O State Budget for 2026 (OE2026) defined by a delicate balance between economic stimulus and fiscal consolidation. The Government predicts real growth of around 2,3%inflation stabilized close to 2%and a reduction in public debt from 93.6% to 87.8% of GDP until 2026 (Ministry of Finance, 2025a). The strategy combines IRC and IRS reductions, reinforcement of public pensions and salariese increased public investmentmainly financed by Recovery and Resilience Plan (PRR) (Ministry of Finance, 2025b).
Under a reading of OE2026, the budgetary framework is accounting consistentbut economically demanding. The projections are based on three fragile pillars: full execution of the planned investment, stability of financial conditions and maintenance of an external context favorable to international trade. Any deviation in these vectors, delay in the execution of the PRR, rise in interest rates or slowdown in exports could compromise the pace of debt reduction (Ministry of Finance, 2025a, chapter VI).
The Report itself recognizes the sensitivity of public accounts to macroeconomic variations: nominal growth 1 pp lower than expected increases debt by around 0,5 p.p. do PIB (Ministry of Finance, 2025a, p. 87). This elasticity shows that budgetary margins remain narrow and that consolidation depends, to a large extent, on maintaining the current stability cycle.
From a structural point of view, the budget represents a trade-off between competitiveness and sustainability. The phased reduction of the IRC from 21% to 20% in 2026, with a target of 17% by 2028 and the adjustment of the IRS aim to reinforce disposable income and business investment (Ministry of Finance, 2025b, diap. 15–18). However, expenditure on pensions and personnel presents a structurally ascendinggenerating pressure on the primary balance. Compatibility between fiscal stimulus and expenditure control will therefore require automatic correction mechanisms and periodic review of public expenditure (Ministry of Finance, 2025a, chapter VII).
O public investment constitutes the central axis of the strategy. The success of OE2026 will depend on your execution efficiency and the ability to channel funds to sectors with a high economic multiplier, youth, energy transition, innovation and human capital. The economic literature shows that the impact of public investment depends more on the quality and pace of implementation than on the budgeted volume (Blanchard & Giavazzi, 2021).
To mitigate risks, it would be prudent to institute a “budget buffer” formal, equivalent to 0.2% of GDP, designed to absorb unforeseen shocks without deteriorating the budget balance. Additionally, the creation of quarterly execution indicatorsincluding monitoring the PRR, revenue evolution and average cost of debt, would reinforce the transparency and credibility of fiscal policy (Ministry of Finance, 2025a).
In summary, OE2026 represents a exercise of responsible ambitionbut whose viability depends on the transition between planning and execution. Debt consolidation will continue only if nominal growth and public investment meet projected targets. The challenge is not conceptual, but operational: transforming predictions into verifiable results.
Fiscal credibility is the main macroeconomic asset. Portugal today has a rare opportunity to consolidate gains after years of discipline. The success of OE2026 will depend on knowing how to preserve this confidence — with less projected optimism and more executed realism.
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