Portugal's Economic Forecast Dimmed Amid Global Turmoil

The Bank of Portugal has significantly downgraded its 2026 economic growth forecast from an earlier prediction of 2.3% to just 1.8%. This revision comes in the wake of prolonged conflict in Iran and recent storms that have battered mainland Portugal, creating headwinds for economic activity.

In its quarterly economic bulletin released on Wednesday, the central bank highlighted the negative consequences of soaring energy commodity prices caused by the war in Iran. This escalation in prices is exerting pressure on economic activities while also driving inflation upwards, particularly into 2026.

Further adding to the economic woes, severe weather events hitting Portugal between late January and mid-February are expected to hinder growth. While projecting a modest growth of 1.6% next year, the bank anticipates inflation to rise to 2.8% this year, intensifying fiscal challenges.