Portuguese economy grows at twice the rate of the Eurozone

In the second quarter of 2026 the Portuguese economy registered a growth of 2.5% compared to the previous year, which was twice the rate of expansion in the Eurozone and thus led to an upward revision of the annual Gross Domestic Product (GDP) forecast to 2.3%.

By Íris Marçal, in News · 30 Sep 2026, 16:03 · 0 Comments

Credits: Unsplash; Author: Ibrahim Boran;

The third edition of the Macroeconomic Report for Portugal, prepared by BFF Banking Group in cooperation with Nova SBE, shows that GDP increased by 0.8% from quarter to quarter between April and June, beating that of countries including Germany, France, Italy and Spain.

This performance was accompanied by a dynamic labour market: the unemployment rate dropped to 5.3%, the lowest level since the current methodological series started in 2011, and the number of people employed reached a record high of 5.4 million.

Even though the overall performance was positive, the study cautions about new indications of economic pressure, especially in relation to labour costs and investment. The fact that there were labour shortages in areas like construction, healthcare, and technology caused labour costs to rise by 5.4% (increasing to 7.1% in the construction sector), with this rise exceeding the growth in productivity per worker.

Core inflation picked up to 2.7% in August as a result of international energy costs caused by the disruptions in the Strait of Hormuz. At the same time, investment appeared to be slowing down, with Gross Fixed Capital Formation decreasing by 1.9% from quarter to quarter and the value of public works tenders falling by 39% in the first six months of the year.

Further investment will rely on carrying out European funds such as Portugal 2030 and the PTRR programme (amounting to €22.6 billion until 2034), after the financial closure of the PRR on 31 August.

In the real estate industry, housing credit increased by 11% on an annual basis in July, with the public guarantee programme for young people making up 32.9% of the total amount lent out over the quarter.

On the fiscal side, discipline remains key to stability, as the public debt ratio is expected to drop to 85.7% of GDP in 2026 and 82.5% in 2027, putting Portugal below the European average. This trend has kept demand for government bonds high, with 10-year yields at 3.67% at the end of August and bonds receiving favourable ratings from S&P, Fitch, and DBRS.