Portugal's Economy Poised for Continued Growth, Budget Surplus, and Hotel Investment Boom

Economic Growth Projections Remain Strong

Portugal's economy is projected to continue its robust performance, with Gross Domestic Product (GDP) growth expected to outpace the eurozone average. Forecasts for 2026 GDP growth hover around 2% to 2.3%. This follows a strong showing in 2025, where growth was projected between 1.9% and 2.4% by various institutions. Since the end of 2019, Portugal's growth has been 3.3 percentage points more than the eurozone average.

The primary driver for this anticipated growth in 2026 is expected to be domestic demand, fueled by private consumption and government tax measures, including reductions in personal income tax. Investment is also slated for significant growth, particularly in 2025 and 2026, largely due to the strategic allocation of EU Recovery and Resilience Facility (RRF) funds. While headline growth figures are strong, some analyses indicate that underlying productivity remains a challenge, with GDP per capita outpacing the eurozone by only 1.4 percentage points and labor productivity showing minimal improvement.

Sustained Budget Surplus and Decreasing Public Debt

Portugal has demonstrated remarkable fiscal discipline, with projections indicating a continued budget surplus. The finance ministry estimated a 0.3% surplus for the end of 2025. Both the government and the International Monetary Fund (IMF) anticipate a 0.1% surplus for 2026, though the European Commission holds a slightly more cautious outlook, forecasting a small deficit. Earlier in 2025, the country registered a budget surplus of 1% of GDP in the first half and a significant 2.1% of GDP during the first nine months. This consistent surplus is attributed to a prudent and solid budgetary policy.

Accompanying the healthy budget figures, Portugal's public debt is expected to continue its downward trend. The Banco de Portugal projects public debt to reach 84% of GDP, a level not seen since the sovereign-debt crisis.

Booming Hotel Investment and Tourism Sector

The hospitality sector in Portugal is experiencing a significant boom, attracting substantial foreign investment. Foreign developers are increasingly viewing Portugal's hospitality market as an attractive investment. A prime example is Mercan Properties Group, which has invested €1.3 billion since 2015 and has an additional €450 million in the pipeline. Between 2024 and 2025, Mercan Properties opened eight new properties, creating over 900 direct and indirect jobs. Notable projects include the groundbreaking of the €200 million Hard Rock Hotel Algarve and other five-star developments in key cities like Faro, Lisbon, and Porto.

The overall Portuguese hotel market is projected to reach approximately €1.15 billion in 2025, with an impressive annual growth rate of 5.85%, potentially reaching €1.53 billion by 2030. Revenue per Available Room (RevPAR) is anticipated to climb to €112.6. The year 2024 saw the opening of 75 new hotels across the country, averaging about one new hotel every five days. Lisbon City alone has 34 hotel projects in its pipeline, with 26 of these expected to open by 2025. The midscale hotel category, particularly 3-star establishments, is witnessing the most significant growth.

Tourism continues to be a vital economic driver, with the Travel & Tourism sector forecast to contribute €62.7 billion to the national economy in 2025, representing 21.5% of GDP. International visitor spending is projected to reach €33.1 billion in 2025. Portugal is expected to conclude 2024 with €27 billion in tourist revenue, with a further 9% growth outlook for 2025.