Europaudvalget 2025
KOM (2025) 0222
Offentligt
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EUROPEAN
COMMISSION
Brussels, 4.6.2025
SWD(2025) 222 final
COMMISSION STAFF WORKING DOCUMENT
2025 Country Report - Portugal
Accompanying the document
Recommendation for a COUNCIL RECOMMENDATION
on the economic, social, employment, structural and budgetary policies of Portugal
{COM(2025) 222 final}
EN
EN
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ECONOMIC DEVELOPMENTS AND KEY POLICY
CHALLENGES
Domestic demand supports
economic growth
Portugal’s
economy remains resilient as
domestic demand increases.
Portugal’s GDP
growth slowed from 2.6% in 2023 to 1.9% in
2024. However, the growth rate picked up
again towards the end of the year, thanks to a
very strong rebound in private consumption.
Sustained, though somewhat decreasing,
growth in foreign tourism also supported the
economy. Since 2022, Portugal has
consistently outperformed the EU average
growth. Portugal’s GDP growth is forecast at
1.8% in 2025 and 2.2% in 2026, also above
the expected EU average. Domestic demand is
projected to remain the main growth driver as
households’ consumption is boosted by
employment and income growth while
investments are benefiting from the projected
peak within the recovery and resilience plan
cycle. In the longer term, a key challenge for
Portugal will be to increase business capacity
to scale up and innovate, and to increase
productivity growth across all regions (see
Section 2).
The labour market continues to improve,
helped by migration flows.
Portugal’s
unemployment rate remained unchanged from
2023 to 2024, at 6.5% (see Social Scoreboard
in Annex 13). Employment rose by 1.2% during
the year, implying a slight improvement in
labour productivity in terms of GDP per
employee. The labour force expanded by 1.1%,
helped by increasingly positive net migration
flows. In contrast, the natural population
change and internal migration are undermining
regional competitiveness. In 2013-2022, the
population aged 20-64 decreased faster than
the EU average, particularly in Centro, Alentejo
and Madeira, leading to a shrinking workforce
in these regions. Youth unemployment (15-24
years) remained high at 21.6% in 2024, up
from 20.5% in 2023, which was substantially
above the EU average and particularly high in
Madeira and the Azores. Portugal continued to
report relatively low job vacancy rates, as well
as consistent signs of labour shortages in
some sectors, notably construction, healthcare
and education, which point to certain skills
mismatches
that hinder the country’s
competitiveness.
Graph 1.1:
Real GDP growth and selected
labour market indicators
10
y-o-y growth, %
% of active population
20
15
10
5
0
-5
8
6
4
2
0
-2
-4
-6
-8
-10
-15
-10
-20
GDP growth
Unemployment rate (rhs)
Employment growth
Estimates for 2025 and 2026 are from the European
Commission's Spring 2025 forecast.
Source:
European Commission
Inflation is slowing down despite sticky
prices in services.
Inflation moved broadly in
line with the EU average, decreasing from
5.3% in 2023 to 2.7% in 2024. However,
inflation in the services sector was 4.5%,
mainly due to a continuous rise in the prices of
tourism-related
services,
particularly
accommodation. Inflation is projected to slow
down further to 2.1% in 2025 and 2.0% in
2026, and continues to be mainly driven by
services, as both domestic demand and
foreign tourism are set to keep pressure on
prices.
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Box 1
UN Sustainable Development Goals (SDGs)
Portugal is improving in most SDGs related to environmental sustainability (SDGs 2, 7,
9, 13 and 14), but is away from the EU average on sustainable cities and communities
(SDG 11), due, for instance, to the rates for recycling of municipal waste and circular
material use that are lower than the EU average.
Progress is being made in several SDGs related to fairness (especially SDGs 4, 5, 7 and
8). However, Portugal is moving away from the targets for some other SDGs related to
fairness (SDGs 3 and 10) because, for instance, many health and well-being indicators
worsened. Although significant progress has been made, Portugal remains well below
the EU average on industry, innovation and infrastructure (SDG 9) due to the low
research and innovation output (see Annex 15).
The
macroeconomic
situation
is
improving.
In June 2024, the European
Commission concluded that Portugal was no
longer
experiencing
macroeconomic
imbalances, and the economy was less
vulnerable to shocks than before.
Portugal’s
private and public indebtedness continues to
decrease. Price and cost-competitiveness
developments remain contained. By contrast,
house prices continue to rise very strongly, and
the estimated overvaluation has increased.
This is not threatening macroeconomic
stability, due to declining household
indebtedness and the appropriate financial
sector regulations, but it is a significant
challenge in terms of housing affordability and
social policies.
2023. It is forecast to further decline in 2025
and 2026, thanks to primary budget surpluses
and growth in GDP not adjusted for inflation.
Fiscal policy measures are expected to
increase net expenditure.
In 2024, net
expenditure(
1
) in Portugal grew by 12.0% (see
Annex 1). This is mainly driven by the increase
in expenditure, on the back of higher public
wages and social transfers, and the estimated
impact of revenue-decreasing fiscal policy
measures, as the reduction in the personal
income tax rates. In 2025, net expenditure is
forecast by the Commission to grow by 6.1%,
which is above the maximum growth rate
recommended by the Council(
2
). This reflects
the impact of fiscal policy measures that
increase public wages and pensions, and that
reduce revenues from direct taxation, as the
broadening of the youth personal income tax
scheme. The cumulative growth rate of net
expenditure in 2024 and 2025 taken together
is projected at 18.8%, which is above the
maximum rate recommended by the Council.
Public finances are supported by
windfall revenues
Portugal’s budget balance maintains a
surplus amid growing expenditure.
In
2024, the budget balance remained at a
surplus, equal to 0.7% of GDP, 0.5 percentage
points of GDP below the 2023 level. Revenues
continued to grow, benefiting from windfall tax
revenues from the corporate income tax, and
increased social security contributions.
Increased public wages and social transfers,
particularly those related to pensions, pushed
up expenditure. This was partly compensated
by postponed public investment. The budget
balance is expected to shrink further in 2025
and 2026. Public debt reached 94.9% of GDP
in 2024, 3 percentage points less than in
(
1
) Net expenditure is defined in Article 2(2) of Regulation
(EU) 2024/1263 as government expenditure net of (i)
interest expenditure, (ii) discretionary revenue
measures, (iii) expenditure on programmes of the Union
fully matched by revenue from Union funds, (iv)
national expenditure on co-financing of programmes
funded by the Union, (v) cyclical elements of
unemployment benefit expenditure, and (vi) one-off
and other temporary measures.
(
2
) Council Recommendation of 21 January 2025
endorsing the national medium-term fiscal-structural
plan of Portugal (OJ C, C/2025/641, 10.2.2025, ELI:
http://data.europa.eu/eli/C/2025/641/oj).
3
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Rising pension expenditure
challenges fiscal sustainability
Population ageing is a continuous
challenge for Portugal’s pension and tax
systems.
Population ageing, alongside a
shrinking working-age population, puts the
sustainability of Portugal’s
pay-as-you-go
pension system under pressure (Graph 1.2;
and Annex 1). While pension costs are
estimated to increase by three percentage
points of GDP by 2046 compared to 2022,
there will be fewer contributors supporting this
expenditure. While in 2025 there are nearly
two contributors per pensioner, it is estimated
that in 2046 there will only be around one
contributor. This will create deficits within the
pension system balance, challenging medium-
term fiscal sustainability. Portugal will have to
resort to state budget transfers and the
Portuguese reserve fund for public pension
schemes (
3
) to offset the deficit. Ageing is also
expected to have an impact on the tax system.
With a lower number of working-age people,
revenues from labour taxation could decrease
(see Annex 2).
Graph 1.2:
Pension system sustainability
(2025-2046)
4,0
3,5
3,0
2,5
2,0
165
160
155
150
145
140
135
130
125
120
115
110
105
100
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043
2044
2045
2046
1,5
1,0
0,5
0,0
-0,5
-1,0
Pension expenditure, % of GDP (baseline = 2022)
Pension system balance, pps of GDP
Old-age support ratio, in % (rhs)
(1) The pension-expenditure-to-GDP ratio is the annual
difference with 2022 data, which was 12% of GDP. The pension
system balance is the difference between contributions and
gross pension expenditure. The old-age support ratio is the
number of contributors per 100 pensioners in the public pension
system.
Source:
2024 Ageing Report (EC/EPC) and own calculations.
The tax system remains complex,
hindering competitiveness
Widespread tax expenditures continue to
create sizeable revenue losses.
Portugal’s
tax system has more than 500 tax
expenditures, such as tax incentives,
exemptions and deductions. Tax expenditures
represented a loss in revenue of around 6% of
GDP in 2023 (
4
). While tax expenditures can be
effective in achieving policy objectives, their
widespread use contributes to the tax system’s
complexity. If not compensated by other
mechanisms, tax expenditures could contribute
to income inequality (see Annex 2). As part of
the Portuguese recovery and resilience plan, a
new tax policy unit on tax expenditures (U-
TAX) was set up in February 2024. In 2025, it
will produce an assessment of existing tax
expenditures to streamline them. As an
additional source of lost revenue, Portugal’s
outstanding tax arrears relative to GDP remain
one of the highest in the EU.
(
4
) Tax and Customs Authority,
2023 Report on Tax
Expenditures,
June 2024.
(
3
)
Fundo de Estabilização Financeira da Segurança Social.
At the cut-off date of the Country Report, this reserve
fund
–
benefiting from the 2023 budget surplus and
positive economic performance
–
stood at
EUR 40 billion (14% of GDP), covering two years of
public pensions.
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The corporate income tax system is
complex and does not favour firms’
growth.
The corporate income tax rate in
Portugal is composed of a state tax and
municipal surtaxes. The state tax depends on
the amount of each firm’s taxable profits. On
top of that, municipalities can set a surtax of
up to 1.5%. As a result, the statutory rate of
the corporate income tax can vary from 12.5%
to 30.5%, depending on a firm's size and
location. This design makes the tax system
complex (
5
). It could also disincentivise firms
from scaling up, hindering greater economies
of scale and associated efficiency gains (see
Annex 2). At the same time, it increases the
scope for profit shifting within the country.
Fossil fuels are subsidised, with both
fiscal and environmental implications.
Petrol and diesel prices in Portugal are close to
the EU average. Excise duty on fuel and energy
products, the carbon tax and value added tax
account for more than half of the final price of
diesel and petrol. The total tax rate on these
products is in line with the EU average.
Portugal has a significant number of fossil
fuel subsidies without a planned phase out
date before 2030 and those include, in
particular, (
6
) reduced excise duty on petrol
and diesel, and exemptions for the use of
diesel in public transport or by freight
companies (see Section 3).
(
5
) Portugal ranks 22 out of the 27 Member States in the
Tax Complexity Index.
(
6
)
European Commission own calculations. The
denominator is based on volumes disclosed by the
Portuguese authorities via 2025 national energy and
climate progress reporting. For all Member States, it
includes public research and development expenditures
for fossil fuels as reported by the International Energy
Agency (energy technology research, development and
demonstration
budgets)
and
excludes,
for
methodological consistency, excise tax exemption on
kerosene consumed in intra-EU-27 air traffic.
5
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Box 2:
Barriers to private and public investment
The investment rate of Portuguese non-financial corporations increased from 21.8% in 2014 to
26.7% in 2023, well above the EU-27 average of 22.8%. Despite this positive development,
several factors still hinder the capacity of Portuguese firms to invest, innovate and
increase their productivity (see Section 2).
In particular, Portuguese firms still report several
barriers to investment:
•
Shortages of skilled staff.
Some 86% of firms report shortfalls in skilled workers as an
obstacle to investment, well above the EU-27 average of 77%. Portugal may benefit from
reducing skills’ mismatches and bridging the gap between skills supplied and skills
demanded (see Section 4).
Business regulation.
Despite the progress made in shortening and streamlining business
procedures and regulations, 83% of firms still report business regulation as a barrier to
investment. Factors such as lengthy licensing and industrial permitting procedures,
compounded by discrepancies in the implementation of regulations across regions and
municipalities, negatively impact firms’ investment decisions.
High operating costs and uncertainty.
Most companies (81%) report high energy costs
as a major obstacle to investment and this, together with the higher financing costs
experienced in recent
years, reduced firms’ investment capacity. At the same time, rapidly
changing international conditions increased businesses’
uncertainty, and over 88% of
firms report this as an obstacle to investment, as seen in Annex 4.
Portugal’s public investment management has improved, but there are still
barriers to its efficiency.
The Portuguese national investment programme provides
guidance for public investment allocation over a 10-year period (see Annex 1). It outlines
three high-level strategic objectives, based on the framework of the EU Partnership
Agreement with Portugal (‘Portugal
2030’).
The plan covers all available funding sources
(such as EU funds, national funding and the private sector) and takes account of all users
such as public authorities, state-owned enterprises and private operators (Belu
Manescu
C., 2024).
•
•
•
These challenges also act as a bottleneck to the implementation of EU funds. The implementation
of Portugal’s RRP
is well underway but faces considerable obstacles linked to the above challenges.
At present, Portugal has fulfilled 33% of the milestones and targets in its RRP.
It remains important to accelerate the implementation of cohesion policy programmes. The mid-
term review offers opportunities to speed up progress and better address EU strategic priorities
related to competitiveness, defence, housing, water resilience and the energy transition.
While Portugal has signalled interest in leveraging the Strategic Technologies for Europe Platform
under cohesion policy, Portugal can further support the development or manufacturing of critical
technologies in the areas of digital and deep tech, clean and resource efficient technologies, and
biotechnologies.
6
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INNOVATION, BUSINESS ENVIRONMENT AND
PRODUCTIVITY
Fostering productivity by
strengthening
businesses’ ability
to innovate and grow
Portugal continues to improve its
competitiveness, but its productivity
levels remain well below those of its EU
peers.
Portugal has experienced strong output
growth over the past years (see Section 1),
supported by structural changes and increases
in productivity. Major structural reforms
implemented since the financial crisis have
helped
improve
the
country’s
fiscal
sustainability,
streamline
administrative
processes and regulation for businesses,
increase the efficiency of the judicial and
financial sector, and support innovation,
reducing the competitiveness gap between
Portugal and other EU countries. Between
2019 and 2023, productivity per hour worked
increased by 4.5%, compared to 2.7% at EU
level and only 2% in the euro area. However,
despite these improvements, in 2023
Portugal’s labour productivity levels were still
only 80.5% of the EU average.
Several
structural
factors
explain
Portugal’s productivity lag compared to
the EU average.
These factors include (i)
Portugal’s business fabric being dominated by
small and medium-sized enterprises with
limited growth or innovation potential; (ii) the
country’s relatively high reliance on labour-
intensive sectors, such as tourism; and (iii)
structural barriers to firms’ capacity to scale
up and innovate. The remaining regulatory and
administrative barriers are also a detriment to
the country's productivity growth potential and
competitiveness.
These
challenges
to
productivity growth could be addressed by
incentivising firms to innovate, easing their
access to finance for scaling up, reducing
excessive business regulation and making the
justice system more effective.
Graph 2.1:
Labour productivity growth and
R&D expenditure in Portugal and the EU
(2012-2023)
2.5%
10%
9%
2.0%
8%
7%
1.5%
6%
5%
1.0%
4%
3%
0.5%
2%
1%
0.0%
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
PT expenditure in R&I (% of GDP)
EU-27 labour productivity growth (rhs)
EU-27 expenditure in R&I (% of GDP)
PT labour productivity growth (rhs)
0%
(1) Labour productivity growth and R&D expenditure in Portugal
and the EU (2012-2023).
Source:
Eurostat and own calculations.
Despite the progress made over the past
years, Portugal still classifies as a
moderate innovator.
Expenditure on R&D
increased from 1.3% of GDP in 2017 to 1.7%
in 2023. However, this remains well below the
2023 EU average of 2.22%. The increase in
R&D levels in Portugal was driven by higher
expenditure from the private sector, equating
to 1.1% of GDP in 2023. The proportion of
public R&D expenditure, on the other hand, has
stagnated, remaining close to 0.6% of GDP
since 2017, also due to a large increase in
Portugal's the nominal GDP in Portugal (see
Annex 3). Innovation investments continue to
be concentrated in a few regions, with modest
improvements in high-technology exports and
new-to-market innovation sales (See Annex
17).
Several
structural
factors
hinder
Portugal’s capacity to innovate.
The
Portuguese
business
landscape
is
characterised by a large proportion of small
and medium-sized enterprises with limited
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innovation
potential.
Historically,
both
entrepreneurship and the capacity of firms to
undertake disruptive innovation have been low,
and these features were exacerbated in the
aftermath of the financial crisis. Over the past
decade, the country has also faced difficulties
in retaining and valuing its young skilled
workers. In this respect, Portugal has high
rates of youth unemployment, and a
significant proportion of its young workers are
overqualified. Because of these issues, many
well-qualified young people leave the country
looking for better opportunities abroad. In
addition, low cooperation between businesses
and research institutions is not conducive to
productivity-enhancing
research
and
innovation.
Important policies and programmes are in
place to increase the country’s capacity
to innovate.
A wide set of policies introduced
in recent years has significantly improved the
country’s innovation capacity. Large incentive
schemes have been put in place to support
research and innovation in strategic sectors.
