Economic growth picks up in the third quarter of 2025

Sequential GDP growth beats market expectations: A second release confirmed that Portugal's GDP grew 0.8% in seasonally adjusted quarter-on-quarter terms in Q3, following a 0.7% expansion in the previous quarter. The result marked a yearly high and exceeded both market expectations and the euro average of 0.3%.

Robust domestic demand fuels GDP expansion: Relative to the prior quarter's data, figures in Q3 improved for private consumption (+1.2% on a seasonally adjusted quarter-on-quarter basis vs +0.7% in Q2), fixed investment (+3.3% vs +2.3% in Q2), exports of goods and services (+0.8% vs -0.1% in Q2) and imports of goods and services (+2.0% vs +0.5% in Q2). Finally, the variation in government consumption was the same as in the prior quarter (+0.5% in Q3 and Q2). Economic growth was driven by domestic demand. Stronger wage growth, pension bonuses and lower personal income tax rates prompted households to increase their spending, while a surge in transport equipment fueled fixed investment growth. By contrast, the trade deficit widened as imports expanded more rapidly than exports. In annual terms, economic output grew 2.4% in Q3, following 1.8% growth in the previous quarter.

Sequential growth expected to ease in Q4: Our Consensus is that sequential GDP growth will weaken in Q4 as the temporary boost from the pension bonus fades and the unemployment rate edges up. In 2026, economic growth is expected to accelerate relative to 2025, with fixed investment gaining momentum on the back of corporate tax cuts, and exports strengthening as key trading partners like Germany post faster growth. Still, a slowdown in the tourism sector should cap the improvement. Key downside risks to GDP growth include the continued underuse of EU recovery funds and softer-than-expected growth in tax revenues limiting state spending power.

How should you choose a forecaster if some are too optimistic while others are too pessimistic? FocusEconomics collects Portuguese GDP projections for the next ten years from a panel of 28 analysts at the leading national, regional and global forecast institutions. These projections are then validated by our in-house team of economists and data analysts and averaged to provide one Consensus Forecast you can rely on for each indicator. By averaging all forecasts, upside and downside forecasting errors tend to cancel each other out, leading to the most reliable GDP forecast available for Portuguese GDP.

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