Portugal’s economy ended 2025 more geared towards exports – growth likely to be 1.1% for year

Portugal’s exports and not consumer spending was what most drove the economy on the whole in 2025.

According to data from the National Statistics Institute (INE) released on Friday, the Portuguese economy grew 1.9% in 2025, although in the fourth quarter the economy grew 0.8%, a slight uptick on the 0.7% for 3Q.

This QoQ growth was largely down to exports and not down to family consumption and internal investment, inverting the trend of recent quarters.

In the third quarter, the economy grew 0.7% (a revision of 0.1% on the previous INE estimate), supported only by internal demand, particularly family consumer demand, boosted by income support measures introduced by the government in the summer, such as the extraordinary reduction on tax at source in August and September and the payment of a pensions bonus in September.

At that time the contribution from net external demand was negative (exports minus imports).

Without the temporary government measures on family incomes, the trend inverted at the end of 2025.

In the last quarter, the internal demand contribution was negative with private consumption slowing, and internal investment falling significantly.

In 3Q family consumption and internal investment grew 4% on the three previous months. On the other hand, net external demand was positive on the back of a sharp reduction of goods and services imports largely down to oil products transactions.

It means that after government support, the driver of Portugal’s economic growth changed at the end of the year and was more based on exports.

According to analysts from the bank BPI, 4Q was “curious and surprising” since the internal component (consumption and investment) was lower with a reduction of stocks which in the previous quarters had been significant.

One reason put forward is that the private sector is putting off investment decisions, particularly the construction sector, with the prospect of benefitting from tax changes in 2026”.

On the other hand, bank BPI reckons that in annual terms, the contribution of external demand (seen in 4Q) will be negative, reflecting the fact that the imported goods and survives to meet internal national demand will be high and in the expectation of an uptick in the Gross Formation of Fixed Capital, but also reservations regarding exports because of international uncertainty over US tariffs.

Despite this uncertainty, and without any expected extraordinary measures from the government as had been the case in 2025 and 2024, BPI bank admits from the data that is currently available, that the growth target for this year defined by the government may well be reached since the risks have now turned out to be highly skewed. (The previous forecast had been 2%).

The final accounts for the year are likely to be growth of 1.1% carried over to 2026 even if the economy stagnates in each one of the next four quarters.

This effect means that the government will only achieve a little over a half of its economic growth forecast which was 2.1%.

SOURCE: Negócios

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