The largest of these, the mobilising and green
agendas developed under the recovery and
resilience plan, are providing EUR 2.9 billion of
support for the creation of innovative products,
processes or services by consortia between
businesses and academia. Tax incentive
schemes also play a significant role in
supporting innovation, with the main one
(SifiDe) granting EUR 947 million of tax relief
to firms’ R&D activities in
2022. To support
the creation of innovative firms, a wider range
of measures, such as a one-stop-shop for
start-ups promoted by Startup Portugal,
several start-up vouchers and a start-up visa
scheme, as well as fiscal incentives, are also in
place to foster the creation of start-ups and
venture firms in strategic areas.
Business dynamism has been rising, but
start-ups and venture firms continue to
face funding difficulties.
There has been
strong growth in the number of new
businesses in Portugal in recent years (second
highest growth in the EU over the last five
years). The number of start-ups in Portugal
increased considerably, from 3 700 in 2022 to
over 4 700 in 2024. This thriving business
environment has been prompted by several
programmes to incentivise the creation of
start-ups and simplify their operations.
However, start-ups and venture firms still have
difficulties in accessing financing and, at a
later stage, scaling up. A number of funds and
programmes, such as the Deep Tech fund and
Venture Capital fund, have been set up to
support young firms and the creation of
innovative companies, but their effectiveness
will be visible only over time.
More could be done to improve
businesses’ capacity to innovate
and
scale up.
Over the past ten years, Portugal’s
capacity to innovate has increased, the
workforce has become more educated and the
business environment has turned more
dynamic. However, further progress is
warranted to boost research and innovation
and catch up with the country’s EU peers. In
particular, several administrative barriers still
hinder the scale-up of firms (e.g. long
industrial licensing and permitting processes,
tax disincentives to scale up and financing
constraints). Major benefits can be unlocked by
removing them, especially for sectors with
high growth and innovation potential (see
Annex 4). It would be beneficial to continue
increasing private investment in R&D and
stepping up cooperation between firms and
academia, also beyond the finalisation of the
main investments under the recovery and
resilience plan due in 2026 (see Annex 3).
Improving access to finance for
start-ups
and firms’ scale up
The Portuguese credit market is well
developed, supported by a sound banking
sector, but its capital market lags behind
those of its EU peers.
The Portuguese
banking sector recorded very good profitability
over 2023 and 2024, with improved
capitalisation levels. Portuguese firms,
especially SMEs, rely heavily on Portuguese
banks and on a mature credit market for their
external financing. However, their demand for
loans has been stagnating due to, among
other reasons, higher lending interest rates
and greater reliance on internal funding. The
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demand for loans started growing again only
in the
second half of 2024. Portugal’s capital
markets,
on
the
other
hand,
are
underdeveloped compared to those of its EU
peers. A large proportion of households’
savings is held as short-term bank deposits,
limiting capital investments and the
availability of equity financing for local
corporations (see Annex 5).
There is not enough venture capital and
private equity.
Local venture capital and
private equity markets remain shallow, with
venture capital representing only 0.02% of
GDP compared to an EU average of 0.08% in
2023. This funding is concentrated on start-
ups, but only a small proportion is allocated to
later development phases (9.4% in Portugal,
compared to 48.7% in the EU). This hinders
the scale-up of Portuguese companies, the
most successful of which often relocate
abroad to access more developed capital
markets and larger equity investments. Large
financial instruments have been set up, in the
recovery and resilience plan and beyond, to
support equity investments in venture firms.
However, the bulk of these investments are
expected to take place in 2025 and 2026.
Improving
financial
literacy
and
enhancing the development of capital
markets could remove some of the
existing barriers to investment.
Low
financial literacy levels, coupled with a high
concentration
of savings in banks’ deposits,
lead to an inefficient allocation of financial
resources. More productive investments could
be achieved by improving the population’s
financial literacy and awareness of investment
options. Portugal also has a low proportion of
households’ savings held in pension or
insurance funds, which limits the available
financing for venture capital and private equity
firms.
to investments.
In the 2024 European
Investment Bank Investment Survey, 48.8% of
Portuguese firms reported business regulation
as a key barrier to investment, compared to
32% of EU firms. The assessment of the OECD
product market regulation indicators for 2023
and 2024 classifies Portugal as the ninth
worst performer out of 38 OECD countries.
Long licensing and permitting procedures
remain a major issue. Despite the progress
made in shortening and streamlining these
processes, local authorities face difficulties in
implementing the new procedures and
practices differ significantly across regions
and municipalities. There are also barriers are
caused by strict requirements to access
regulated professions, as well as outstanding
barriers to the retail distribution sector. Late
payments remain widespread in the country,
especially in the autonomous regions, despite
significant improvements made in reducing
average durations in recent years (see Annex
4).
Portugal’s digital infrastructure is well
developed, but businesses are late to
adopt
some
advanced
digital
technologies.
Portugal’s internet coverage
and capacity are above the EU average. Digital
public services are also widely available to
businesses. Nevertheless, firms are late to
adopt some key digital technologies (see
Annexes 3 and 6). In 2023, cloud computing
had been adopted by only 32.3% of
enterprises (38.9% at EU level) and, in 2024,
artificial intelligence by 8.6% of enterprises,
well below the EU average of 13.5%. The
Portuguese information and communication
technology sector is expanding extremely
rapidly. Between 2021 and 2023 its turnover
increased by 27.8% and the number of
workers in the sector surged by 24.8%.
However, there is a need for further
development to catch up with other EU
countries, and the number of graduates in
computing remains relatively low (0.2% of the
population aged 24-35, vs 0.36% at EU level).
The regulatory framework could benefit
from a more extensive use of policy
evaluations and increased transparency
of stakeholder involvement.
Portugal
introduced ex ante impact assessments for
Reducing administrative and
regulatory barriers for businesses
Portuguese firms report administrative
and regulatory burden as a major barrier
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new regulations, as well as instruments for the
testing and experiment of new technologies,
such as the ’Technological Free Zones’.
However, the use of ex post assessments
remains significantly below the EU average.
Progress could be made in introducing ex post
regulatory impact assessments, to better
quantify the impact of new regulations or
policies, as well as to gauge the accuracy of
the ex ante evaluations. Transparency in the
involvement of stakeholders in regulatory
processes could also be improved, especially
concerning the regulation of interest groups.
Progress could be made by introducing a clear
regulatory framework for lobbying activities,
including the creation of a register of interest
representatives.
Graph 2.2:
Pending cases in Portuguese courts
of first instance and share of non-performing
loans to non-financial corporations (2008-
2024)
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Civil enforcement actions
Insolvencies
Non Performing Loans to NFCs (%, rhs)
20%
18%
16%
14%
12%
10%
8%
6%
4%
2%
0%
many instances and the length of appeals,
with cases in second-instance courts lasting on
average over 1 200 days, as of 2023 (see
Annex 6). The judicial system also faces
difficulties in hiring and retaining sufficient
staff, especially court clerks for administrative
and tax courts. It would be beneficial to
increase the attractiveness of such jobs,
especially in areas with high costs of living. In
this respect, the introduction of transfer
allowances or remote-working arrangements
could be explored.
(1) Pending civil enforcement actions and insolvencies in courts
of first instance are reported as a percentage of their peak
value (i.e. 1.25 million in 2012 for civil enforcement actions;
4 842 in 2014 for insolvencies). Non-performing loans are
reported as
the share of domestic banks’ outstanding loans to
non-financial corporations.
Source:
Direção-Geral da Política de Justiça
(Estatísticas
da
Justiça),
Bank of Portugal Statistics (BPStat) and own
calculations.
Bottlenecks in the judicial system affect
the business environment.
Portuguese
courts have made significant headway in
reducing their backlogs of cases. For example,
pending civil executive actions in courts of first
instance declined from 1.25 million in 2012 to
0.35 million in 2024. Despite positive
developments, courts still face backlogs and
proceedings take a long time (267 days for
first-instance civil and commercial cases in
2023). The delays are exacerbated by the
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DECARBONISATION, ENERGY AFFORDABILITY AND
SUSTAINABILITY
Addressing a complex regulatory
framework for renewables
Portugal's share of renewables in
electricity generation is the second
highest in the EU.
In 2024, 87.7% of the
electricity generated in Portugal came from
renewable sources, up by 11 percentage points
compared with 2023, and well above the
47.4% at EU level. Hydropower and wind
accounted for three quarters of the total
electricity generated from renewable sources
(42% and 33%, respectively). Solar was the
renewable source that increased the most, on
a yearly basis, by 36%. Despite this progress,
the share of fossil fuels in Portugal’s energy
mix in 2023 remained considerable, with oil
accounting for 47.2% and natural gas for
16.8%, while renewables and biofuels reached
only 31.4%.
Portugal's renewable energy ambitions
are hindered by a complex and lengthy
permitting process.
The complexity of the
legislation governing the country’s spatial
planning at national, regional and local levels
complicates the renewables permitting
process. Moreover, the lack of clear and
standardised assessment criteria leads to
different authorities interpreting the legislation
in different ways, resulting in complex and
time-consuming processes. For instance, the
implementation of Simplex Ambiental
–
an
amendment to the legislation aimed at
simplifying environmental-related permitting
procedures
–
has revealed potential loopholes
in assessments and the application of
deadlines. Specifically, for renewables projects,
such as solar energy, the impact assessments
are often undertaken in a fragmented manner,
failing to account for the cumulative effects
on the surrounding territories.
Energy
communities
are
facing
implementation bottlenecks.
The permitting
process for collective self-consumption and for
renewable energy community projects is also
slow. Public entities face difficulties in
becoming members of energy communities
due to mandatory requirements, such as
permitting
authorisation
and
public
procurement, which delay the process. At
present, 400 of 500 registered collective self-
consumption installations have obtained an
operating licence, and just one in ten
registered energy communities has secured an
operating licence. Giving preferential status to
energy community projects in tenders and
priority access to the grid would unlock the
potential of renewable energy communities
and collective self-consumption.
Tackling insufficient resources and
skills gaps among public
authorities
Insufficient resources and technical
issues with digital platforms cause
significant delays in the response of
permitting entities.
Portugal's public
authorities lack the tools, such as key
performance indicators and open databases,
to continuously monitor the implementation of
legislation and track the progress of renewable
energy plants, including their potential
environmental impact. The multiple entities
that need to be consulted during the
permitting process, without a single point of
contact, has also created delays. The
responsible entities often lack the necessary
skills to evaluate renewables projects. In
addition, inadequate communication and
conflict-resolution
channels
between
promoters, public authorities and local
communities further slow down permitting
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decisions. The planned digital one-stop shop
for renewables projects, which is supposed to
be finalised by 2026, is facing delays.
Fostering long-term contracts to
provide more stability to electricity
markets
Graph 3.1:
Electricity generation per energy
source and day-ahead electricity price in
Portugal (28.03.2025 - 02.04.2025)
funding. Currently, energy storage solutions
are currently limited, and Portugal lacks a
stable support framework for renewable
energy projects. To address price fluctuations,
further developing risk-based instruments,
such as power purchase agreements and
contracts for difference, should be made.
Promoting storage and demand-side response
would reduce the risk of curtailments and
ensure to safeguard the balance of the
electricity grid.
Shortcomings in the electricity
grids
The national grid capacity is facing
limitations, making it difficult to connect
new renewable energy projects.
This
happens particularly in areas that have seen a
significant surge in renewable energy projects,
like Sines. Reinforcements and new
transmission lines are under construction or
expected to be commissioned soon. The
permitting procedure for energy infrastructure
remains complex and lengthy: on average it
takes 36 months and is subject to both
environmental and sector-specific legislation
(see Annex 8). Furthermore, a significant part
of the grid
–
approximately 20 GW of RES
capacity to be installed
–
is currently reserved
for project agreements (
9
) that have not yet
been connected. Although these projects are
strategically important, they are blocking
capacity that could be used by other
developers, thereby causing prolonged
connection queues. To mitigate this issue,
effective monitoring mechanism to ensure
that these projects do not unnecessarily block
the grid would be beneficial, allowing for more
efficient use of existing capacity and
facilitating the connection of new projects.
(1) The above snapshot of a recent week is provided as a
graphic demonstration of the volatility of Portugal's
electricity market.
Source:
ENTSO-E and OMIE (REN).
High volatility in the Iberian electricity
market demonstrates the need for fossil-
free flexibility solutions such as energy
storage and demand-side response to
balance
the
electricity
grid
and
incentivise investment in renewables.
Wholesale electricity prices were highly
volatile in 2024, fluctuating between EUR 0
and EUR 157 per megawatt-hour (
7
)(
8
). This
volatility, which is still present in the market
(Graph 3.1), creates uncertainty and makes it
harder for renewable energy projects to secure
(
7
) In 2024, there were 1 887 hours when renewable
energy met all
of Portugal’s
electricity needs. There
were even periods when there was so much excess
renewable energy that prices dropped to zero.
(
8
) OMIE.
(
9
) For larger-scale electricity generation projects (above
1 MVA), a prior allocation of injection capacity in the
electrical grid is required. This grants the holder the right
to use the grid injection point with the allocated
capacity for the duration of the corresponding operating
licence (Títulos
de Reserva de Capacidade).
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The lack of transparency around
available distribution grid capacity and
expansion plans makes it difficult for
developers to plan and invest in new
projects.
Without clear information from grid
operators on grid capacity and future
expansion and modernisation plans per sub-
station in an accessible open platform,
developers cannot be certain about the
viability of their projects, because it is unclear
when access to the grid will be possible.
Reinforcing the distribution grids and
improving planning and optimisation would be
beneficial. For example, further fostering
hybrid projects (combining multiple renewable
energy sources and storage technologies in a
single connection point) could help maximise
grid efficiency, beyond the increase of almost
300 MW of power already achieved through
these means. At present, promoters do not
have a centralised platform to monitor their
projects’ progress.
This issue is expected to be
addressed by the upcoming digital one-stop
shop, which will include a user-friendly portal
for developers to access the information and
tools they need.
Portugal’s regulatory framework hinders
the development of flexible resources.
Portugal has so far prioritised reverse hydro
storage, with 3.6 GW installed, and most of its
potential is already exploited. Battery storage,
on the other hand, could be further increased.
Certain flexibility resources, such as demand-
side response, storage and aggregators, are
still facing regulatory restrictions in the
provision of ancillary services. The recent
EUR 100 million tender to add 500 MW of
battery
energy
storage,
where
the
manifestation of interest exceeded more than
1 GW, is expected to drive growth for large-
scale battery storage. On the other hand, the
energy storage market for customers, like
homes and businesses, still faces expensive
battery systems and a lack of clear
regulations. Portugal plans to draft a
comprehensive storage strategy by 2026.
While Portugal foresees a total storage
capacity in 2030 around 5.9GW (
10
), there is
still lack of clarity on future actions and
support for storage projects(
11
).
Providing incentives to spur
private investment in energy
efficiency and address energy
poverty
Energy efficiency improvements have
slowed down in recent years, despite the
supporting measures in both the recovery
and resilience plan and cohesion policy
programmes.
Energy efficiency could be
improved significantly in Portugal, especially in
the residential building sector, where more
than three quarters of the building stock has
an energy performance of category C or lower.
In 2023, primary energy consumption
decreased by 0.3%, marginally contributing to
the 11% reduction target to be reached by
2030 (
12
). Portugal estimates EUR 110 billion
of investment needs in residential buildings
and EUR 33 billion in non-residential buildings
up to 2050. While both the recovery and
resilience
plan
and
cohesion
policy
programmes include substantial renovation
measures, the incentive schemes are mostly
grant based, as outlined in Annex 8. Private
investment in this area is still scarce and the
lack of financing schemes to leverage private
investment is a major impediment for energy
efficiency renovations, leading to a significant
investment gap.
Portugal’s high levels of energy poverty
persists and there is a need for a radical
policy shift on energy efficiency to
prioritise holistic building renovations.
Around 17.5% of the population struggles to
adequately heat their homes. Despite efforts
to improve the situation, the current rate of
(
11
) Currently, Portugal only has in place a regulatory
sandbox dedicated to energy for the improvement on
regulatory framework regarding energy projects
–
Decree-Law No 15/2022
(
12
) The indicator of primary energy consumption of the
entire building sector had a reduction of 6.5% in relation
to the baseline year (2019).
(
10
) Final National Energy and Climate Plan, 2025
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progress (0.54% reduction in discomfort hours
in 2023), is not sufficient to meet the 2030
target (26% by 2030) (
13
). Energy efficiency
measures are often fragmented and focus on
individual solutions rather than addressing the
building as a whole, which would have a
greater impact on improving thermal comfort.
Portugal is planning to launch a pilot project
programme (Bairros
Sustentáveis)
that will
target buildings and homes in energy poverty
in the two metropolitan areas of Lisbon and
Porto, with the goal of addressing energy
poverty.
zero sectors are solar power and wind (
14
). The
country also has significant manufacturing
potential for electrolysers, as Portugal
accounts for 8-9% of the EU's total capacity.
However, these projects still need to be
implemented and a solid regulatory
framework for renewable gases is vital for the
sector's development. To support the
development of net-zero technologies,
Portugal has set up two incentive schemes to
encourage investments in their production. But
the permitting procedures for these
technologies remain the same as those for
other industrial processes and are hindered by
several bottlenecks (see Section 2).
