following a 1.2% gain in the previous quarter. The Bank of Portugal warned that rising inflation and tighter financing conditions are likely to constrain consumption and investment throughout 2026.

The Portuguese GDP stalled in the first quarter of 2026, holding the 0.9% expansion from the earlier period, to reflect the strong impact of the war in the Middle East in the Portuguese economy, according to a flash estimate. There was a negative contribution in net external demand, aligned with the surging costs of oil that Portuguese refineries import and supply pressures on European natural gas and petroleum gas. Household consumption was also lower on the squeeze in domestic purchasing power. On the other hand, investment was higher in the period. From the previous year, the GDP expanded by 2.3%.