Rating Upgrade
Fitch Ratings upgraded Portugal’s long‑term issuer default rating from ‘A’ to ‘A+’ on 5 September 2026, citing stronger public finances and assigning a stable outlook.
Fiscal Outlook
Fitch projects general government debt to decline to 87.0 % of GDP in 2026, down from 89.7 % in 2025, and further to 82.9 % in 2028, driven by continued primary surpluses and moderate nominal growth. The primary surplus is expected to narrow to 0.1 % of GDP in 2026 from 0.7 % in 2025, still well above the ‘A’‑median projected deficit of 3.0 %. The agency notes that the narrowing reflects storm‑related emergency support, tax relief, housing measures, peak investment under the Recovery and Resilience Plans loan component, and higher wage and pension spending.
Growth and External Balance
Fitch forecasts GDP growth of 2.1 % in 2026, up from 1.9 % in 2025 and close to the ‘A’‑median forecast of 2.0 %. Investment is highlighted as a key growth driver as RRP absorption accelerates in the programme’s final year, while private consumption remains the main engine supported by a resilient labour market, real‑wage gains and high household savings. The current‑account surplus is projected to narrow to 0.2 % of GDP in 2026 from 1.2 % in 2025, then recover to around 0.5 % in 2027‑2028.
Housing Market
Residential prices are reported to be about 99 % above their 4Q19 level in 1Q26, compared with a 31 % increase across the euro area, indicating structural housing pressure due to supply constraints and sustained immigration‑driven demand, limiting the likelihood of a sharp near‑term correction.
Governance and Outlook
Fitch notes that Portugal’s governance indicators are above the ‘A’ median, with institutional strengths reinforced by EU and eurozone membership, although legacy public and external debt remain high. The rating outlook is stable.