Developing a sustainable industrial
sector in Portugal
The
decarbonisation
of
Portugal's
industry can support the sector's
competitiveness.
The production of energy-
intensive industries in Portugal has declined by
an average of 3.7% since 2021, with the
chemicals sector being a major contributor to
this decrease, its production having
plummeted by 47.5% over the same period.
Simplified permitting procedures, dedicated
support for decarbonisation, and initiatives to
improve the circularity of raw materials would
help create the necessary conditions for these
industries to thrive (see Annex 7). Furthermore,
Portugal is in a privileged position in the EU,
due to its high potential for the extraction of
critical and strategic minerals, such as copper,
tungsten, feldspar and lithium. This also
presents business opportunities in areas such
as battery manufacturing, with potential
positive spillovers to decrease divergences
across regions. Portugal has launched an
action plan to develop the extraction and use
of sustainable raw materials. Involving local
communities better would ensure that these
projects were implemented more effectively.
Portugal’s manufacturing capacity across
all net-zero technologies remains modest
but
with
significant
development
potential.
Portugal’s largest industrial net-
(
13
) National strategy report.
Accelerating decarbonisation of
transport
Investment is needed in charging
infrastructure to support the growth of
electric mobility in Portugal.
Investment in
electric charging infrastructure has been
impaired by a regulatory framework
characterised
by
confusing
pricing
mechanisms, leading to complex billing,
underinvestment and higher costs for
consumers. The proposed new framework for
electric charging infrastructure aims to
liberalise the market and boost transparency
in
charging
services.
By
reducing
intermediaries and ensuring clear invoicing,
this model seeks to simplify the current
complex pricing mechanisms. It also introduces
ad hoc charging with EU-wide payment
methods, and it allows alternative energy
supply methods, fostering a more competitive
and user-friendly environment. However, rural
areas must receive adequate investment to
develop the required charging infrastructure.
Fossil fuel subsidies remain a significant
impediment to Portugal achieving its
goals for decarbonising transport.
Portugal
has a substantial amount of relevant fossil
fuel subsidies without a planned phase-out
(
14
) European
Commission
Report,
The
net-zero
manufacturing industry landscape across Member
States,
January 2025.
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before 2030, equivalent to 0.69%
of Portugal’s
GDP, above the EU weighted average of
0.49%. Scaling down and phasing out these
subsidies is in line with EU commitments and
can give the government greater flexibility for
its spending choices. Fossil fuel subsidies that
do not address energy poverty in a targeted
way, that do not respond to genuine energy
security concerns, that hinder electrification
and that are not essential for industrial
competitiveness could be considered for
priority phase-out. The following fossil fuel
subsidies are particularly damaging from an
economic and environmental perspective: tax
reductions and exemptions for diesel used by
freight companies, railway locomotives and
public transport. For instance, freight
companies receive tax reductions for diesel,
allowing them to reimburse the difference
between domestic and minimum taxation
levels, while public transport vehicles and
railway locomotives enjoy exemptions from
the fuel excise tax. Such measures perpetuate
reliance on fossil fuels and disincentivise the
shift to electric vehicles and other sustainable
solutions. Nevertheless, it is noted that, in
Portugal, the combination of national energy
and carbon taxes and EU emissions trading
creates above-EU-average disincentives for
fossil fuel use in the industrial and electricity
sectors (see Annex 8).
Key infrastructure projects are poised to
transform
Portugal’s
transportation
landscape, but close monitoring is needed
to ensure timely delivery.
Lisbon's new
airport,
designed
to
accommodate
40 to 45 million passengers a year, offers a
significant
opportunity
to
incorporate
sustainable practices, including a railway link
to the city centre. High-speed rail projects
further demonstrate a commitment to cleaner
transport alternatives, efficiently connecting
urban centres and reducing the carbon
footprint. The Lisbon-Madrid cross-border
high-speed line, in particular, is crucial for
linking Portugal to the rest of Europe. Timely
progress on this project, along with its
adaptation to the European standard nominal
track gauge of 1 435 mm, which will link
Lisbon to the rest of the continent, could
significantly boost Portugal's competitiveness
and resilience. Upgrading and expanding
railway infrastructure will promote sustainable
mobility, bridge regional disparities and foster
social cohesion, ultimately driving economic
competitiveness and growth across the
country. However, the delays in implementing
the Ferrovia 2020 plan and the National
Investment Programme 2030 require these
plans should be monitored closely to ensure
timely delivery. Improving rail infrastructure,
decarbonising transport, and personal mobility
are
paramount, particularly in Portugal’s
metropolitan areas, which face significant
challenges in air quality and traffic congestion
(see Annex 7).
Climate adaptation and
preparedness
Portugal is one of the Member States
most affected by climate change.
Portugal
is particularly vulnerable to heatwaves,
droughts and wildfires, which are set to
intensify due to climate change. Natural
hazards are also expected to become more
frequent and extreme.
Portugal has already undertaken a
comprehensive analysis of the impacts of
climate change through its national
roadmap for adaptation 2100 study.
This
study evaluates regional and national impacts
under different climate scenarios until the end
of the century. It also highlights key
phenomena that affect livelihoods and
economic development and should serve as
the foundation for the 2025 review of the
country's national adaptation strategy. Given
that many adaptation measures are local, it is
essential to implement them in line with the
national strategy to maximise their impact. At
the same time, it would be beneficial to better
incorporate climate adaptation into sector-
specific policies, especially in areas like
agriculture, energy, housing, spatial planning
and infrastructure development. One example
is the special arrangements for small-scale
biomass power plants in high-risk fire areas,
aimed at addressing forest fire management
and renewable energy production. These
installations are encouraged to reduce fire
risks by using forest residues and promoting
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sustainable energy generation. Addressing the
adverse effects of climate change
–
such as
floods, coastal erosion, desertification,
droughts, heatwaves and forest fires
–
remains imperative. Effectively managing
these risks will not only mitigate their impact
but also strengthen Portugal’s water resilience,
which is an increasingly vital issue in the face
of climate change. Cohesion funds provide
around EUR 680 million and, together with a
wide range of measures under the recovery
and resilience plan, have been helping to boost
Portugal’s resilience to the effects of climate
change.
Tackling water management
inefficiencies
Portugal is among the most drought-
affected countries in the EU.
Despite some
progress made in recent years and the
announcement of a national water strategy
(Água
que Une)
in early March 2025, it would
be beneficial if water management were made
more efficient and the measures in the
strategy implemented quickly. Over the past
20 years, available freshwater has decreased
by 20-30% in most river basins. The frequency
and severity of droughts is forecast to
increase significantly in Portugal due to
climate change. For example, the 2022
drought affected more than 43% of Portugal’s
total area. Water demand in certain areas
already exceeds available water resources and
the pressure is likely to increase in the coming
years. Effective water management in
Portugal is essential for ensuring agricultural
productivity, energy production, climate
change
adaptation
and
infrastructure
resilience, while also supporting the tourism
and
industrial
sectors.
With
the
implementation of its national long-term
strategy, Portugal needs to strike the right
balance between water use and preserving the
health of its ecosystems. At the same time,
the country would benefit from better planning
for long-term climate risks, to ensure that its
water management can adapt to future
changes in climate, such as droughts or other
extreme weather patterns.
Streamlining the water governance
structure would improve coordination at
regional and local level, generate
economies of scale and boost overall
efficiency.
Increasing water retention in the
landscape and effecting long-term changes in
economic practices would be beneficial.
Improving wastewater management, reducing
leaks in water pipelines, strengthening
monitoring, restoring the natural sponge
function of the landscape and minimising
groundwater extraction would help address
water scarcity. Rehabilitating wetlands and
rivers (including floodplains) and implementing
other nature-based solutions can also help
tackle the lack of water. Water pricing does
not reflect the scarcity of the resource.
Addressing this could be an effective demand-
side tool but water pricing must be designed
carefully to take account of social
vulnerabilities.
Addressing ineffective waste
management and gaps in the
circular economy
Portugal is far below the EU average on
circular economy and waste management
indicators.
Portugal’s circular
material use
rate was 2.8% in 2023, well below the EU
average of 11.8%. Portugal is at high risk of
missing the EU target of recycling 55% of
municipal waste by 2025 (in 2023 it was
30.1%). Portugal is also behind on the EU
target to recycle 50% of plastic packaging
waste by 2025 (37.3% in 2022).
Despite progress, Portugal needs to do
more to improve waste management and
develop the potential of the circular
economy.
As mandated by the National
Waste Management Plan 2030, approved by
the government in 2023, the strategic plan for
municipal waste and the strategic plan for
non-urban waste were adopted in 2023.
Municipal action plans for municipal waste set
out strategies to comply with national targets.
Of the around 300 municipal action plans, 54
have received conditional approval from the
Portuguese Environment Agency (APA) and the
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Regulatory Authority for Water and Waste
Services (ERSAR), while 7 municipalities have
yet to submit their action plans. To implement
the objectives set out in Portugal’s National
Waste Management Plan 2030, a range of
reforms have been introduced in recent years.
Progress has been achieved through initiatives
and regulatory measures such as the
development of a deposit-refund system
(expected to be fully operational by 2026),
increased contributions from extended
producer responsibility (EPR) schemes for
packaging, the expansion of EPR to cover
additional product categories, and higher fees
for landfill use and incineration. By 2030, a
pay-as-you-throw system will replace flat-rate
waste tariffs with charges based on the actual
amount of waste generated by each
household. While Portugal has made notable
progress regarding the regulatory framework,
substantial investments will still be needed at
both national and municipal levels to ensure
full implementation. The total capital
investment required for Portugal to meet the
2035 recycling targets for municipal and
packaging
waste
is
estimated
at
15
EUR 911 million ( ). Portugal's recovery and
resilience plan includes funding to strengthen
and improve waste collection, sorting and
treatment capacity. Portugal has not yet
updated its national circular economy action
plan. In 2025, Portugal presented a new action
plan for the waste sector,
titled ’TERRA –
Efficient Transformation of Waste into
Environmental Resources’.
The action plan
identifies the investments needed by 2030,
while also highlighting the importance of
implementing the updated Circular Economy
Action Plan. and measures, missing a chance
to bring into in line with the EU circular
economy action plan 2020 and advance its
circular economy objectives.
(
15
) European Commission, Study on investment needs in
the waste sector and on the financing of municipal
waste management in Member States.
17
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SKILLS, QUALITY JOBS AND SOCIAL FAIRNESS
adult participation in lifelong learning (from
38% in 2016 to 33.4% in 2022), drifting away
from the 2030 national target of 60%; (ii) an
increased proportion of underperformers in
maths, science and reading in school; and (iii)
more young people leaving school and training
early (see Annex 12). Together, these three
factors further contribute to the population not
having the right skills for an evolving economy.
The mismatches also increase high youth
unemployment, hindering social cohesion.
Existing vacancies often fail to align with the
skills of available young workers and the
young unemployed (see Annex 10). A large
proportion of unemployed young people have
low skill levels, which makes them less able to
compete in a labour market that is
increasingly dominated by a more educated
workforce. Although fewer highly skilled young
people are unemployed, four in ten have little
chance of finding work (
18
).
The lack of a proper skills anticipation
mechanism has a negative impact on
career choices and labour market
matching.
The lack of a reliable forecast of
future market needs, to inform students of
career prospects and to adapt the higher
education offer to labour market needs,
results in many qualified young people
remaining unemployed for a long time or
simply seeking better opportunities abroad.
The proportion of migrant youth registered as
unemployed has also increased significantly
from 2022 to 2023 and nearly half of migrant
workers
with
higher
education
are
overqualified for the jobs they occupy. This
further aggravates skills mismatches and
destabilises labour market dynamics.
Portugal has successfully addressed
overall segmentation of the labour
(
18
)
Jovens à procura de emprego inscritos no IEFP:
Características, trajetórias e colocações
Addressing skills mismatches,
labour shortages and youth
unemployment for a competitive
future
Unemployment levels remain low but
labour shortages persist.
While the
unemployment rate in Portugal remains low
(6.5% in 2024), the country faces labour
shortages which persist in some sectors (see
Annex 10). This does not help Portugal’s low
productivity and hampers improvements in the
country’s competitiveness. As reported in late
2023 (
16
), six in every ten Portuguese
employers have struggled to find workers with
the right skills in the previous 24 months,
especially those with specific vocational
education
and
training
and
tertiary
qualifications. Employers identify this as the
most challenging issue faced by companies in
many
sectors
such
as
construction,
information and communication technology,
healthcare and renewable energy. In addition,
it was predicted that the demand for high-
skilled labour would increase significantly in
the short to medium term (2020-35) (
17
), due
to the increase of fast-growing sectors such
as,
for
instance,
information
and
communication technology and renewable
energy.
Skills mismatches aggravate Portugal’s
sectoral labour shortages and fuel
structurally high youth unemployment.
The skills supply (particularly regarding higher
education) does not appear to match market
needs. The development of the necessary skills
is also threatened by the following: i) declining
(
16
)
Flash Eurobarometer.
(
17
) Portugal- 2023 Skills forecast | European Centre for the
Development of Vocational Training.
18
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market.
It restricted the use of fixed-term and
temporary work agency contracts, compared
with the OECD average (
19
). Despite these
improvements, young people still face
precarious employment conditions, which
determine their career possibilities, further
education pathways and chances of starting
an independent life.
By
focusing
on
education,
skills
development
and
labour
market
integration, public policies could reduce
skills mismatches and boost Portugal’s
competitiveness.
Portugal’s
recovery and
resilience plan is supporting the creation of
tertiary education options and the participation
of people in courses and programmes for
adult learning. However, further incentives
could get more people and businesses
engaged in lifelong training for upskilling and
reskilling. It would be easier to include young
people in the labour market and tackle youth
unemployment if concrete and sustainable
partnership-based reforms were made,
alongside agreements between decision
makers, social partners and stakeholders. More
policy efforts could help integrate migrant
youth into the labour market. This would
promote social cohesion and help mitigate the
ageing of the Portuguese workforce and
labour shortages.
Public sector labour shortages could have
a negative impact on the quality of public
services.
First, in the national health service,
the country faces a heavy emigration of
nurses (e.g., in 2023, 60% of the graduates
that registered in the professional association
of nurses intended to emigrate(
20
) and
between 2020 and 2024 only about half of
the positions opened to recruit doctors were
filled (see Annex 14). Although Portugal has a
high prevalence of mental health disorders
with an impact on the well-being of its
population and consequently significant
productivity losses (
21
), the national health
(
19
)
OECD Data Explorer.
(
20
)
60% dos enfermeiros portugueses pediram declaração
para emigrar em 2023 - CNN Portugal
(
21
) https://www.oecd.org/en/publications/portugal-country-
health-profile-2023_069af7b1-en.html.
service does not have enough professionals to
provide accessible mental health care. Second,
there are too few teachers and the gap is
expected to get worse in the near future. This
is due to several factors, including the fact
there are fewer new teachers graduating and
that half of current teachers are over 50 years
old, with only a small fraction under the age of
30 (
22
). The
career’s
lack of attractiveness is
one of the reasons why fewer people want to
become teachers. Third, the tax authorities are
facing a similar situation, with more than half
of their employees expected to retire in the
coming years. Lastly,
Portugal’s justice system
also has too few court clerks, who are
essential for it to operate properly.
Portugal would benefit from closing these
public sector labour shortages.
It would be
beneficial to simplify recruitment procedures
to enable the timely recruitment of the
necessary staff, and to continue promoting the
attractiveness of public sector careers for the
profiles where shortages are most severe,
following efforts of recent years. Furthermore,
to tackle teacher shortages, the number of
people choosing to study teaching would need
to increase. This could be done by improving
career prospects for the profession and by
promoting this professional path among
students before university. In addition,
providing more flexible working conditions
could be explored as a way of encouraging
young people to join the profession and of
incentivising teachers to work in less
populated areas.
Tackling housing affordability and
accessibility
Higher housing demand in large cities and
popular
tourism
areas
aggravates
shortages of affordable housing and
undermines social cohesion.
Among the
more affected groups are young people, low-
and
middle-income
families
and
(
22
)
Estado da Educação 2023 - Conselho Nacional de
Educação.
19
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disadvantaged persons. They face rising rental
prices and are unable to buy property due to
high interest rates and housing prices.
Between 2015 and 2023, housing prices in
Portugal increased by 105.8% (compared with
48.1% in the EU) (
23
). High housing prices
relative to income contribute to the fact that
Portuguese young people
leave their parents’
home later than EU average. Middle-income
families find it increasingly difficult to save up
for and purchase homes, increasing their risk
of falling into poverty (see Annex 11). This
impacts on labour availability and negatively
affects competitiveness, since higher housing
costs limit the possibilities of businesses and
public bodies to attract and retain qualified
workers. In addition, higher housing costs
weigh on households’ budgets, savings and
their capacity to invest.
pressure on social services. A higher proportion
of people struggle to keep their homes
adequately warm in Portugal than the EU
average (see Annex 11). Measures and
investments for housing and buildings to be
financed under the European Social Climate
Fund can target the most vulnerable groups
and help cushion the impact of the green
transition’s
costs on these groups.
