Lisbon, June 24, 2026 (Lusa) - The International Monetary Fund (IMF) forecasts that Portugal’s budget will break even this year, compared with its April forecast of a deficit of 0.1% of GDP.

“The fiscal position is expected to be broadly balanced in 2026,” the IMF projects in its Article IV mission report, noting that “the impact of storm-related expenditure is preliminarily estimated at around 0.3% of GDP”.

In addition to storm relief, the Government has also introduced a reduction in the ISP (tax on petroleum and energy) due to rising energy prices, and other measures are set out in the 2026 state budget (OE2026), including, for example, further cuts to IRS (personal income tax).

The IMF notes that the 2026 state budget will help to address recent shocks, but warns that the expansionary stance “may exacerbate inflationary pressures”.

The institution also considers that maintaining broadly balanced budgetary positions in the medium term, as the Government projects, will require additional offsetting measures.

Taking into account the expenditure pressures arising from an ageing population, the planned increases in defence spending to meet NATO’s target of 3.5% of GDP by 2035, and the lasting impact of recent and planned tax cuts, the IMF team projects rising deficits from 2028 onwards, and therefore “offset measures are needed to meet the targets”.

The Government, which was consulted during this Article IV mission, stated, according to the report, that it agreed with many of the IMF team’s fiscal policy recommendations, but “is confident that balanced budgets can be achieved in the medium term without additional austerity measures”.

The government also forecasts a balanced budget this year, a forecast updated in April in the annual progress report sent to Brussels.

MES/AYLS // AYLS

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