Portugal's Strategic 2026 Budget: Balancing Growth and Fiscal Responsibility

Portugal's centre-right minority government has released its 2026 budget bill, projecting slightly improved economic growth alongside a modest budget surplus. This ambitious fiscal plan manages to accommodate new tax cuts aimed at businesses and lower-income families.

Set in the final year of projects funded by the European Union's pandemic recovery fund, the 2026 budget forecasts a 5.5% increase in investment, continuing an upward trajectory from this year's 3.6% rise. Overall, the economy is anticipated to grow by 2.3% in 2026, surpassing the Bank of Portugal's slightly lower expectations.

In keeping with its commitment to fiscal prudence, the government projects a budget surplus of 0.1% of GDP, continuing a streak of surpluses that have bolstered Portugal's economic standing in the eurozone. As part of its tax reform efforts, the government plans to systematically lower the corporate tax rate, ultimately aiming to enhance the competitiveness of its business sector.

(With inputs from agencies.)