Portugal could benefit from further
action to alleviate housing cost pressures
on households,
particularly by increasing
affordable and social housing stock, including
in the Azores and Madeira. A comprehensive
review of existing housing policies and their
efficiency would help identify what is working
and where shortcomings remain. Bringing
vacant dwellings back onto the market,
together with renovating those not ready to be
immediately inhabited, could help increase the
supply of affordable housing, especially in
constrained areas. Linked to the previous
section, promoting more efficient public
transport and improving the public transport
network would make it easier for people to
commute from suburban and rural areas,
increase the attractiveness of other areas and
reduce pressure on major urban centres.
Social pressures go beyond housing
affordability,
with
poverty
levels
persisting
due
to
the
limited
effectiveness of the social protection
system.
Compared to the EU average,
Portugal has a lower percentage of the
population in severe material and social
deprivation (4.3%, against 6.4% in the EU) (
24
),
and at risk of poverty and social exclusion
(19.7%, against 21% in the EU) (
25
). However,
social benefits (excluding pensions) have
limited effectiveness in reducing poverty, and
high housing costs add pressure to the 2030
poverty reduction target under the European
pillar of social rights action plan. The efficiency
of the social benefits system is undermined by
overlapping benefits targeting the same
(
24
)
Living conditions in Europe - material deprivation and
economic strain - Statistics Explained.
(
25
)
Living conditions in Europe - poverty and social
exclusion - Statistics Explained.
Graph 4.1:
House price index (2015=100)
220
200
180
160
140
120
100
2015 2016 2017 2018 2019 2020 2021 2022 2023
EU
Portugal
Source:
Eurostat
The current social and affordable housing
stock is insufficient to meet demand.
Despite efforts under the Portuguese recovery
and resilience plan and cohesion policy, along
with other government investments expected
to increase the housing stock by 2030, there is
not enough social and affordable housing (see
Annex 11). Affordable housing shortages and
rising rental prices have also increased
homelessness, which has put additional
(
23
)
Housing in Europe
–
2023 edition - Interactive
publications - Eurostat
20
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objective. The single social benefit reform
included in the Portuguese recovery and
resilience plan still needs to be implemented
but is then expected to improve the current
situation. At the same time, workers with non-
standard contracts, such as very short-term or
hourly contracts, do not have access to some
social benefits, including benefits related to
unemployment and occupational illness. In
addition, the adequacy of the minimum
income scheme is still limited (see Annex 11).
Preparedness for a rapidly ageing
population
A rapidly ageing population threatens the
sustainability of the pensions system and
requires
improved
long-term
care
solutions.
Almost a quarter of the Portuguese
population is aged 65 or over, which could
impact the sustainability of the pensions
system (see Section 1 for an analysis of the
impact of ageing on public finances
sustainability). At the same time, there is a
need to improve long-term care services to
provide for the needs of older people.
Portugal's per-capita public investment in
long-term care is three times lower than the
EU average and Portugal is below the EU
average for the number of years of healthy
life of its population. Access to home care
remained at around half the EU average in
2022. Despite improvements, coverage rates
in long-term care remain low across all
regions, with even greater disparities in rural
and remote areas, as well as in the Azores and
Madeira. The number of carers has increased,
but the size of the workforce is still
insufficient to cope with the growing demand
for care, resulting in a strong reliance on
informal carers (see Annex 11). Implementing
the action plan for the national strategy for
long-term care would help meet the growing
demand for services and address staff
shortages. Portugal could also benefit from
improving the coverage of the independent life
support model (MAVI), a scheme co-financed
by the European Social Fund Plus to promote
the independent living of people with
disabilities and incapacity so that they can
lead an independent, self-determined life.
21
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KEY FINDINGS
To foster competitiveness, sustainability and
social fairness, Portugal would benefit from:
•
accelerating the implementation
of the RRP,
including the REPowerEU
chapter;
swiftly
implementing
cohesion policy, taking advantage of
the opportunities under the mid-term
review; and making optimal use of EU
instruments, including InvestEU and
STEP, to improve competitiveness;
taking action to mitigate the
impact of ageing on the
sustainability of the pension
system
and the provision of long-
term care;
fostering a business environment
that is conducive to the growth of
innovative and disruptive firms
by
supporting
investments
in
productivity-enhancing research and
innovation,
including
net-zero
technologies, promoting access to
venture capital and private equity for
firms, and removing barriers and
disincentives to business expansion
and scale-up;
simplifying administrative and
regulatory barriers for businesses
by streamlining administrative and
regulatory requirements, simplifying
and shortening industrial permitting
and licensing procedures, deploying
evidence-based policy evaluations,
improving
and
increasing
transparency
of
stakeholders’
involvement in policy making, further
reducing late payments and further
improving the efficiency of the justice
system;
strengthening the capacity of the
electricity
transmission
and
distribution grid
by simplifying the
grid’s
permitting framework, releasing
unused capacity and increasing grid
transparency
to
incentivise
investments in the national network;
•
making further progress towards
decarbonisation by fostering the
deployment of renewables
by
simplifying the licensing process and
training
staff
in
permitting
procedures, and making the cost of
renewable energy more stable and
predictable;
taking concrete steps to phase
out fossil fuel subsidies
and
reducing reliance on fossil fuels
particularly in the transport sector;
improving water governance to
strengthen climate adaptation
by
implementing
a
strategy
for
integrated and sustainable water
management, improving monitoring,
reducing leaks, tackling waste-water
collection and treatment and water
re-use;
tackling skill mismatches
by
investing in skills development and
lifelong learning and making them
more relevant to the needs of the
labour market, and by providing
young
people
with
quality
employment conditions;
addressing labour shortages in
critical public sector areas,
including healthcare, education and
the justice system, by simplifying
recruitment
procedures
and
promoting the attractiveness of these
careers;
•
•
•
•
•
•
•
•
22
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•
improving housing affordability
and accessibility
by targeting
vacant and derelict buildings in high-
demand
areas
by
addressing
shortages of social and affordable
housing and by promoting efficient
public transport connections that
improve the attractiveness of other
territories and reduce the pressure in
high demand areas.
23
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ANNEXES
 kom (2025) 0222 - Ingen titel kom (2025) 0222 - Ingen titel
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LIST OF ANNEXES
Fiscal
A1.
A2.
Fiscal surveillance and debt sustainability
Taxation
29
29
36
Productivity
A3.
A4.
A5.
A6.
Innovation to business
Making business easier
Capital markets, financial stability and access to finance
Effective institutional framework
40
40
45
50
57
Sustainability
A7.
A8.
A9.
Clean industry and climate mitigation
Affordable energy transition
Climate adaptation, preparedness and environment
62
62
68
74
Fairness
A10. Labour market
A11. Social policies
A12. Education and skills
A13. Social Scoreboard
A14. Health and health systems
80
80
84
89
93
94
Horizontal
A15. Sustainable development goals
A16. CSR progress and EU funds implementation
A17. Competitive regions
97
97
100
108
LIST OF TABLES
A1.1.
A1.2.
A1.3.
A1.4.
A1.5.
A1.6.
A1.7.
A1.8.
A1.9.
General government balance and debt
Net expenditure growth
Net expenditure (outturn and forecast), annual and cumulated deviations vis-à-vis the recommendation
Defence expenditure and the national escape clause
Macroeconomic developments and forecasts
General government budgetary position
Debt developments
RRF
–
Grants
RRF - Loans
30
30
31
31
32
32
33
33
34
27
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A1.10.
A1.11.
A2.1.
A3.1.
A4.1.
A5.1.
A6.1.
A6.2.
A7.1.
A8.1.
A8.2.
A9.1.
A13.1.
A14.1.
A16.1.
A16.2.
A17.1.
Projected change in age-related expenditure in 2024-2040 and 2024-2070
Fiscal Governance Database Indicators
Taxation indicators
Key innovation indicators
Making Business Easier: indicators.
Financial indicators
Portugal. Selected indicators on administrative burden reduction and simplification
Digital Decade targets monitored through the Digital Economy and Society Index
Key clean industry and climate mitigation indicators: Portugal
Retail energy price components for household and non-household consumers, 2024
Key Energy Indicators
Key indicators tracking progress on climate adaptation, resilience and environment
Social Scoreboard for Portugal
Key health indicators
Selected EU funds with adopted allocations - summary data (million EUR)
Summary table on 2019-2024 CSRs
Selection of indicators at regional level (NUTS 2024) in Portugal
35
35
37
44
49
56
58
59
67
68
73
79
93
95
103
104
109
LIST OF GRAPHS
A2.1.
A2.2.
A2.3.
A3.1.
A3.2.
A4.1.
A5.1.
A5.2.
A5.3.
A5.4.
A5.5.
A6.1.
A6.2.
A7.1.
A7.2.
A7.3.
A8.1.
A8.2.
A9.1.
A9.2.
A10.1.
A10.2.
A11.1.
A12.1.
A12.2.
A14.1.
A14.2.
A15.1.
A16.1.
A16.2.
A17.1.
A17.2.
Tax revenue shares in 2023
Tax wedge for single and second earners as a % of total labour costs, 2024
Percentage change in mean disposable income from PIT tax expenditures, by income decile (2023)
Public expenditure on R&D as a percentage of GDP
Patent applications filed under the PCT per billion GPD (in PPS €) in 2022
Making Business Easier: selected indicators.
Net savings-investment balance
International investment position
Capital markets and financial intermediaries
Composition of NFC funding as % of GDP
Composition of household financial assets per capita and as % of GDP
Trust in justice, regional / local authorities and in government
Indicators of Regulatory Policy and Governance (iREG)
GHG emission intensity of manu-facturing and energy-intensive sectors, 2022
Manufacturing industry output: total and selected sectors, index (2021 = 100), 2017-2023
Greenhouse gas emissions in the effort sharing sectors, 2005 and 2023
Monthly average day-ahead wholesale electricity prices and European benchmark natural gas prices (Dutch TTF)
Portugal's installed renewable capacity (left) and electricity generation mix (right)
Direct dependency (1) on ecosystem services (2) of the gross value added generated by economic sector in 2022
Investment needs and gaps in EUR million, in 2022 constant prices
Key labour market indicators
Labour market outcomes of young people
Impact of social benefits (excluding pensions) on poverty reduction
Underachievement rates by field, PISA 2012, 2018 and 2022 (%)
Employment rate of recent graduates by educational attainment (annual)
Life expectancy at birth, years
Treatable mortality
Progress towards the SDGs in Portugal
Distribution of RRF funding in Portugal by policy field
Distribution of cohesion policy funding across policy objectives in Portugal
Access to healthcare and primary education in rural areas
Greenhouse gas emissions per capita
36
38
39
40
41
46
50
51
51
53
54
57
58
64
65
65
68
71
76
77
80
81
84
89
90
94
94
97
101
101
111
112
28
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FISCAL
ANNEX 1: FISCAL SURVEILLANCE AND DEBT SUSTAINABILITY
This Annex contains a series of tables relevant for the assessment of the fiscal situation in
Portugal, including how Portugal is responding to Council recommendations issued under the
reformed Economic Governance Framework.
The reformed framework, which entered into force on 30 April 2024(
26
), aims to strengthen
debt sustainability and promote sustainable and inclusive growth through growth-enhancing
reforms and priority investments.
The medium-term fiscal-structural plans (hereinafter, MTPs or
plans) constitute the cornerstone of the framework, setting the budgetary commitment of Member States
over the medium term. The latter is defined in terms of net expenditure growth, which is the single
operational indicator for fiscal surveillance.
Portugal submitted its plan on 11 October 2024.
The plan covers the period until 2028, presenting a
fiscal adjustment over four years. On 21 January 2025, the Council adopted the Recommendation
endorsing Portugal’s
plan.(
27
)
The assessment of the implementation of the Council Recommendation
endorsing Portugal’s
plan is carried out on the basis of outturn data from Eurostat and the Commission Spring
2025 Forecast and taking into account the Annual Progress Report (APR), that Portugal
submitted on 30 April 2025.
Furthermore, given Portugal’s
request to activate the National Escape
Clause (
28
) following the Commission Communication of 19 March 2025(
29
), the assessment also
considers, as appropriate, the projected increase in defence expenditure based on the Commission Spring
2025 Forecast.
The Annex is organised as follows.
First, developments in
government deficit and debt
are
presented based on the figures reported in Table A1.1. Then, the assessment of the
implementation of
the Council Recommendation endorsing the plan
follows, based on the relevant figures presented in
Tables A1.2 to A1.9, including data on defence expenditure.
The Annex also provides information on the cost of ageing and the national fiscal framework.
Fiscal sustainability risks are discussed in the Debt Sustainability Monitor 2024.(
30
)
Developments in government deficit and debt
Portugal’s government surplus amounted to 0.7% of GDP in 2024.
Based on the Commission
Spring 2025 Forecast, it is projected to decrease to 0.1% of GDP in 2025. The government debt-to-GDP
ratio amounted to 94.9% at the end of 2024 and, according to the Commission, is projected to decrease
(
26
) Regulation (EU) 2024/1263 of the European Parliament and of the Council (EU) on the effective coordination of economic policies
and on multilateral budgetary surveillance, together with the amended Regulation (EC) No 1467/97 on the implementation of the
excessive deficit procedure, and the amended Council Directive 2011/85/EU on the budgetary frameworks of Member States are the
core elements of the reformed EU economic governance framework.
(
27
) OJ C, C/2025/641, 10.02.2025, ELI:
http://data.europa.eu/eli/C/2025/641/oj
(
28
) On 30 April 2025, Portugal requested to the Commission and to the Council the activation of the National Escape Clause. On this
basis, the Commission adopted a Recommendation for a Council Recommendation allowing Portugal to deviate from, and exceed,
the net expenditure path set by the Council COM(2025) 612.
(
29
) Communication from the Commission accommodating increased defence expenditure within the Stability and Growth Pact of 19
March 2025, C(2025) 2000 final.
(
30
)
Commission (2025) ‘Debt Sustainability Monitor 2024,’
European Economy-Institutional Papers
306.
29
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to 91.7% end-2025. The debt ratio has declined by almost 40 pps. of GDP since its 2020 historical peak
on the back of favourable interest-growth-rate differentials and primary surpluses.
Table A1.1:
General government balance and debt
Variables
1
2
2024
% GDP
% GDP
Outturn
0,7
94,9
APR
0,3
91,5
2025
COM
0,1
91,7
APR
n.a.
n.a.
2026
COM
-0,6
89,7
General government balance
General government gross debt
Source : Commission Spring 2025 Forecast (COM), Annual Progress Report (APR)
Developments in net expenditure
The net expenditure(
31
) growth of Portugal in 2025 is forecast by the Commission(
32
) to be
above the recommended maximum, corresponding to a deviation of 0.4% of GDP.
Considering
2024 and 2025 together, the cumulative growth rate of net expenditure is also projected above the
recommended maximum cumulative growth rate, corresponding to a deviation of 0.5% of GDP. According
to Portugal’s APR, the net expenditure growth, for both 2025 and cumulative for 2024 and 2025, is
forecast to be above the recommended maximum. The differences are explained by the Commission's
forecast of lower expenditure funded by transfers from the EU in 2025. Another driver of the differences
is the higher negative impact of discretionary revenue measures estimated by the Commission forecast in
2024, particularly measures related to the personal income tax.
Table A1.2:
Net expenditure growth
Annual
REC
2024
2025
2026
Cumulative*
COM
REC
Growth rates
12,0%
n.a.
6,1%
17,4%
6,3%
23,4%
APR
n.a.
15,3%
n.a.
COM
n.a.
18,8%
26,3%
APR
11,6%
3,4%
n.a.
n.a.
5,0%
5,1%
* The cumulative growth rates in the APR are calculated by reference to the base year of 2023.
Source:
Council Recommendation endorsing the national medium-term fiscal-structural plan of Portugal (Rec), Annual Progress
Report (APR) and Commission's calculation based on Commission Spring 2025 Forecast (COM).
The assessment of the net expenditure growth and in particular the comparison with the
recommended net expenditure path considers that Portugal has requested the activation of
the national escape clause to facilitate transitioning to a higher level of defence expenditure.
General government defence expenditure in Portugal remained stable at 0.8% of GDP between 2021 and
2023(
33
). According to the Commission 2025 Spring Forecast, expenditure on defence is projected at 0.8%
of GDP in 2024 and 2025. The projected cumulated deviation after taking into account the flexibility
provided by the national escape clause for defence spending is below the threshold of 0.6% of GDP.
(
31
) Net expenditure is defined in Article 2(2) of Regulation (EU) 2024/1263 as government expenditure net of (i) interest expenditure,
(ii) discretionary revenue measures, (iii) expenditure on programmes of the Union fully matched by revenue from Union funds, (iv)
national expenditure on co-financing of programmes funded by the Union, (v) cyclical elements of unemployment benefit
expenditure, and (vi) one-off and other temporary measures.
(
32
) Commission Spring 2025 Forecast,
European Economy-Institutional paper 318,
May 2025.
(
33
) Eurostat, government expenditure by classification of functions of government (COFOG).
