OECD forecasts neither surplus nor deficit for Portugal in 2026

The Organisation for Economic Cooperation and Development (OECD) has forecast that Portugal will end 2026 on an even keel with neither a budget deficit in the red nor the black.

However, according to forecasts published on Thursday, Portugal will suffer a budget deficit of 0.1% in 2027.

In its Economic Outlook, the OECD signals that fiscal policy will be expansionary in 2026, forecasting that spending on grants from the Recovery and Resilience Plan (RRP) will increase to close to 2.3% of GDP in 2026, while loan disbursements will increase to 0.7% of GDP.

“Temporary measures to mitigate the energy price shock, including cuts and subsidies in fuel tax, as well as support for those affected by the storms of early 2026, are expected to reach 0.4% of GDP in 2026,” estimates the OECD.

Fiscal policy will help cushion the external shock in 2026, before becoming more restrictive in 2027, reflecting the gradual elimination of temporary measures introduced in response to higher energy prices and severe storms, and the end of RRP funding.

In 2027, fiscal policy will become contractionary, with a projected tightening of 2.5% of GDP, the organisation indicates. “The gradual elimination of temporary support, as well as subsidies and loans from the Recovery and Resilience Plan (RRP), will affect domestic demand, despite increased spending from European cohesion funds,” it points out.

Public debt “will continue to decrease, but ensuring a sustained downward trajectory in the medium term will require more efficient spending,” warns the OECD. The forecasts are for a ratio of 86.3% of GDP this year and 83.3% of GDP in 2027.

The government has already updated its forecasts in the progress report submitted to Brussels in April, also projecting a net zero balance this year.

Source and credits: OECD