Fiscal outlook
Portugal recorded 0.5% surplus and a debt-to-GDP ratio of 93.6% in 2024. It additionally has falling debt and Fitch upgraded the sovereign to ‘A’ on 12 September 2025.
Deficit measures the extent of borrowing in a given 12 months. Debt-to-GDP compares the whole public debt to the scale of the financial system. Each are presently used to find out how a lot borrowing a member state is allowed to undertake. Nonetheless, neither measure in itself determines a authorities’s capability to maintain greater ranges of public funding. Fiscal sustainability depends upon development, the multiplier results of funding, rates of interest, inflation, the construction of the financial system and exterior dangers akin to local weather change. NEF advocates transferring away from strict numerical debt targets.
Rising local weather prices
Summer season 2025 delivered an excessive wildfire season throughout Iberia: attribution scientists report ~260,000 hectares burned in Portugal, which is 5 instances the same old space by early September. Within the south, the Algarve’s structural drought retains forcing emergency measures, together with offering water equal to a 12 months’s city utilization there. A 2022 research discovered the Iberian Peninsula is experiencing its driest local weather in not less than 1,200 years. An unprecedented sequence of storms hit the nation on the finish of January 2026 which killed not less than 16 individuals and left hundreds with out electrical energy. Damages are estimated to quantity to €755m, leaving many properties destroyed in addition to infrastructure such because the nation’s predominant motorway.
What NEF’s modelling reveals
Organisation for Financial Co-operation and Growth (OECD) projections present Portugal’s GDP declining by 14% by 2050 and 20% by 2070 below present insurance policies. Our modelling reveals the next:
- Beneath present insurance policies (BAU – enterprise as regular), Portugal’s debt is 72 pps greater than the climate-agnostic baseline in 2050 and 230 pps greater in 2070.
- With early EU mitigation and enough adaptation spending, debt is 57 pps greater in 2050 and 86 pps in 2070.
- Delayed EU investments and inadequate adaptation ends in greater debt ranges of 69 pps in 2050 and 113 pps in 2070.
- EU early motion mixed with world cooperation ends in 6 pps greater debt ranges than the climate-agnostic baseline in 2050 and 19 pps decrease ranges in 2070.
- Progressive taxation, akin to a wealth tax, mixed with EU early motion would enhance debt by 14 pps in 2050 and cut back debt by 1 pps in 2070 in comparison with the climate-agnostic baseline.
Picture: iStock