30
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Table A1.3:
Net expenditure (outturn and forecast), annual and cumulated deviations vis-à-vis the
recommendation
Variables
Total expenditure
2
Interest expenditure
3
Cyclical unemployment expenditure
4
Expenditure funded by transfers from the EU
5
National co-financing of EU programmes
6
One-off expenditure (levels, excl. EU funded)
Net nationally financed primary expenditure (before
7=1-2-3-4-5-6
discretionary revenue measures, DRM)
8
Change in net nationally financed primary expenditure (before DRM)
9
DRM (excl. one-off revenue, incremental impact)
Change in net nationally financed primary expenditure
10=8-9
(after DRM)
11
Outturn / forecast net expenditure growth
12
Recommended net expenditure growth*
13=(11-12) x 7
Annual deviation
14 (cumulated from 13)
Cumulated deviation
15=13/17
Annual balance
16=14/17
Cumulated balance
17
p.m. Nominal GDP
1
bn NAC
bn NAC
bn NAC
bn NAC
bn NAC
bn NAC
bn NAC
bn NAC
bn NAC
bn NAC
% change
% change
bn NAC
bn NAC
% GDP
% GDP
bn NAC
2023
Outturn
113,4
5,5
0,1
3,7
0,6
1,3
102,1
2024
Outturn
122,0
5,9
0,1
3,0
0,4
0,0
112,6
10,4
-1,8
12,3
12,02%
11,8%
0,2
0,2
0,1
0,1
285,2
2025
COM
131,8
6,4
0,1
6,2
0,5
0,0
118,5
5,9
-0,9
6,8
6,1%
5,0%
1,2
1,4
0,4
0,5
299,2
2026
COM
140,8
7,0
0,1
7,9
0,5
0,0
125,4
6,9
-0,5
7,4
6,3%
5,1%
1,4
2,8
0,4
0,9
312,8
267,9
* The growth rate for 2024 is not a recommendation but serves to anchor the base, as the latest year with outturn data when
setting the net expenditure path is year 2023.
Source:
Commission Spring 2025 Forecast and Commission's calculation
Table A1.4:
Defence expenditure and the national escape clause
1
2
3
4
Total defence expenditure
of which: gross fixed capital formation
Flexibility from increases in defence expenditure
Cumulated balance after flexibility
% GDP
% GDP
% GDP
% GDP
2021
0,8
0,1
2022
0,8
0,1
2023
0,8
0,1
2024
0,8
0,1
2025
0,8
0,1
0,0
0,5
2026
0,8
0,1
0,0
0,9
Source:
Eurostat (COFOG), Commission Spring 2025 Forecast and Commission's calculation
31
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Table A1.5:
Macroeconomic developments and forecasts
Variables
1=7+8+9
2024
Outturn
APR
2,4
2,4
1,7
4,4
2,2
2,8
2,7
0,0
-0,3
0,6
0,6
6,4
1,8
2,4
2,7
4,9
n.a.
2025
COM
1,8
3,2
1,2
3,5
1,7
4,3
2,9
0,0
-1,1
0,2
1,0
6,4
0,7
2,1
3,1
4,9
2,4
APR
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
2026
COM
2,2
2,8
1,2
4,3
2,8
4,1
2,8
0,0
-0,5
0,4
0,9
6,3
1,3
2,0
2,2
4,0
2,0
Real GDP
% change
1,9
2
Private consumption
% change
3,2
3
Government consumption expenditure
% change
1,1
4
Gross fixed capital formation
% change
3,0
5
Exports of goods and services
% change
3,4
6
Imports of goods and services
% change
4,9
Contributions to real GDP growth
7
- Final domestic demand
pps
2,7
8
- Change in inventories
pps
-0,1
9
- Net exports
pps
-0,7
10
Output gap
% pot GDP
0,7
11
Employment
% change
1,6
12
Unemployment rate
%
6,5
13
Labour productivity
% change
0,3
14
HICP
% change
2,7
15
GDP deflator
% change
4,4
16
Compensation of employees per head
% change
8,0
Net lending/borrowing vis-à-vis the rest of the
17
% GDP
2,9
world
Source:
Commission Spring 2025 Forecast (COM), Annual Progress Report (APR)
Table A1.6:
General government budgetary position
Variables (% GDP)
1=2+3+4+5
2
3
4
5
8=9+16
2024
Outturn
43,5
14,6
10,3
12,6
6,0
42,8
40,7
10,6
5,2
18,2
0,8
2,7
3,2
2,1
0,7
2,8
0,3
0,0
0,3
2,4
APR
44,4
14,6
9,7
12,7
7,4
44,1
41,9
10,7
5,4
17,9
0,6
3,5
3,8
2,2
0,3
2,4
n.a.
-0,1
0,1
2,3
2025
COM
44,2
14,7
9,9
12,7
6,9
44,0
41,9
10,8
5,2
18,2
0,6
3,7
3,4
2,1
0,1
2,3
0,0
0,0
0,0
2,1
APR
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
2026
COM
44,4
14,7
9,8
12,7
7,3
45,0
42,8
10,8
5,2
18,4
0,6
4,2
3,5
2,2
-0,6
1,7
-0,8
0,0
-0,8
1,4
Revenue
of which:
- Taxes on production and imports
- Current taxes on income, wealth, etc.
- Social contributions
- Other (residual)
Expenditure
of which:
- Primary expenditure
of which:
- Compensation of employees
- Intermediate consumption
- Social payments
- Subsidies
- Gross fixed capital formation
- Other
- Interest expenditure
General government balance
Primary balance
Cyclically adjusted balance
One-offs
Structural balance
Structural primary balance
9
10
11
12
13
14
15
16
18=1-8
19=1-9
20
21
22=20-21
23=22+16
Source:
Commission Spring 2025 Forecast (COM), Annual Progress Report (APR)
32
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Table A1.7:
Debt developments
Variables
1
2=3+4+8
3
4≈5+6+7
5
6
7
8
Gross debt ratio* (% of GDP)
Change in the ratio (pps. of GDP)
Contributions**
Primary balance
'Snow-ball' effect
of which:
- Interest expenditure
- Real growth effect
- Inflation effect
'Stock-flow' adjustment
2024
Outturn
94,9
-2,8
-2,8
-3,9
2,1
-1,8
-4,1
3,8
2025
APR
91,5
-3,4
-2,4
-2,4
2,2
-2,2
-2,4
1,4
COM
91,7
-3,2
-2,3
-2,3
2,1
-1,6
-2,9
1,4
APR
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
2026
COM
89,7
-2,1
-1,7
-1,7
2,2
-2,0
-2,0
1,3
* End of period.
** The 'snow-ball' effect captures the impact of interest expenditure on accumulated general government debt, as well as the
impact of real GDP growth and inflation on the general government debt-to-GDP ratio (through the denominator). The stock-flow
adjustment includes differences in cash and accrual accounting (including leads and lags in Recovery and Resilience Facility grant
disbursements), accumulation of financial assets, and valuation and other residual effects.
Source:
Commission Spring 2025 Forecast and Commission's calculation (COM), Annual Progress Report (APR)
Table A1.8:
RRF
–
Grants
Revenue from RRF grants (% of GDP)
1
2
RRF grants as included in the revenue projections
Cash disbursements of RRF grants from EU
2020
n.a.
n.a.
2021
0,0
0,8
2022
0,2
0,2
2023
0,6
1,4
2024
0,7
0,8
2025
2,3
1,3
2026
1,7
1,2
Expenditure financed by RRF grants (% of GDP)
3
4
5
6=4+5
Total current expenditure
Gross fixed capital formation
Capital transfers
Total capital expenditure
2020
0,0
0,0
0,0
0,0
2021
0,0
0,0
0,0
0,0
2022
0,1
0,1
0,0
0,1
2023
0,1
0,1
0,3
0,5
2024
0,2
0,2
0,3
0,5
2025
0,8
0,9
0,5
1,4
2026
0,6
0,7
0,4
1,1
Other costs financed by RRF grants (% of GDP)
7
8
9
Reduction in tax revenue
Other costs with impact on revenue
Financial transactions
2020
0,0
0,0
0,0
2021
0,0
0,0
0,0
2022
0,0
0,0
0,0
2023
0,0
0,0
0,0
2024
0,0
0,0
0,0
2025
0,0
0,0
0,0
2026
0,0
0,0
0,0
Source:
Annual Progress Report
33
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Table A1.9:
RRF - Loans
Cash flow from RRF loans projected in the Plan (% of GDP)
1
2
Disbursements of RRF loans from EU
Repayments of RRF loans to EU
2020
n.a.
n.a.
2021
0,2
0,0
2022
0,2
0,0
2023
0,3
0,0
2024
0,4
0,0
2025
0,4
0,0
2026
0,6
0,0
Expenditure financed by RRF loans (% of GDP)
3
4
5
6=4+5
Total current expenditure
Gross fixed capital formation
Capital transfers
Total capital expenditure
2020
0,0
0,0
0,0
0,0
2021
0,0
0,0
0,0
0,0
2022
0,0
0,0
0,0
0,0
2023
0,0
0,0
0,0
0,0
2024
0,0
0,0
0,1
0,1
2025
0,0
0,1
0,2
0,3
2026
0,0
0,4
0,5
0,9
Other costs financed by RRF loans (% of GDP)
7
8
9
Reduction in tax revenue
Other costs with impact on revenue
Financial transactions
2020
0,0
0,0
0,0
2021
0,0
0,0
0,0
2022
0,0
0,0
0,1
2023
0,0
0,0
0,0
2024
0,0
0,0
0,1
2025
0,0
0,0
0,2
2026
0,0
0,0
0,1
Source:
Annual Progress Report
Cost of ageing
Total age-related spending in Portugal is projected to rise from a little over 23% of GDP in
2024 to about 26.5% in 2040, followed by a decline to just below 23% in 2070 (see Table
A1.10). The small overall decline by 2070 is due to pension expenditure, with spending on long-term care
and, especially, healthcare expected to rise.
Public pension spending is projected to increase in the medium term but to start declining
steadily thereafter.
Starting with a projected 12.7% of GDP in 2024, between 2024 and 2040, pension
expenditure is expected to rise by 2 pps of GDP, peaking in 2046 at 2.5 pps above the current level. In the
longer term, spending would fall again, though, with a projected decrease of 2.3 pps by 2070 compared to
the 2024 level.
Public healthcare (
34
) expenditure is projected at 5.9% of GDP in 2024 (below the EU average
of 6.6%) and is expected to increase by 0.8 pps by 2040 and by a further 0.5 pps by 2070.
This
increase in healthcare expenditure contributes significantly to fiscal risks. The Portuguese RRP includes
reforms and investments that aim to improve the cost-effectiveness of the health system. For example,
the new performance-based management contract template for managers in state-owned enterprises in
the National Health System (NHS) aims to tackle persistent budgetary overspends. Also, a new referral
mechanism has been set up to direct inappropriate or avoidable cases from emergency services in NHS
hospitals to primary healthcare services.
Public expenditure on long-term care (
35
) is projected at 0.5% of GDP in 2024 (below the EU
average of 1.7%) and is expected to increase by 0.3 pps of GDP by 2040 and by a further
0.1 pp of GDP by 2070.
(
34
)
Key performance characteristics, recent reforms and investments are discussed in Annex 11 ‘Health and health systems’.
(
35
) The quality and the accessibility of the long-term
care system are covered in Annex 9 ‘Social policies’.
34
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Table A1.10:Projected
change in age-related expenditure in 2024-2040 and 2024-2070
age-related
expenditure
2024 (% GDP)
PT
EU
23.3
24.3
age-related
expenditure
2024 (% GDP)
PT
EU
23.3
24.3
change in 2024-2040 (pps GDP) due to:
pensions
2.0
0.5
healthcare
0.8
0.3
long-term care
0.3
0.4
education
0.0
-0.3
total
3.1
0.9
age-related
expenditure
2040 (%GDP)
26.4
25.2
age-related
expenditure
2070 (%GDP)
-0.4
1.3
22.8
25.6
PT
EU
PT
EU
change in 2024-2070 (pps GDP) due to:
pensions
-2.3
0.2
healthcare
1.3
0.6
long-term care
0.4
0.8
education
0.1
-0.4
total
Source:
2024 Ageing Report (EC/EPC).
National fiscal framework
The Portuguese Public Finance Council (CFP) is a relatively well-resourced independent fiscal
institution with a fairly wide mandate.
The CFP has access to information governed by MoUs and
pursues a communication strategy. While the funding level currently is sufficient, hiring decisions need to
be pre-authorized by the Ministry of Finance whenever it leads to an increase in the total number of staff
of the CFP, which is a provision restraining CFP autonomy.
The planning of public investment has recently improved, but good practices are still limited to
a few sectors.
The national investment programme provides guidance for public investment allocation
over a 10-year period covering all financing sources (EU, national and others). Ongoing efforts to integrate
this 10-year investment plan, which includes the EU Partnership
Agreement with Portugal (‘Portugal
2030’),
into the medium-term budgetary framework are critical for its effectiveness. A common
methodology for project assessment is currently only used for a limited number of sectors (e.g. public
order and safety, agriculture). These sectors also benefit from central support for training on development
and implementation of assessment methodologies, which could be shared with other sectors. Only a few
sectors (e.g. tertiary education) benefit from an independent review of the quality and objectivity of
assessments.
Table A1.11:Fiscal
Governance Database Indicators
2023
Country Fiscal Rule Strength Index (C-FRSI)
Medium-Term Budgetary Framework Index (MTBFI)
Portugal
17,40
0,72
EU Average
14,52
0,73
The Country Fiscal Rule Strength Index (C-FRSI) shows the strength of national fiscal rules aggregated at the country level based
on i) the legal base, ii) how binding the rule is, iii) monitoring bodies, iv) correction mechanisms, and v) resilience to shocks. The
Medium-Term Budgetary Framework Index (MTBFI) shows the strength of the national MTBF based on i) coverage of the
targets/ceilings included in the national medium-term fiscal plans; ii) connectedness between these targets/ceilings and the
annual budgets; iii) involvement of the national parliament in the preparation of the plans; iv) involvement of independent fiscal
institutions in their preparation; and v) their level of detail. A higher score is associated with higher rule and MTBF strength.
Source:
Fiscal Governance Database
35
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ANNEX 2: TAXATION
This annex provides an indicator-based
overview of Portugal’s tax system.
It includes
information on: (i) the tax mix; (ii) competitiveness
and fairness aspects of the tax system; and (iii)
tax collection and compliance.
The weight of consumption taxes in the
Portuguese tax mix has decreased since the
COVID-19 pandemic.
In 2023, Portugal obtained
34.1% of its tax revenues from consumption taxes
(Graph A2.1), 2.4 pps less than in 2019. This
decrease is largely explained by government
support measures in the context of the energy
crisis, which have been gradually phased-out in
the last two years. The relatively high VAT
actionable policy gap (22.2% in 2022, 3.2 pps
above the EU average) reflects the extended use
of reduced rates and exemptions in the VAT
system (
36
). Capital taxes amounted to 21.0% of
total tax revenues, broadly stable compared with
recent years. Conversely, the share of labour-tax
revenues has increased significantly (rising from
42.8% of the total in 2019 to 44.8% in 2023), on
the back of strong job creation. Despite this rapid
increase in labour-tax revenues, when compared
with the EU-27 average, labour-tax revenues in
Portugal are still low when expressed as a share of
GDP (16.0% of GDP, 4.0 pps below the EU
average). Portugal has a comparatively low
implicit tax rate on labour (30.5% in 2023, 6.5 pps
below the EU average)(
37
), reflecting the
prominence of tax expenditures, including
preferential regimes, in personal income taxation
(see further below).
Revenues from environmental and property
taxes are falling.
Portugal’s revenues from
environmental taxes have decreased from the
equivalent of 2.6% of GDP in 2019 to 2.0% in
2023. Despite this decrease, the share remains in
line with the EU aggregate. Revenues from
pollution and resources taxes are increasing (from
0.7% of total revenues from environmental taxes
in 2019 to 1.9% in 2023) but remain
comparatively low as a share of GDP. Property tax
revenues decreased slightly between 2019 and
2023, falling from the equivalent of 2.2% of GDP
to 2.1%, and are in line with the EU-27. However,
(
36
)
VAT Gap in the EU, 2024 Report.
In 2022, the VAT policy gap
remained stable, but its structure followed the pattern
observed in many other countries, with an increasing VAT
rate gap and a decreasing VAT exemption gap.
(
37
)
Implicit tax rate [tax_itr],
Taxation Trends Data 2025.
revenues from recurrent immovable property taxes
remain comparatively low (equivalent to 0.6% of
GDP in 2023, against 0.9% in the EU-27).
Graph A2.1:
Tax revenue shares in 2023
Tax revenue shares in 2023, Portugal (outer ring)
and EU (inner ring)
21,0
21,9
51,2
26,9
34,1
44,8
Taxes on labour
Taxes on consumption
Taxes on capital
Source:
Taxation Trends Data, DG TAXUD
The complexity of the corporate income tax
(CIT)
structure may be hampering Portugal’s
competitiveness.
The CIT rate of a company in
Portugal can vary from 12.5% (for legal
recognised startups that invest in R&D activities)
to 30.5% of its taxable income depending on its
size and location. The latter rate is the second
highest top rate of CIT in the EU-27, despite its
recent reduction by one percentage point. This high
variability is the result of the confluence of state
and municipal surcharges, and it could be
influencing businesses’ decisions on location
and
growth while hindering economies of scale.
Portugal has a comparatively high effective
average CIT rate (23.9% in 2023, 5.0 pps above
the EU-27 average). Portugal ranks 22 out of the
27 Member States in the tax complexity index (
38
),
which suggests that there may be areas for
improvement both in the structure of the tax
regulations, and in the way that tax processes are
carried out by the tax authorities.
