Portugal has been able to reduce public debt from 134.1% of GDP in 2020 to 96.8% of GDP in mid 2025, below 2010 levels, thanks to strong nominal GDP growth and fiscal consolidation reforms. After having returned to surplus in 2023, the government balance is expected to record a slight deficit in 2026-2027 reflecting the impact of new and permanent balance-deteriorating measures. As the fiscal deficit stays low, public debt should stabilize around current levels. Along with the EUR22bn allocated to Portugal within the EU Recovery and Resilience Facility, this should give Portugal room to increase public investments, in particular regarding state pensions, public-sector pay, health infrastructure and education.  

We expect insolvencies to stabilize in 2026-2027. Services, construction and retail remained the three largest contributors to the national count (respectively contributing 23%, 18% and 13% of the total recorded in 2025), though they all recorded less cases than in the same period of 2024. Nevertheless, disparities persist across sectors. Textiles saw a large decrease but transportation (+21 cases i.e. +29%) and agrifood (+10 i.e. +10%) recorded more insolvencies than last year. 

Portugal has quickly emerged as one of the top business destinations in the EU, offering an ideal environment for entrepreneurs, investors and international companies alike. Recent data from Eurostat reveal that business creation is on a significant rise in Portugal, reflecting the country’s effort to support innovation and new business ventures, making it an increasingly attractive hotspot for global and domestic investors. Measures to reduce bureaucracy along with a supportive legal framework made it easy for start-ups, foreign companies and Portuguese companies to get off the ground.

Portugal’s dependency on tourism is both a strength and a weakness, considering the volatility of touristic activities. With almost one in five Portuguese living abroad, Portugal also benefits from a non-negligible inflow of remittances from workers, particularly those located in other European countries. 

In February, Portugal held the seventh election in three years, raising concerns about voter turnout and election fatigue. In the presidential elections runoff on 8 February, the Socialist Party candidate Antonio Jose Seguro won 2/3 of votes, compared with 1/3 for Andre Ventura populist anti-immigration Chega party, which has surged to become Portugal's second-largest parliamentary force with 22.8% in the May 2025 legislative elections. While the Portuguese presidency holds largely ceremonial powers, the president can dissolve parliament, veto legislation and influence political stability during crises. Meanwhile, the minority government led by the center-right Democratic Alliance already faces challenges in passing legislation, and political uncertainty from the presidential race could complicate fiscal consolidation efforts and structural reforms needed to address Portugal's high debt levels, housing crisis and demographic challenges. However, Portugal's democratic institutions remain robust, and the tradition of political stability and pro-EU orientation has historically provided continuity despite fragmented parliaments.