S&P Global Ratings on Friday confirmed Portugal's A+ long-term and A-1 short-term sovereign credit ratings in both foreign and local currencies and kept a positive outlook on the ratings.
The agency views the Portuguese economy as able to absorb a moderate rise in energy prices that could result from disruptions at the Strait of Hormuz in 2026. Its assessment points to several mitigating factors: Portugal's low energy intensity, a tourism sector that has so far shown resilience, and a ramp-up of capital spending financed through the Next Generation EU (NGEU) program.
Growth and energy exposure
S&P projects real GDP growth of 1.7% in 2026. The agency attributes part of this expansion to faster implementation of NGEU-funded projects that reach their deadline this year and to continued strong private consumption supported by a tight labor market.
Portugal's vulnerability as a net importer of oil and natural gas is tempered, in S&P's view, by its relatively low energy intensity of 64 kilograms of oil equivalent per thousand euro of GDP and by an increasing share of renewables in the national energy mix, at about 36%. The ratings agency also noted that certain fuel supply chains are localized, particularly for aviation, which helps limit disruption risks for the tourism sector.
Fiscal trajectory and deficit outlook
Despite emergency support for energy and costs related to weather-related reconstruction, S&P said net general government debt is on a downward path. The agency projects net debt will fall from 85% of GDP in 2025 to 75% by 2029. S&P attributes this trajectory to prudent fiscal policy that creates fiscal space to address longer-term pressures such as rising defense needs and population aging.
Portugal recorded a budget surplus of 0.7% of GDP in 2025, exceeding its 0.3% target, the ratings agency said. The higher-than-expected surplus reflected buoyant tax receipts supported by a resilient labor market and strong wage growth. For 2026, S&P expects a modest deterioration to a deficit of 0.2% of GDP, factoring in the fiscal effects of support measures following Atlantic storm Kristin at 0.4% of GDP and additional energy support measures at 0.1% of GDP. Beyond 2026, the agency expects the budget balance to remain broadly around neutral as temporary emergency measures and an intense capex cycle tied to NGEU phase out.
Labor market and banking-sector outlook
S&P highlighted continued strength in the labor market. Unemployment fell to 5.6% in June 2026, the lowest rate since 2002, and the agency expects unemployment to stay structurally low, averaging about 6% over 2025-2028. The post-pandemic increase in registered employment has been driven largely by foreign workers, who accounted for more than 80% of the rise and have helped alleviate shortages in tourism, construction, and healthcare.
On banking, S&P projects Portuguese banks will remain profitable in 2026, forecasting an average domestic return on equity of around 13% and an average cost-to-income ratio of roughly 43%.
Bottom line
S&P's decision to affirm Portugal's A+/A-1 ratings and to maintain a positive outlook rests on a combination of modest near-term growth supported by NGEU-driven capex, resilience in consumption and tourism, a tightening labor market, improving public debt dynamics, and a measured exposure to energy price volatility. The agency flags temporary fiscal pressures in 2026 and 2027 but expects these to be manageable within a declining net-debt trajectory.