(
38
)
Global MNC Tax Complexity Project. The ‘tax
complexity
index’
measures the complexity of a country’s corporate
income tax system as faced by multinational corporations.
36
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Table A2.1:
Taxation indicators
PT
Median (EU-27)
Tax structure
2010
Total taxes (including compulsory actual social contributions) (% of
GDP)
Taxes on labour (% of GDP)
of which, social security contributions (SSC, % of GDP)
Taxes on consumption (% of GDP)
of which, value added taxes (VAT, % of GDP)
Taxes on capital (% of GDP)
Personal income taxes (PIT, % of GDP)
Corporate income taxes (CIT, % of GDP)
Total property taxes (% of GDP)
Recurrent taxes on immovable property (% of GDP)
Environmental taxes (% of GDP)
Effective carbon rate in EUR per tonne of CO
2
equivalents
Tax wedge at 50% of average wage (single person) (*)
Tax wedge at 100% of average wage (single person) (*)
Corporate income tax - effective average tax rates (1) (*)
Difference in Gini coefficient before and after taxes and cash social
transfers (pensions excluded from social transfers) (2) (*)
Outstanding tax arrears: total year-end tax debt (including debt
VAT gap (% of VAT total tax liability, VTTL) (**)
Portugal
2021 2022
35,1
16,0
10,4
12,4
8,9
6,7
6,9
2,4
2,3
0,7
2,3
85,7
28,1
40,7
23,9
8,4
45,6
4,1
35,9
15,8
10,2
12,5
9,4
7,6
6,9
3,3
2,3
0,7
1,9
NA
28,1
40,9
23,9
8,3
41,8
1,3
2023
35,7
16,0
10,4
12,2
9,0
7,5
6,9
3,4
2,1
0,6
2,0
80,3
29,8
41,1
23,9
8,0
2024
2010
37,8
19,8
12,9
10,9
6,8
7,1
8,6
2,2
1,9
1,1
2,5
NA
33,9
40,9
21,3
8,6
2021
40,2
20,5
13,0
11,2
7,3
8,5
9,6
2,9
2,2
1,1
2,4
86,0
31,8
39,9
19,3
8,2
35,5
EU-27
2022 2023
39,7
20,1
12,7
10,9
7,4
8,7
9,4
3,2
2,1
1,0
2,1
NA
31,5
39,9
19,1
7,9
32,6
7,0
39,0
20,0
12,7
10,5
7,1
8,5
9,3
3,2
1,9
0,9
2,0
84,8
31,5
40,2
18,9
7,7
2024
30,4
12,5
8,6
11,3
7,6
6,5
5,4
2,7
1,7
0,6
2,4
NA
28,1
36,4
28,4
8,4
By tax base
Some tax types
Progressivity &
fairness
29,7
39,4
31,8
40,3
Tax administration &
considered not collectable) / total revenue (in %) (*)
compliance
2,4
6,6
(1) Forward-looking effective tax rate (KPMG).
(2) A higher value indicates a stronger redistributive impact of taxation.
(*) EU-27 simple average.
(**) Forecast value for 2023. For more details on the VAT gap, see European Commission, Directorate-General for Taxation and
Customs Union, VAT gap in the EU - 2024 report,
https://data.europa.eu/doi/10.2778/2476549
For more data on tax revenues as well as the methodology applied, see the Data on Taxation webpage,
https://ec.europa.eu/taxation_customs/taxation-1/economic-analysis-taxation/data-taxation_en.
Source:
European Commission, OECD
Portugal ranks high in public support for R&D
on the back of very generous tax incentives.
In 2021 (last available data), public support for
R&D was the equivalent of 0.3% of GDP, well
above the EU-27 average of 0.2% of GDP. This
support was mainly indirect, with tax incentives
contributing the equivalent of 0.3% of GDP and
direct public financing of business R&D
expenditure equivalent to 0.1%
of GDP. Portugal’s
tax credit regime for R&D-related investments
(‘SIFIDE II’) provides generous credits that lead to
an implied tax-subsidy rate on R&D expenditures
of 35%, the highest in the EU-27 and more than
twice the EU-27 average (source:
OECD).
In
addition, the country’s revamped ‘patent box’
regime provides up to an 85% tax exemption (up
from a 50% exemption in place until 2022) to
income derived from the use of various forms of
intellectual property. Despite both preferential
schemes, total R&D expenditure in Portugal
remains below the EU average.
Portugal’s labour-tax
rates are somewhat
more progressive than the EU average.
Graph
A2.2 shows that the labour-tax wedge(
39
) for
(
39
) The tax wedge is defined as the sum of personal income
taxes and employee and employer social-security
Portugal in 2024 was slightly lower than the EU
average at 67% and 100% of the average wage.
Also, it was more pronouncedly lower than the EU
average at 50% of average wage, while being
higher than the EU average for high-income
earners at 167% of the average wage. This means
that the statutory rates were somewhat more
progressive (i.e. increasing more at higher
incomes) than for the EU average. Accordingly,
Portugal’s tax
and benefit system helped reduce
inequality (as measured by the difference in Gini
coefficients before and after taxes and benefits,
see Table A2.1) by slightly more than the EU
average in 2023 (a reduction of 8.0 points in
Portugal compared to a reduction of 7.7 points for
the EU average). Despite this, Portugal remains
one of the EU countries with the highest inequality
after redistribution, as measured by the Gini index
(see Annex 9 for further details). Second earners
at a wage level of 67% of the average wage,
whose spouses earn the average wage, were
subject to a tax wedge that was practically equal
to the EU average. The tax wedge for second
earners in Portugal was clearly higher than the one
contributions net of family allowances, expressed as a
percentage of total labour costs (the sum of the gross wage
and social-security contributions paid by the employer).
37
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for single people at the same wage level, but
again this difference corresponded to the EU
average difference.
Graph A2.2:
Tax wedge for single and second
earners as a % of total labour costs, 2024
Tax wedge, % of total labour costs
50
45
45,2
39,3
36,1
29,7
39,4
40
35
30
25
20
50
100
150
Earnings as % of the average wage
Single earner - PT
Second earner - PT
Single earner - EU average
Second earner - EU average
(1) The second earner tax wedge assumes a first earner at
100% of the average wage and no children. For the
methodology of the tax wedge for second earners, see
OECD, 2016, Taxing Wages 2014-2015.
Source:
European Commission
Portugal has two preferential tax regimes in
the area of personal income tax (PIT) that
have been recently amended.
More restrictive
rules apply to the ‘inpatriate’ regime (a scheme to
encourage people to move to Portugal) since the
2024 state budget, with the aim of attracting
entrepreneurs and high qualified workers
correcting some of the distortions prompted by the
previous inpatriate regime (including the former
regime’s side effects on the housing market).
Meanwhile, the 2025 State budget has broadened
the eligibility of the preferential regime for young
workers ‘IRS
Jovem’.
In particular, it has extended
its duration and age limit, and it has increased the
income exemption limit that it confers. EUROMOD
simulations conducted by the JRC show that this
reform boosts disposable income by an average of
0.6%, with the highest gains concentrated in
higher-income deciles.
Some
tax
expenditures
in
PIT
disproportionately benefit higher-income
households and increase income inequality.
According to EUROMOD simulations conducted by
the JRC, the five top deciles in the income
distribution are estimated to experience an
increase in their mean disposable income by more
than 5% thanks to PIT tax expenditures (Graph
A2.3) in force. By contrast, gains for the two
lowest deciles from these tax expenditures are
below 1%, although low-income taxpayers benefit
from other measures that are not counted as tax
expenditures in this study but are rather
considered to be part of the basic tax structure. (
41
)
Work-related tax expenditures (tax allowances for
employees and the self-employed) are the most
regressive, followed by pensioner tax allowances
and the general-household-expenses tax credit
(the ‘Other’ category in Graph
A2.3). This suggests
the need to carry out a comprehensive evaluation
of tax expenditures as part of the ongoing reform
under the recovery and resilience plan.
Portugal’s ability to increase tax revenues is
hindered by the proliferation of tax
expenditures that are not always socially
and economically effective.
Tax revenues in
Portugal expressed as a percentage of GDP have
stabilised at nearly 36%, which is still more than 3
pps below the EU average (Table A2.1). Despite the
substantial reduction of this gap during the last
decade, the revenue raising-capacity
of Portugal’s
tax system faces significant challenges due to
rapid population ageing and the widespread use of
tax expenditures. The projected shrinking of the
labour force (by 10% between 2024 and 2038,
according to the Commission’s
Ageing Report
2024)
is expected to erode labour and
consumption tax bases in the coming years.
Moreover, pension spending is set to increase by
1.9 pps of GDP in the same period. Foregone
revenues from tax expenditures were estimated at
6.4% of GDP in 2023 (
40
). The planned reform in
the recovery and resilience plan to streamline tax
expenditures could help to rationalise the tax
system, make it more resilient, and increase tax
receipts. A dedicated tax policy unit (U-TAX) in the
Portuguese civil service has been working on this
reform since February 2024.
(
40
)
Global Tax Expenditure Database (GTED).
(
41
)
For
a discussion of issues related to the definition of tax
expenditures, and some estimations of tax expenditures for
all EU Member States see
Turrini, A. et al. (2024): “Tax
Expenditures in the EU: Recent Trends and New Policy
Challenges”, European Commission, European Economy
Discussion Paper 212.
Results for Portugal presented in this
Annex differ from those in the note, among other reasons,
due to a partial (not full) inclusion of the social security
contribution deduction as a work-related tax expenditure,
thus allowing cross-country comparability of results.
38
 kom (2025) 0222 - Ingen titel
3035405_0040.png
Graph A2.3:
Percentage change in mean disposable
income from PIT tax expenditures, by income
decile (2023)
8,0%
7,0%
6,0%
5,0%
4,0%
3,0%
2,0%
Despite recent improvements, the cost-of-
tax-collection ratio in Portugal remains high.
Despite having decreased significantly in recent
years (from 1.1% in 2020 to 0.9% in 2022),
Portugal’s cost-of-tax-collection
ratio remains
slightly above the unweighted EU average (0.8%).
Salary costs as a share of total tax-collection
costs remained comparatively high while ICT
operating costs as a share of total tax-collection
costs remained low. Some improvements in this
area could be made to bring Portugal into line with
best practices across the EU, for example, by
increasing the digitalisation of the tax
administration and working with other Member
States to collect unpaid fines.
The relatively old age of workers is an acute
challenge for the tax administration.
In early
2024, the average age of workers in Portugal’s tax
administration was one of the highest in the world.
53.0% of
the administration’s staff are older than
54 and only 8.2% is under 45, with an average
age of 54.9. Only 0.8% of the staff have fewer
than 5 years of service, and staff turnover is only
2.1% per year. The lack of replacement of workers
and the expected retirement of half of all workers
over the coming decade are a challenge to the
effectiveness of the tax administration.
Portugal
is
rolling
out
a
digital
transformation strategy.
Portugal is following a
strategy for the digital transformation of its tax
administration. The ongoing implementation of
different measures as part of the recovery and
resilience plan is expected to improve the
performance of Portugal’s tax administration.
Taxpayers in Portugal spend less time and effort
complying with their tax obligations than they
used to thanks to e-filing of tax returns. All CIT, PIT
and VAT returns are e-filed. If needed, taxpayers
can go to public offices that provide help and in
the case of PIT it is possible to use the tax returns
pre-filled automatically by the tax authorities.
1,0%
0,0%
D1
Work
D2
D3
D4
D5
D6
Health
D7
D8
Housing
D9
D10
Other
Family
Education
Source:
Estimations performed by the European Commission,
Joint Research Centre, with the
EUROMOD
tax-benefit
microsimulation model.
Note:
Tax expenditures are categorised into six groups. The
‘other’ group includes
tax expenditures not related to any of
the other categories. The percentage change is calculated with
a baseline without tax expenditures. The impact of the
inpatriate regime, which is not included in the simulations due
to technical constrains of EUROMOD, would likely have a
significant impact on high income deciles, given the
quantitative importance of this tax expenditure (above EUR
1.5 billion in 2023, equivalent of 8% of PIT revenue).
The VAT compliance gap in Portugal
substantially improved in 2022 resulting in
one of the lowest gaps in the EU.
Portugal had
an estimated VAT compliance gap of 1.3% of VAT
total tax liability in 2022, approximately 3 pps less
than in 2021. It was well-below the EU-27
average of 7.0% in 2022, which itself had slightly
increased from an average of 6.6% in 2021.
The percentage of outstanding tax arrears in
Portugal remains high.
At 41.8%, outstanding
tax arrears remained among the highest in the EU-
27 at the end of 2022, despite a slight reduction
from 45.6% in 2021. This rate is above the EU
average of 32.6% and remains above the pre-
COVID-19 values. In addition, the percentage of
tax arrears that is still considered collectable at
the end of the year is quite low (29.5.% in 2022).
This is explained by several legal and procedural
constraints, including the fact that 45% of the tax-
enforcement processes are related to debts
managed by external entities.
39
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PRODUCTIVITY
ANNEX 3: INNOVATION TO BUSINESS
Portugal
struggles
to
maximise
its
innovation potential despite growing private
sector investment and public support for
R&D activities.
According to the European
Innovation Scoreboard (
42
), Portugal remains a
moderate innovator. Its research and innovation
performance stood at 83.5% of the EU average in
2024,
which is below the moderate innovators’
average (84.8%). Portugal’s total R&D intensity
has been steadily increasing, reaching 1.69% in
2023, against the EU average of 2.24%. However,
the country is still far from reaching its own target
of 2.4% by 2025, set in its 2021-2030 public R&D
investment programme (
43
). The growth in total
R&D spending is driven by increasing private
sector investment, while public expenditure has
been stagnant, thus limiting improvements in the
public science base. In addition, despite growing
public support for business innovation, innovation
output remains weak. Innovation performance is
hindered by modest science-business linkages, and
access to finance for innovative firms remains an
issue. Moreover, due to the limited uptake of
advanced digital technologies by enterprises
overall, the potential benefits of these
technologies to business processes remain
unexploited.
cited publications worldwide (8.1% of total
publications in 2021, against the EU average of
9.6%). In addition, despite progressive increase in
the last decade, Portugal's international co-
publications as a percentage of the total number
of publications are at 53.2% in 2023, below the
EU average of 55.9%. This suggests that there is
still room to expand and strengthen international
activities in the public research system.
Graph A3.1:
Public expenditure on R&D as a
percentage of GDP
0.80
0.75
0.70
0.65
0.60
0.55
2012
2017
2020
Portugal
2021
EU
2022
2023
Source:
Eurostat
Science for innovative ecosystem
Portugal has a strong public research base,
but limited public investment holds back
excellence.
Public expenditure on R&D has been
on a declining trend over the last decade and
settled at 0.59% in 2023, below the EU average.
This trend can be observed especially in the share
of R&D investment in the Higher Education Sector
as % of GDP, which, despite rates above the EU
average for the past 15 years, has been
decreasing since 2020. This affects the excellence
of the Portuguese public research system, as
evidenced
by the decreasing share of the country’s
scientific publications within the top 10% most-
(
42
) 2024 edition of the European Innovation Scoreboard (EIS),
Country profile:
Portugal.
The EIS provides a comparative
analysis of innovation performance in EU countries, including
the relative strengths and weaknesses of their national
innovation systems (also compared to the EU average).
(
43
) Adopted by
Council of Ministers Resolution 186/2021.
The Portuguese R&I system is characterised
by significant differences in R&D investment
among the seven Portuguese regions
(see also
Annex 17). Three regions are emerging innovators
(Algarve and the Autonomous regions of Azores
and Madeira), three are moderate innovators
(North, Centre and Alentejo), while Lisbon is the
only ‘moderate innovator +’, with a performance
very close to that of the EU average (
44
). Also,
beneficiaries of the ‘mobilising and green agendas
for business innovation’ measures under the
recovery and resilience plan, aimed at developing
new products, processes or services in relevant
strategic areas, are mainly located in coastal areas
in central and northern Portugal, i.e. areas where
overall R&D expenditure is already higher (
45
). This
suggests that innovation is likely to remain
concentrated in those areas, possibly accentuating
the difference in innovation performance among
the regions.
(
44
) 2023 Regional Innovation Scoreboard, Country Profile:
Portugal
.
(
45
)
Marques Santos, A. and Conte, A., Applicants and
beneficiaries of innovation-related actions under the
Portuguese RRP, European Commission, 2023, JRC132061
40
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3035405_0042.png
Business innovation
The Portuguese economy is characterised by
a predominance of micro and small
companies with limited innovation capacity,
but a promising start-up ecosystem is
developing.
Overall business R&D spending is
increasing, growing from 0.63% of GDP in 2013 to
1.06% of GDP in 2023, but innovation output
remains limited. Patenting activity, measured as
patent applications filed under the Patent
Cooperation Treaty per billion GDP, remains rather
modest compared to the EU average (0.9
compared to 2.8 in 2022). Patents in the green
sector, where numbers align with the EU average,
are an exception. Internationalisation levels of
Portuguese companies are also relatively weak,
with a substantially lower proportion of medium-
to-high and high-tech exports than the EU
average (
46
). The size of the overall ICT sector is
below the EU average (4.5% vs 5.5% in gross
value added in 2021), and its R&D business
expenditure amounts to 23.5% of total R&D
expenditure (
47
). As
regards
the
start-up
ecosystem, on the other hand, Portugal’s business
birth rate is higher than the EU average (
48
), and
seven unicorn companies (
49
) (start-ups valued at
over USD 1 billion) have been founded in the
country to date, although only one is currently
headquartered in Portugal (
50
).
