Portugal's Growth Forecast Slashed Amid Global Conflicts

Portugal's central bank on Wednesday sharply reduced its 2026 economic growth forecast to 1.8% from the 2.3% it projected in December. This adjustment is attributed to the fallout from the war in Iran and subsequent storm damage on the mainland, putting a strain on economies worldwide.

In its quarterly economic bulletin, the Bank of Portugal highlighted that the significant rise in energy commodity prices due to the conflict is impacting economic activity and driving inflation higher, particularly in 2026. The forecast assumes that the war's duration and effect on confidence and global supply chains will remain limited.

Governor Alvaro Santos Pereira noted that, given the current geopolitical climate, the growth expected is lower, with higher inflation risks, particularly if the conflict escalates. This could have broader implications on Portugal's economy due to the Middle East's role in energy and fertilizer supply chains.