FX.co ★ Portugal’s Economy Stalls in Q1 2026

Portugal’s economy stagnated in the first quarter of 2026, a marked deceleration from the 0.9% growth recorded in the previous quarter. This slowdown was largely driven by extreme weather events—most notably Storm Kristin and persistent heavy rainfall—which caused extensive damage to infrastructure, agriculture, and buildings, particularly in the Central region. The economy was further affected by the adverse spillovers from the conflict in the Middle East.

The loss of momentum also reflected the waning impact of government measures that had previously supported household incomes in the second half of 2025. Household consumption growth fell sharply, easing to 0.1% in Q1 2026 from 0.9% in the prior quarter. Government consumption also moderated, rising by 0.3% compared with an increase of 0.4% previously.

Net external demand exerted downward pressure on GDP: although exports expanded by 2.1%, imports grew at the significantly faster pace of 5.4%. In contrast, fixed investment provided a rare bright spot, accelerating to a 1.9% increase in Q1 after a 1.2% gain in the previous quarter.

The Bank of Portugal cautioned that rising inflation and tighter financing conditions are likely to restrain both consumption and investment over the course of 2026.