Graph A3.2:
Patent applications filed under the PCT
per billion GPD (in PPS
€) in 2022
8
7
6
5
4
3
2
1
0
Source:
Patstat
Portugal's public policy addresses R&I
challenges by providing strong support for
business innovation, primarily through tax
incentives, but direct public support for
business R&D is limited.
The government
provides increasing public support for business
R&D, mainly in the form of R&D tax incentives. The
proportion of GDP spent on public support for
business expenditure on R&D more than doubled
over the last decade, from 0.159% in 2013 to
0.487% in 2022. A specific patent box tax regime
is in place, which aims to reduce taxation on
income from intellectual property, such as
copyright income from computer programs,
patents, industrial models and drawings. Despite
the strong R&D tax incentives, direct public support
for business R&D remains low (
51
); it could be
further explored as R&D grants tend to favour
young and innovative firms with limited financial
capacity. As regards the creation of new
companies, different initiatives are in place to
foster the growth of start-ups and help them scale
up. These include the reinforcement of Startup
Portugal’s
(
52
) structure through its recovery and
resilience plan (RRP) funds, which has allowed the
creation and strengthening of new programmes
and initiatives, specifically designed to better
support
and
incentivise entrepreneurs
and
investors.
A broader diffusion of digital technologies
could make business processes more
effective and boost overall competitiveness.
(
51
)
OECD (2023), OECD Economic Surveys: Portugal 2023, OECD
Publishing, Paris, https://doi.org/10.1787/2b8ee40a-en.
(
52
)
Startup Portugal
is a non-profit organisation dedicated to
promoting entrepreneurship and innovation in the country.
(
46
)
Competitive industrial performance Index, World Bank Group
(
47
) Eurostat,
ICT sector size
and
R&D in ICT sector,
all data from
2021.
(
48
) 2024 European Innovation Scoreboard, Country profile:
Portugal
https://ec.europa.eu/assets/rtd/eis/2024/ec_rtd_eis-
country-profile-pt.pdf.
(
49
)
Unicorns | Dealroom.co
(
50
)
Digital Decade Country Report - Portugal
41
SE
FI
DK
DE
NL
AT
FR
EU average
BE
SI
IT
LU
IE
ES
HU
MT
LV
PT
CZ
CY
EE
EL
HR
SK
PL
LT
BG
RO
 kom (2025) 0222 - Ingen titel
3035405_0043.png
Portugal is slightly above the EU average in terms
of basic digital intensity of SMEs. However,
according to the OECD 2023 Economy Survey (
53
),
Portuguese firms, notably smaller ones, lag behind
in the use of information and communication
technologies, especially those that are well-suited
to small firms, such as cloud computing. Although
Portugal’s
communication infrastructure is well
developed with fast and ultrafast broadband
connectivity in most areas (see also Annex 4),
insufficient training of both managers and staff,
together with poor knowledge of support
mechanisms, act as a barrier to the adoption of
digital technologies by small businesses. As
regards the take-up of advanced digital
technologies, 38.6% of enterprises use data
analytics, which is above the EU average of 33.2%.
Nevertheless, the country lags behind in other
areas, with only a minority of enterprises (roughly
a third) using cloud computing and a mere 8.6%
harnessing artificial intelligence, falling short of
the EU average in both cases.
Despite several ongoing initiatives and slight
improvements,
academia-business
cooperation remains relatively weak.
The
proportion of public-private scientific co-
publications remains below the EU average (6.4%
compared to 7.7% in 2023), despite a steady
increase over the past years. In addition, the
proportion of public expenditure on R&D financed
by businesses has been on a declining trend over
the last years (representing 0.013% of GDP in
2023, compared to an EU average of 0.050%),
indicating a low propensity of businesses to
engage in research activities with public labs. The
number of researchers employed by the private
sector also remains modest (
54
), although it more
than doubled in the past decade, a promising sign
that the initiatives in place are giving some results.
Portugal is dedicating significant resources to
fostering knowledge valorisation through its
recovery and resilience plan (RRP) (for example
through measures such as the accreditation of
new ‘collaborative laboratories’ (COLABs) (
55
) and
‘mobilising and green agendas for business
innovation (
56
)). Also, in 2023 a PhD studentship in
a non-academic environment was launched to
encourage mobility of researchers from the public
to the private sector.
Financing innovation
Venture capital financing in Portugal remains
very low.
In 2024 Portuguese start-ups raised
EUR 886 million, 55% more than in 2023 (
57
).
Despite this jump, the amount was significantly
lower than in record years 2021 and 2022, when
start-ups managed to raise EUR 1.6 billion and
EUR 1.1 billion, respectively. The availability of
funds for scaling up activities is limited overall.
Venture capital as a percentage of GDP is one of
the lowest in Europe
–
reaching 0.018% in 2023,
against the EU average of 0.078%
–
which is even
lower than in previous years. This highlights a
persistent financing gap for early-stage innovative
firms in Portugal. In addition, there is a significant
gap in the availability of funds between early-
stage and later-stage start-ups. This gap which is
significantly larger in Portugal than in other
European countries and reflects a lack of later-
stage financing options for start-ups looking to
scale up (
58
).
Innovative talent
Portugal’s productivity capacity is affected
by a considerable brain drain, due in part to
unattractive salary conditions. To address
this, the government is taking steps to
stabilise research careers and attract
foreign entrepreneurs.
Retaining talent is a key
challenge and a priority for Portugal, and its
education system manages to attract and form a
high number of graduates also in science,
technology, engineering and mathematics. The
country has one of the highest numbers of new
graduates in science and engineering per thousand
(
56
) Big consortia between companies, scientific and
technological institutions.
(
57
) TTR Database.
(
58
)
OECD (2023), OECD Economic Surveys: Portugal 2023, OECD
Publishing, Paris, https://doi.org/10.1787/2b8ee40a-en.
(
53
)
OECD (2023), OECD Economic Surveys: Portugal 2023, OECD
Publishing, Paris, https://doi.org/10.1787/2b8ee40a-en.
(
54
) 5.2 per thousand active population in 2022, compared to a
EU average of 5.6.
(
55
) Entities which bring together relevant partners from the
public and the private sector.
42
 kom (2025) 0222 - Ingen titel
3035405_0044.png
population aged 24-35 (20.5 in 2022, compared
to the EU average of 17.6). In contrast, the number
of graduates in the field of computing is relatively
modest compared to the EU average. Moreover,
the public sector can count on a good number of
researchers, as Portugal performs well in terms of
public sector researchers per thousand active
population (6.4 in 2023, against the EU average of
4.2). Specific programmes aimed at stabilising
researcher careers and make them more attractive
are in place. The Tenure programme, run by the
Foundation for Science and Technology, supports
the hiring of doctoral researchers for permanent
positions in the national science and technology
system.
A ‘start-up visa’ programme is also in
place as part of ongoing efforts to attract foreign
investment. This programme welcomes foreign
entrepreneurs who intend to develop projects
capable of generating start-ups based on new
ideas and business models (
59
). In addition, in 2025
Portugal initiated a new tax benefit which aims to
attract foreign entrepreneurs and high qualified
employees (
60
).
Entrepreneurship
education
is
well
integrated into the Portugal education
system across all education levels.
It
constitutes a segment of citizenship education,
which is a mandatory part of the school
curriculum. Higher education institutions have also
expanded their offer of entrepreneurship
education through initiatives, incubators and by
creating a greater connection to the business
world.
Nevertheless, to
further improve
entrepreneurship education in Portugal, a greater
emphasis on practical, project-based learning, and
the implementation of continuous monitoring of
existing initiatives are needed.
(
59
)
Startup Visa - Visa.
(
60
) Regulation of the tax incentive scheme for scientific research
and innovation, as provided for in Article 58-A of the Statute
of Tax Benefits.
Ordinance No. 352/2024/1
43
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3035405_0045.png
Table A3.1:
Key innovation indicators
Portugal
Headline indicator
R&D intensity (gross domestic expenditure on R&D as % of GDP)
Science and innovative ecosystems
Public expenditure on R&D as % of GDP
Scientific publications of the country within the top 10% most cited
publications worldwide as % of total publications of the country
Researchers (FTEs) employed by public sector (Gov+HEI) per thousand
active population
International co-publications as % of total number of publications
R&D investment & researchers employed in business
Business enterprise expenditure on R&D (BERD) as % of GDP
Business enterprise expenditure on R&D (BERD) performed by SMEs as %
of GDP
Researchers employed by business per thousand active population
Innovation outputs
Patent applications filed under the Patent Cooperation Treaty per billion
GDP (in PPS €)
Employment share of high-growth enterprises measured in employment
(%)
Digitalisation of businesses
SMEs with at least a basic level of digital intensity
% SMEs (EU Digital Decade target by 2030: 90%)
Data analytics adoption
% enterprises (EU Digital Decade target by 2030: 75%)
Cloud adoption
% enterprises (EU Digital Decade target by 2030: 75%)
Artificial intelligence adoption
% enterprises (EU Digital Decade target by 2030: 75%)
Academia-business collaboration
Public-private scientific co-publications as % of total number of
publications
Public expenditure on R&D financed by business enterprise (national) as %
of GDP
Public support for business innovation
Total public sector support for BERD as % of GDP
R&D tax incentives: foregone revenues as % of GDP
BERD financed by the public sector (national and abroad) as % of GDP
Financing innovation
Venture capital (market statistics) as % of GDP, total (calculated as a 3-
year moving average)
Seed stage funding share (% of total venture capital)
Start-up stage funding share (as % of total venture capital)
Later stage funding share (as % of total venture capital)
Innovative talent
New graduates in science and engineering per thousand population aged
25-34
Graduates in the field of computing per thousand population aged 25-34
0.007
4.7
81.2
14.1
0.016
10.9
81.9
7.2
0.018
17
70.7
12.4
0.021
17.9
73.7
8.3
0.023
26.9
63
10.1
0.018
27.2
63.4
9.4
:
:
:
:
0.078
7.3
44
48.7
:
:
:
:
0.144
0.087
0.057
0.174
0.122
0.052
0.435
0.354
0.081
0.396
0.296
0.100
0.487
0.387
0.100
:
:
0.120
:
:
:
0.204
0.102
0.100
0.251
0.141
0.110
4.6
0.007
5.4
0.014
5.7
0.016
6
0.014
6.4
0.013
6.4
0.013
:
:
7.7
0.05
8.9
0.02
:
:
:
:
:
:
:
:
:
:
:
:
:
:
28.14
7.2
70.37
:
:
:
:
38.56
32.29
7.86
74.26
:
:
8.63
72.91
33.17
38.86
13.48
:
:
:
:
0.7
12.57
1
23.07
1
:
1.1
:
0.9
:
:
:
:
:
2.8
12.51
:
:
0.68
0.27
2.4
0.67
0.31
3.1
0.92
0.46
4.5
0.99
0.5
5
1.05
0.51
5.3
1.06
0.53
5.5
:
:
:
1.49
0.4
5.7
2.7
0.3
:
0.57
10.2
5.2
47
0.63
9.1
5.9
52.9
0.66
8.5
6.2
54.2
0.64
8.1
6.2
53.2
0.6
:
6.3
53.4
0.59
:
6.4
53.2
:
:
:
:
0.72
9.6
4.2
55.9
0.64
12.3
:
39.3
1.38
1.32
1.61
1.67
1.69
1.69
:
2.24
3.45
2012
2017
2020
2021
2022
2023
2024 EU average (1)
USA
17
1
18
1.3
19.5
2
20.8
2.1
20.5
2
:
:
:
:
17.6
3.6
:
:
(1) EU average for the last available year or the year with the highest number of country data.
Source:
Eurostat, DG JRC, OECD, Science-Metrix (Scopus database), Invest Europe, European Innovation Scoreboard
44
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3035405_0046.png
ANNEX 4: MAKING BUSINESS EASIER
Portugal has made progress in becoming
more competitive and making business
easier. However, challenges persist and the
country has room to further improve its
business environment.
The focus lies on
reducing administrative and regulatory burden,
late payments, and barriers to entry and to
competition for some regulated professions and
the retail sector. Further trade integration in
services, improving the governance of state-owned
enterprises and reducing the duration of
insolvency proceedings
could also boost Portugal’s
competitiveness.
stood at 92.3% in 2023, significantly higher than
the EU average of 64%. FTTP coverage in rural
areas also increased considerably, reaching 68.7%
against an EU average of 53%. For mobile
connections, overall 5G coverage increased to 98%
(EU average, 89%). However, major challenges
persist in improving basic and advanced skills
across the population (see Annex 12). Meanwhile,
SME use of digital tools lags behind the EU
average (see Annex 3).
Cybersecurity awareness in businesses is
increasing
the
resilience
of
digital
infrastructure.
The number of enterprises that
experienced ICT security incidents leading to
unavailability of ICT services due to attack from
outside (e.g. ransomware attacks, denial of service
attacks) slightly increased in Portugal, from 2.5%
in 2022 to 3.1% in 2024. However, it remains
below the EU average (3.4%). ICT security
measures were deployed by 95.6% of enterprises
(above the EU average of 92.8%) and 65.6% of
enterprises made their employees aware of their
obligations for ICT security related issues, again
above the EU average (60%).
Portugal can benefit from improving its
logistics infrastructure.
The 2023 Logistics
Performance Index (LPI) issued by the World Bank
(
63
) ranked Portugal in 18th position among the
EU-27 (38th worldwide). This almost places the
country in the lowest third of EU countries. Its
poorest scores are in international shipments (3.1
out of 5), customs (3.2), and tracking and tracing
(3.2).
Portugal’s infrastructure is an increasing
obstacle for investment.
In 2024, 17.4% of
Portuguese
firms
stated
that
transport
infrastructure was a major obstacle for
investment, an increase from 15.5% in 2023 that
kept Portugal above the EU average (13.4%).
Furthermore, looking at the five-year average,
Portugal has worsened slightly over time (Portugal
15.5% vs EU average 14.4%) (
64
).
Economic framework conditions
Portugal’s supply chains have recovered
from the tensions in 2023 and are now more
resilient than the EU average.
Portugal
experienced a significant improvement in material
shortages in 2024 (
61
) as only 5.2% of Portuguese
businesses have reported constraints, compared to
9.2% in 2023 and 16% in 2022. This puts Portugal
in fourth place among its EU peers, as the EU-27
average for 2024 stood at 10%. This shows a
clear recovery from the consequences of supply
chain disruptions in previous years that were
experienced not only in Portugal but across the EU.
Labour shortages are limited and continue to
diminish.
Portugal has continued to improve in
2024 with 9.5% of firms reporting labour supply
constraints (10.9% in 2023, 11.5% in 2022), well
below the EU average (20.2% in 2024). Similarly,
Portugal’s vacancy rates
(
62
) continued along the
path towards pre-2022 levels, recording a decline
to a 1.7% vacancy rate in 2024, down from 2% in
2022. Moreover, Portugal’s vacancy rate has
always remained below the EU average (2.36% in
2024).
Digital
infrastructure
is
solid
and
continuously improving, in line with the
Digital Decade targets.
Portugal has made
considerable progress, especially on connectivity,
and business awareness of cybersecurity is
increasing. Fibre to the premises (FTTP) coverage
(
61
) EC, ECFIN BCS.
(
62
) EC, ECFIN BCS.
(
63
)
2023 Logistics Performance Index (LPI) of the World Bank
(
64
)
EIBIS 2024 - Portugal
45
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Graph A4.1:
Making Business Easier: selected
indicators.
(1) Regulatory
burden
Regulation as a major
obstacle to investment
24.5
48.8
41.6
EU Trade Integration
31.5
(3) Shortages
transactions, thus infringing the Late Payment
Directive (
68
). In B2B transactions, Portugal
recorded some of the lowest rates of on-time
payments in the EU: the best performing sector is
wholesale with on-time payments reaching 21%,
while transport and logistics are the lowest
performers with barely 13% of payments made
within the agreed contractual term. Portugal also
has the largest difference in on-time payments
between micro and large enterprises, where only
21% and 5% pay on time, respectively.
Portugal is a prime attractor of foreign
direct investment (FDI) within the EU.
Portugal
ranked fourth in the EU with 248 projects (
69
) in
2022, an increase of 57% on 2019. Its main
investors are Germany (14.5%), USA (14.1%) and
France (10.1%), and 73.4% of total FDI projects in
Portugal are from EU countries. The sectors
attracting the most projects are software and IT
services (40%), business and professional services
(14%), and transportation manufacturers and
suppliers (8%).
(2) Single
Market
Material shortages as a
factor limiting production
10
5.2
16.6
(4) Late payments
from public entities
13.7
47.9
from private entities
42.7
0
10
20
30
40
Share (%)
50
60
EU27
PT
Share of (1) enterprises, (2) average intra-EU exports and
imports in GDP, (3) firms, (4) SMEs.
*Q4 data on trade integration is not yet available.
