Lisbon, April 17, 2026 (Lusa) - The impact of the conflict in the Middle East has compounded the damage caused by the winter storms, and now is the time to make use of the fiscal space that Portugal has managed to create, said Alfred Kammer, the IMF’s Director for Europe, in an interview with Lusa.
“Portugal has done a remarkable job in reducing its public debt,” said the International Monetary Fund (IMF) official, which has helped strengthen the country’s resilience to shocks.
In what Alfred Kammer calls a “success story”, Portugal has managed to create “some fiscal space that it can use when circumstances warrant it”, and given the impact of the storms, “this is a very particular moment to use” that margin, he argued.
"And if that leads to a small deficit in 2026, so be it," he said, downplaying the possibility of Portugal recording a negative budget balance in 2026.
The IMF’s forecast, set out in the Fiscal Monitor report released this week, is for a deficit of 0.1% of Gross Domestic Product (GDP) in 2026.
The government’s 2026 state budget originally predicted a surplus of 0.1% of GDP, but has acknowledged that this figure may need revision due to the combined impact of the storms and the Middle East conflict.
Finance minister Joaquim Miranda Sarmento acknowledged the risk of a deficit in 2026, saying it should not exceed the 0.5% limit.
“There is a figure that would keep the country in a much more comfortable position, which is for the deficit not to exceed 0.5%, because if it does, it puts us at the mercy of the European Commission’s discretion,” he said.
The government has approved a support package following the severe weather in January and February, alongside measures to tackle rising fuel prices caused by the war in Iran, notably a discount on fuel tax (ISP).
For Kammer, the important thing is that Portugal continues to stay on course with debt reduction and that this is merely a temporary and one-off situation, warning that such support must be limited and one-off, thereby enabling the country to “stay on course with debt reduction to reduce vulnerabilities”.
In its Fiscal Monitor, the IMF projects a steady decline in Portugal’s public debt ratio, falling to 85.6% of GDP in 2026, 82.2% in 2027, 79.3% in 2028, 77% in 2029 and 75.5% in 2030.
Regarding economic growth, the IMF estimates that it will stand at 1.9% in 2026 and 1.8% in 2027.
Kammer pointed out that for Portugal, which relies heavily on renewable energy, the expected impact of the war in Iran would likely sit between -0.2% and -0.3% over the next two years.
MES/MYAL // AYLS
Lusa
