Portugal’s economy is expected to remain solid in 2026, but uncertainty around exports and rising house prices could cloud to positive outlook, according to Bank of Portugal governor Álvaro Santos Pereira.
Speaking on RTP Notícias’ Grande Entrevista, Santos Pereira said economic projections point to a “certain level of confidence”.
“We predict that the Portuguese economy will remain robust. If we compare the current economy to how it looked around a decade and a half ago, it is a truly incredible transformation,” said the former minister of economy during Pedro Passos Coelho’s PSD/CDS-PP government.
While growth may not be spectacular, he described it as “robust”, with inflation hovering around 2% and supported mainly by domestic consumption and increased investment, including funds from the Recovery and Resilience Plan (PRR).
Despite the positive tone, the governor warned that exports area “big unknown”, noting that Portugal has lost export market share for the first time. “It’s essential that we closely monitor what is happening with exports,” he said.
Santos Pereira pointed to financial markets as the main external threat. He said there are signs of overvaluation not only in the United States of America but also in other regions, warning that a sharp correction could have a significant global impact. “If that correction is severe, it will affect economies around the world,” he cautioned.
Domestically, the housing market remains one of his biggest concerns. With housing prices continuing to rise, he warned of the growing pressure on families.
“If there is a financial crisis on an international level, it can impact the prices of houses,” he said, stating that the increasing house prices are already worrying him due to the “impact they have on families,” particularly as demand continues to exceed supply. Portugal, he noted, has recorded one of the steepest increases in house prices relative to income among OECD countries over the past decade.
“Over the last 10 years, demand has consistently outpaced supply, and when that happens, prices keep rising,” he said, adding that the solution lies largely in boosting housing supply. This includes building more homes, ensuring enough labour in the construction sector and creating conditions that allow people to actually afford a house. Without a meaningful increase in supply, he warned, high prices are here to stay.
Santos Pereira also used the interview to call for major structural reforms, arguing that reforming the state should be an absolute priority.
“It is time to carry out important reforms, namely in the fight against corruption,” the governor argued, defending that Portugal should replicate the “best practices” from the UK, New Zealand and Nordic countries.
“When rules are clear and penalties are enforced, there is more effective action,” he said.
On labour policy, the governor defended a “flexicurity” model, which aims to protect workers while allowing companies greater flexibility. He reiterated his support for individual time-banking schemes, arguing that they help businesses adapt to seasonal demands while benefiting the broader economy. “Someone may work more hours at Christmas and be compensated later – that flexibility helps companies and the economy,” he explained.
Finally, asked about Venezuela and its large oil reserves, Santos Pereira downplayed its global economic impact. While acknowledging that recent events in the country could influence oil prices, he said the quality of Venezuelan crude means the overall effect on the global economy is likely to be limited.
