According to the European Commission, in accumulated terms, that is, compared to the base year of 2023, it is estimated that Portugal’s net expenditure will increase by 26% in 2026, a value higher than the maximum accumulated growth rate of 23.4% recommended by the Council of the European Union, and the equivalent of an accumulated deviation of 0.7% of the Gross Domestic Product (GDP), also above the ceiling of 0.6% that takes into account a relief in community budgetary rules.
According to the European Commission’s autumn forecasts, released last week, it is expected that, in 2025, Portugal’s net expenditure will increase by 5.8%, a value higher than the maximum growth rate of 5.0% recommended by the Council and which corresponds to a deviation of 0.3% of GDP this year.
For 2026, net expenditure is estimated to increase by 5.2%, above the maximum growth rate of 5.1% recommended by the Council, equivalent to a deviation of less than 0.1% of GDP next year.
In January this year, the EU Council adopted a recommendation for Portuguese net expenditure growth not to exceed 5.0% in 2025, 5.1% in 2026, 1.2% in 2027 and 3.3% in 2028.
This corresponds to the maximum accumulated growth rates calculated with reference to 2023, of 17.4% in 2025, 23.4% in 2026, 24.8% in 2027 and 28.9% in 2028.
Still, Portugal is one of 16 EU countries that requested and was authorized to activate the safeguard clause under budgetary rules in order to invest more in defense.
Such approval allows Portugal, during the period 2025-2028, to deviate from and exceed the maximum recommended growth rates of net expenditure, as long as the deviation does not exceed 1.5% of GDP.
Taking into account the flexibility now allowed, the projected cumulative deviation for 2026 (based on current projections for defense spending) is 0.7% of GDP, above the 0.6% of GDP threshold, according to the European Commission.
“In line” with EU recommendations
As part of the European Semester autumn package, published today, the community executive announces that Portugal (and 11 other member states of the euro zone) has a “compliant” OE2026, meaning that the country can “continue to apply, as planned, budgetary policies” next year.
This is after, last year, Brussels considered Lisbon’s budget for this year not to be fully in line with it as it still provided for energy support following the energy crisis.
“In general, the Commission considers that Portugal’s draft budgetary plan fulfills the obligations in terms of budgetary policy set out in the Stability and Growth Pact, as the budgetary situation for 2026 is expected to be close to balance, thus contributing to a reduction in the ratio of public debt to GDP”, it is listed.
Regarding the conclusions of post-macrofinancial assistance program supervision, Brussels highlights that “Portugal’s repayment capacity is supported by comfortable liquidity reserves and an active debt management strategy”, and highlights the “positive growth” expected for the country in the coming years, despite “low deficits” and “high levels” of debt.
The European Semester is an annual exercise in economic policy coordination.
Today’s package was presented on the sidelines of the plenary session of the European Parliament, in the French city of Strasbourg.
