Bank of Portugal Raises 2026 Growth Forecast to 2.3%

LISBON, Oct 7 (Reuters) — The Bank of Portugal on Wednesday raised its 2026 economic growth forecast to 2.3% from 1.8% projected in June on a surge in EU-backed investment and strong exports, while warning that an escalation of the war in the Middle East could weigh on growth and further stoke inflation. It also expects gross domestic product, which expanded 1.9% in 2025, to grow by 1.8% in both 2027 and 2028. In its quarterly economic bulletin, the central bank said its upgraded 2026 growth outlook was driven by "stronger EU recovery fund-backed investment, fiscal stimulus and a rebound in exports after a sharp loss of market share in 2025". It sees investment rising 5.6% this year after growing 4.3% in 2025. Exports are forecast to grow 3.5% this year after zero growth in 2025. The central bank kept its forecast for EU-harmonised inflation this year unchanged at 3.1%. Last year, inflation clocked 2.2%. It sees the pace of price rises easing to 2.4% next year and 2% in 2028. It warned that an escalation or prolonged conflict in the Middle East could trigger further increases in energy prices, deepen supply-chain disruptions and hurt confidence, weighing on economic activity while fuelling inflationary pressures. (Reporting by Sergio Goncalves; editing by Andrei Khalip) ((mailto:sergio.goncalves@thomsonreuters.com; +351213509204; Reuters Messaging: rm://sergio.goncalves.reuters.com@reuters.net/)