IMF raises Portugal's growth forecast: But inflation in 2027 may be higher than government expects

The International Monetary Fund (IMF) revised upward the growth forecasts of the Portuguese economy for 2026 and 2027. According to new forecasts published on October 13, the Portuguese economy may grow by 2.1% this year and 1.9% next year. However, the IMF's inflation expectations are higher than the figures used by the government in its 2027 State Budget proposal. This difference raises the question to what extent economic growth will be reflected in the purchasing power of households.

Portugal's economy may grow above the Eurozone average

In the IMF's October 2026 World Economic Outlook report, the growth forecast for Portugal was increased to 2.1% in 2026 and 1.9% in 2027.

This represents an upward revision of 0.4 and 0.3 points, respectively, compared to the agency's previous estimates.

In the same period, the Eurozone economy is expected to grow 1.1% in 2026 and 1.2% in 2027.

Accordingly, Portugal's economic growth rate may reach approximately twice the Eurozone average in 2026.

However, the IMF's forecasts are more cautious than the Portuguese government's expectations.

In its 2027 State Budget proposal submitted to the Parliament, the government predicts that the economy will grow by 2.3% in 2026 and 2.1% in 2027.

One of the biggest differences is in inflation

One of the important divergences between the IMF and the government's forecasts is the future course of consumer prices.

Economic indicator IMF Portuguese government

2026 growth 2.1% 2.3%

2027 growth 1.9% 2.1%

2026 inflation 3.2% 2.9%

2027 inflation 3.0% 2.3%

Inflation figures are estimates of the harmonized consumer price index used in international comparisons.

For 2027, the difference between the two institutions reaches 0.7 points.

This distinction is important; because the government's budget planning and the economic expectations of independent international organizations are not based on the same assumptions.

Factors such as energy costs, developments in international trade and consumer demand may change the course of inflation.

Why can the cost of living continue to increase while the economy is growing?

An increase in a country's economic growth rate does not mean that consumer prices will decrease.

While growth shows the increase in the total value of goods and services produced in the economy, inflation measures the change in the general level of prices.

For example, if inflation is 3% in 2027, it means that the general level of prices will be 3% higher on average compared to the previous year. This rate does not mean that all products will increase by the same amount.

Therefore, while the Portuguese economy continues to grow, essential expenses such as rent, food, transportation and energy may continue to put a strain on household budgets.

In particular, the real purchasing power of employees whose wage increases are below inflation may decrease.

What does it mean for salaries and family budgets?

If the 3% inflation predicted by the IMF for 2027 occurs, the salary will remain the same. an employee's purchasing power decreases.

For example, the nominal income of a person who has a monthly net income of 1,500 euros and whose salary is not increased does not change. However, if the general price level rises by 3%, the amount of goods and services that can be purchased with the same money decreases.

A 3% salary increase only approximately compensates for the general price increase; It does not mean that one's purchasing power has increased significantly.

However, the impact of salary increases may vary depending on tax cuts, the household's consumption basket and personal spending structure.

IMF forecasts do not directly constitute a new salary, tax or social assistance decision. These decisions are determined by separate legislation and budget processes.

Why is it important for the 2027 budget?

The government's growth and inflation forecasts are used in many budget calculations, from tax revenues to public expenditures.

Lower-than-expected growth could impact tax revenues and economic activity. Higher inflation could suppress public procurement, social spending and household purchasing power.

However, the IMF's predictions are not final economic results. It may be updated again with economic data to be announced in the coming months.

The real issue for Portugal is not only the continuation of growth, but also the extent to which this growth will be reflected in wages, employment and living standards.

Resources

- IMF — World Economic Outlook, October 2026

- ECO — FMI and Portugal a crescer o dobro da Zona Euro mas está mais pessimista que Governo, Diogo Mendo Fernandes ve Ânia Ataíde, 13 October 2026