The Portuguese economy has been gaining strength since spring, including the second quarter (April to June), and is expected to grow slightly above forecast this year, revealed this Wednesday the economic studies office at the Universidade Católica Portuguesa, in Lisbon. However, prices of goods and services are rising more than expected and consumer inflation has been revised upwards.
Necep, the research group that works at the Centro de Estudos Aplicados da Católica, coordinated by João Borges Assunção, indicates that “in the third quarter of 2025, the Portuguese economy is expected to have grown 0.6% quarter-on-quarter and 2.2% year-on-year, after 0.7% and 1.8% in the previous quarter, respectively”.
If so, this is the biggest quarterly growth this year: the economy rose 1.7% in the first quarter of 2025 compared to the same period last year, then advanced another 1.8% in the second quarter and now should increase another 2.2% in real terms (discounting inflation) in the period from July to September, according to the same office.
With these results, the Catholic group says that “the central point of the estimation of growth of the Portuguese economy in 2025 was revised slightly upward (0.1 percentage points) to 1.8%following the robust growth seen in the second quarter, as well as the estimate now put forward for the third quarter”.
On August 29, the National Statistics Institute (INE) confirmed real economic growth of 1.8% in the second quarter. The flash estimate for the third quarter will be revealed on October 30th.
On Tuesday, the Bank of Portugal put forward an annual growth projection for 2025 of 1.9%, the same as that of the Public Finance Council (CFP). But it maintained its forecast of 2.2% next year.
Necep also states that “for 2026 and 2027, the previous forecasts were maintained [de há três meses] of 2% and 2.2%, respectively”.
Risks outside and inside
In any case, “the forecast intervals remain high, as a result of the uncertainty surrounding the evolution of the world and European economy, in a context (still) guided by the potential impact of the enormous volatility of the North American administration’s trade policy since the beginning of the year”, explains the group of economists.
“Geopolitical risks remain active in Ukraine and Eastern Europe, but strong mediation initiatives have emerged in the Middle East. Despite geopolitical and commercial tension, markets continue to show some normality, with confined episodes of volatility followed by strong appreciation”, and in the case of Portugal, “Attention is now focused on the presentation and discussion of the State Budget for 2026, as well as the upcoming electoral acts.”
Inflation returns
Inflation is less contained, taking more purchasing power away from families, especially the less well-off.
According to the group of researchers, “in Portugal, annual inflation once again stood at 2.4% at the end of the quarter, but with underlying inflation [sem contar com energia e alimentos] of 2%”.
The chain variation, between quarters, “was high in September (0.9%), so the phenomenon does not yet seem to be completely under control”, says Necep.
“In this way, the inflation estimate in 2025 was revised slightly upward from 2.3% to 2.4%, in line with the year-on-year inflation in September” and “in the euro zone, total inflation stood at 2.2% at the end of the quarter, so the medium-term objective of 2% appears achievable in the coming months”.
In other words, yet another argument for the European Central Bank (ECB) to stop lowering interest rates, as it has already signaled. These are expected to stay at 2% until the end of 2026 or later.
Regarding the labor market, the group of analysts indicates that the unemployment rate should rise slightly above 6%. “In Portugal, the unemployment rate was 5.8% [da população ativa] in the third quarter, with the prospect of 6.3% in 2025 and 6.1% in 2026.