Sources:
(1) EIB IS, (2) Eurostat, (3) ECFIN BCS, (4) SAFE
survey.
Regulatory and administrative
barriers
The general regulatory framework has large
room for improvement.
According to the EIB
Investment Survey (
70
), 48.8% of Portugal’s
firms
said regulations were a major obstacle to
investment in 2024, a slight increase from 48.6%
in 2023. This ranks Portugal fourth in the EU, well
above the EU average (24.5%). Looking at the
five-year
average,
Portugal
has
slowly
deteriorated over time (Portugal 47.5% vs EU
average 23.6%). Similarly, the level of regulation
of professions is higher than the EU average.
Portugal is making some progress in bringing
regulatory changes in to improve the
business environment, but further progress
would benefit the economy.
Portugal has a
score of 1.57 (out of 6) for the overall OECD PMR
indicator (
71
)(
72
), meaning it performs worse than
(
68
)
ECJ ruling in Case C-487/23
Late payments are a prominent issue for
Portuguese SMEs.
Only 19.7% of Portuguese
companies pay on time. The payment gap is over
two weeks in both business-to-business (B2B)
(14.64 days) and public administration-to-business
(G2B) (15.01 days). Although in 2024 Portugal
performed slightly better than the EU average, this
situation has persisted over time. The five-year
average for the B2B payment gap was 15.03 days
compared to the 13.9-day EU average. For the
G2B payment gap, the five-year average was
15.73 days, while for the EU-27 it was 14.61
days (
65
)(
66
).
Portugal’s payment performance is amongst
the worst in the EU (
67
).
In July 2024, the
European Court of Justice concluded that
Portuguese public authorities have not complied
with their obligations to pay on time in G2B
(
65
)
Informa DB
(
66
) Intrum and EC, ECFIN BCS.
(
67
)
EU Payment Observatory. Annual Report 2024
(
69
)
EY Attractiveness Survey Portugal 2023
(
70
)
EIBIS 2024 - Portugal
(
71
)
2023 OECD Product Market Regulation (PMR) Report
46
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the average OECD economy (1.35), despite some
progress since 2018. The performance could be
improved
by
simplifying
administrative
requirements for starting new firms, as well as
assessing the regulatory impact of new and
existing laws on competition, and better involving
stakeholders in the regulatory consultation
process, while improving lobbying activities and
interaction transparency. Further efforts can be
made to ensure a level playing field between
state-owned enterprises (SOEs) and private firms.
Under component 18 of the RRP (recovery and
resilience plan), the measure on the removal of
barriers to licensing could also help improve
Portugal’s business environment. Portugal has
carried out two key reforms to increase the
efficiency of the administrative and tax courts. On
digital markets, Portugal has introduced a law to
regulate platform work to address the new
challenges created by atypical labour relations
(see Annex 10).
For many professions, regulatory barriers to
entry and competition remain high in
Portugal.
There are 253 specific regulated
professions in Portugal, ranking it seventh in the
EU (
73
). Many professions present very high
barriers to entry and to competition, such as civil
engineers (2.5 in Portugal vs 1.39 EU average) and
accountants (2.14 vs 0.74 EU average). In 2024,
Portugal underwent some reforms to reduce
regulatory barriers for some regulated professions
related to construction, legal and accounting
services (
74
). Given their recent introduction, the
effects are yet to be reflected in Portugal’s OECD
PMR scores, which are expected to improve.
According to the OECD STRI, Portugal (0.048) ranks
in 2024 below the EU average (0.050) (
75
).
Portugal’s retail sector also presents high
barriers to entry and to competition.
This is
especially significant in retail distribution (score of
2.29 in Portugal vs 1.17 EU average (
76
)) and the
retail sale of medicines (3.38 vs 2.96 EU average).
On the other hand, Portugal has a lower Retail
Restrictiveness Indicator (1.51) than the EU
median (1.70) (
77
).
Portugal has made significant progress in
insolvency procedures, particularly by
implementing new insolvency arrangements.
However, there is a large backlog in insolvency
cases in courts (
78
). The average time needed to
resolve civil and commercial cases at first instance
has increased (267 days in 2023), worsening from
previous year’s numbers (238 days in
2022) (
79
).
Portugal’s RRP includes plans to create digital
platforms to digitalise judicial processes and
reduce the administrative burden, as well as to
review the insolvency arrangements overall (see
Annex 6).
The estimated duration of insolvency
proceedings remains well above the OECD
average and the efficiency of administrative
and tax courts could further improve.
Further
steps might include the full rolling out of
specialised courts, as currently 6 out of 23 first
instance courts do not have specialised chambers.
The use of voluntary out-of-court procedures could
also be further encouraged to prevent court
congestion and speed up procedures. Despite new
procedures since 2019 and temporary pandemic-
specific arrangements, their take-up remains low
overall, and it is essential to process
administrative data to draw conclusions and adjust
the regulations of each instrument (
80
). Portugal
has significantly improved over time in the number
of pending insolvency cases with 1 190 in the
third quarter of 2024, coming down from 1 225 in
the same period of 2023 and continuing a
constant positive trend that dates back to 2014,
when it had reached a peak of 4 842 pending
insolvency cases in the aftermath of the 2008
Financial Crisis. (
81
)
(
72
)
Portugal country note
( ) EC,
Regulated Professions Database.
73
(
76
) EU average (without Romania, due to lack of data).
(
77
) EC,
Retail restrictiveness indicator
(2022).
(
78
)
OECD Economic Surveys: Portugal 2023
(
79
) EC, 2025 EU Justice Scoreboard.
(
80
) Currently, there is no out-of-court available data to analyse
the evolution of the instruments.
(
81
)
Destaque Estatístico Trimestral nº132, Janeiro 2025.
Direçao-Geral da Politica de Justiça, República Portuguesa.
(
74
) EC,
Communication on updating the reform
recommendations for regulation in professional services,
COM(2021) 385. 9/7/2021;
OECD, Product Market Regulation
(PMR) indicators: How does Portugal compare?
OECD, 2024;
OECD Services Trade Restrictiveness Index (STRI) 2024 -
Portugal
(
75
)
OECD Services Trade Restrictiveness Index (STRI) 2024 -
Portugal
47
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In 2024, Portugal had the fourth highest
growth rate of business registrations in the
EU, and the 12th highest number of
bankruptcy declarations, which indicates a
good business dynamism.
With a 22.6% growth
rate, Portugal had the fourth highest level of
business registrations in 2024 in the EU, which has
an overall average of 3%. Furthermore, looking at
the five-year average, Portugal had the second
highest growth rate in the EU at 10.6% (1.4%, EU-
27) (
82
). The increase in business bankruptcy
declarations in Portugal in 2024 stood at 5.6%,
well below the EU average of 43.1%. Looking at
the five-year
average, Portugal’s bankruptcy rate
remained unchanged, while the EU average
increased by 22.5% (
83
).
is much shorter than the EU average. Portugal
resolved 89.3% of SOLVIT cases it handled as lead
centre in 2024 (vs EU average 84.9%), improving
on its 2023 result (86.9%) (
86
). As of December
2024, Portugal has 27 pending infringement
proceedings, slightly above the EU average of 24.
This ranks Portugal 16th in the EU (
87
).
Public procurement
Although public procurement indicators are
better than the EU average (see table of
indicators),
competition
in
public
procurement could be improved.
According to
the OECD PMR, Portugal is considered slightly less
competition friendly than the EU average (0.67 vs
0.50 for the EU). However, the indicator value
remained unchanged between 2018 and 2023.
Portugal has taken steps to promote
sustainable procurement.
Although a majority
of awarded contracts were based on price criteria
alone (72%), Portugal is advancing in transforming
the decision process (
88
). As part of its RRP, in
2023 Portugal revised its national strategy for
green public procurement, adding mandatory
ecological criteria for the procurement of services
and products (notably in the construction sector)
that integrated sustainable bio-based products.
Sustainable public procurement is a crucial
approach for transforming public purchases in
Portugal. Through the implementation of
sustainable public procurement, the Portuguese
government can reduce its environmental impact
and foster innovation and competitiveness.
Socially responsible public procurement
(SRPP) in Portugal usually focuses on gender
equality, non-discrimination and promotion
of dignified work.
Cases of good SRPP practice
are found at different administrative levels,
although further awareness-raising campaigns
and capacity buildings programmes would be
beneficial. Additionally, encouraging broader
support and participation of social economy
entities in these processes would also be valuable.
(
86
) EC, ECFIN BCS.
(
87
) EC,
2025 Single Market and Competitiveness Scoreboard.
(
88
) EC.
2025 Single Market and Competitiveness Scoreboard
Single market
Portugal is well integrated in trade of goods
in the single market, but it can still improve
in trade of services.
Portugal intra-EU imports
and exports in goods stood at 24.8% of its GDP in
2023, while the EU average stood at 23.81%.
17.72% of Portuguese SMEs in the industrial
sector exported goods to other EU Member States
in 2022, while the EU average was 13.08%. In
contrast, Portugal’s intra-EU
imports and exports
in services represented 4.4% of its GDP in 2023,
while the EU average was 7.57% (
84
).
The conformity of single market directive
transposition and the SOLVIT (
85
) case
resolution rate have somewhat improved.
Portugal has continued to improve its conformity
deficit in 2024. It had just 0.7% (vs the 0.9% EU
average) of single market directives transposed
incorrectly, while in 2023 it was 0.8%. The
transposition deficit has increased to 1%, placing
Portugal slightly above the EU average (0.8%).
However, the duration of infringement proceedings
(
82
) EC, ECFIN BCS. (Index 2021 = base 100).
(
83
) EC, ECFIN BCS. (Index 2021 = base 100).
(
84
) EC, ECFIN BCS.
(
85
)
SOLVIT
is an online service aimed at helping citizens and
businesses that believe their EU rights have been breached
by public authorities in another EU country and have not (yet)
taken their case to court. It is provided by the national
administration in each EU country and in Iceland,
Liechtenstein and Norway.
48
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Table A4.1:
Making Business Easier: indicators.
Portugal
POLICY AREA
INDICATOR NAME
2020
Investment climate
Material shortage, firms facing constraints, %
1
Shortages
Labour shortage, firms facing constraints, %
1
Vacancy rate, vacant posts as a % of all
available ones (vacant + occupied)
2
Transport infrastructure as an obstacle to
investment, % of firms reporting it as a major
obstacle
3
Infrastructure
VHCN coverage, %
4
FTTP coverage, %
4
5G coverage, %
4
4.8
6.6
0.9
7.9
8.5
1.4
15.8
11.5
2.0
9.2
10.9
1.8
5.2
9.5
1.7
10.0
20.2
2.3
2021
2022
2023
2024
EU-27
average
11.2
-
-
-
16.0
90.5
87.6
0.0
17.3
93.0
90.8
70.1
15.5
94.2
92.3
98.1
17.4
-
-
-
13.4
78.8
64.0
89.3
Reduction of regulatory and administrative barriers
Impact of regulation on long-term investment,
Regulatory environment
% firms reporting business regulation as a
48.1
45.8
46.3
3
major obstacle
Payment gap - corporates B2B, difference in
19.8
11.8
13.6
days between offered and actual payment
5
Payment gap - public sector, difference in days
24.5
11.9
10.4
between offered and actual payment
5
Late payments
Share of SMEs
experiencing late
payments, %*
6
from public or private
entities in the last 6
months
from private entities
in the previous or
current quarter
from public entities in
the previous or
current quarter
48.6
48.8
24.5
15.4
16.8
37.3
14.6
15.0
-
15.6
15.1
-
41.6
38.1
41.8
-
-
-
-
42.7
47.9
-
-
-
-
13.7
16.6
Integration
Single Market
EU trade integration, % (Average intra-EU
27.1
imports + average intra EU exports)/GDP
2
EEA Services Trade Restrictiveness Index
7
Transposition deficit, % of all directives not
transposed
8
Conformity deficit, % of all directives
transposed incorrectly
8
SOLVIT, % resolution rate per country
8
Number of pending infringement proceedings
8
0.044
0.1
1.3
98.7
37.0
30.2
0.044
1.4
1.1
94.0
28.0
34.0
0.044
1.3
1.3
93.2
32.0
32.1
0.043
0.4
0.8
87.0
25.0
31.5
0.048
1.0
0.7
89.3
27.0
41.6
0.050
0.8
0.9
84.9
24.4
Compliance
Public procurement
Single bids, % of total contractors**
8
Competition and
transparency in public
procurement
Direct awards, %**
8
24
7
20
7
24
5
21
10
38
1
-
7.0
*Change in methodology in 2024: reporting late payments from public and private entities separately.
**The 2024 data on single bids is provisional and subject to revision. Please note that approximately 35% of the total data is
currently missing, which may impact the accuracy and completeness of the information. Due to missing data, the EU average of
direct awards data is calculated without Romania.
Source:
(1) ECFIN BCS, (2) Eurostat, (3) EIB IS, (4) Digital Decade Country reports, (5) Intrum Payment Report, (6) SAFE survey, (7)
OECD, (8) up to 2023: Single Market and Competitiveness Scoreboard, 2024: Public procurement data space (PPDS).
49
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ANNEX 5: CAPITAL MARKETS, FINANCIAL STABILITY AND ACCESS TO FINANCE
Portugal lacks abundant domestic savings
and deep capital markets.
While the country
remains a net borrower from the rest of the world,
its net international investment position (NIIP) has
shifted significantly over the recent years. It
moved from deep deficits towards a more
balanced stance as borrowing from abroad
declined, exports grew, and recapitalised banks
managed to cut off some of their reliance on
foreign funds. Local firms are mostly small with
an overwhelming majority of micro-enterprises.
Unsurprisingly,
close to three quarters of firm’s
investment needs are financed from internal
resources. External financing is dominated by
owners’ equity, bank loans. and, in the case of
large firms, by credit from the rest of the world.
Banks still play a pivotal role in financing
Portuguese non-financial corporations (NFCs).
Retail participation in capital markets is low,
despite some progress being made. Listed shares
jointly with bonds are equivalent to just 16.5% of
Portugal’s GDP. The investment policies
of
domestic institutional investors are quite
conservative, and investment funds are heavily
invested in real estate, with over 40% of assets
under management (AUM) invested in this
segment. Portugal continues to lag on innovation,
hampered by limited capital market engagement,
low financial literacy, high taxation, and structural
barriers that impede the retention of high-growth
companies.
pandemic. This imbalance has resulted in net
borrowing from abroad averaging a negative 1.1%
of GDP over 2014-2023. Consequently, domestic
savings are predominantly channelled into local
projects and foreign capital needs to step in only
to fill an occasional financing gap.
Graph A5.1:
Net savings-investment balance
25 % of GDP
20
15
10
5
0
-5
2017
2018
2019
2020
2021
2022
2023
Private investment, net
Private saving, net
Borrowing from the rest of the world
Lending to the government
Private saving, gross
Source:
AMECO
Availability and use of domestic
savings
Net savings are outpaced by domestic
financing needs leading to a reliance on
external borrowing.
Over the past decade, the
private savings ratio, net of fixed capital
consumption, has averaged around 2.6% of GDP,
surging to 3.9% in 2020 and 2021 as households
bolstered reserves amid the Covid-induced
uncertainty (graph A3.1). The net private
investment ratio, a key gauge of the private
sector’s contribution to capital growth, has
averaged a negative 0.9% of GDP with significant
volatility around the pandemic period and a spike
to 1% in 2022, reflecting a post-pandemic
investment surge. Lending to the government has
fluctuated
significantly
over
2017-2023,
averaging 1.6% of GDP but soaring to 5.8% in
2020 driven by the fiscal stimulus during the
Portugal’s economy remains a net debtor to
the global financial system.
Nevertheless,
Portugal’s NIIP despite remaining deeply negative
is reflecting a gradual improvement. As of Q3
2024, total Portuguese assets held abroad
including reserves reached 157.2% of GDP, while
liabilities to foreigners stood at 219.9% of GDP,
resulting in an NIIP of negative 62.7% of GDP
(graph A3.2). Foreign direct investment liabilities,
at close to 80% of GDP, significantly outpace
assets at 34% of GDP, highlighting the country’s
dependence on foreign capital inflows. Portfolio
investment liabilities, worth half the GDP, stood
below the portfolio assets worth close to 67% of
the GDP, while official reserve assets remain
modest at just 13.4% of GDP. Other investment
liabilities, at 91.1% of the GDP, dwarf assets (43%
of GDP), contributing to the persistent NIIP deficit.
This structure underscores the Portuguese
economy’s extensive integration into international
capital flows, primarily as a recipient of foreign
investment. Though, when taking a step back, the
country is clearly improving on its NIIP
performance and is gradually becoming less
dependent from the global financial flows.
50
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Graph A5.2:
International investment position
300
% of GDP
200
100
Graph A5.3:
Capital markets and financial
intermediaries
MFIs
Non-financial corporations
Insurance and pension funds
Government
180
160
140
% of GDP
0
-100
-200
-300
-400
2017
2018
2019
2020
2021
2022
2023
2024-Q3
Foreign Direct Investment, Assets
Other investment, Assets
Foreign Direct Investment, Liabilities
Portfolio Investment, Assets
Official reserve assets
Portfolio Investment, Liabilities
Non-financial corporations
120
100
Financial corporations
Other investment, Liabilities
NIIP
Source:
ECB
20
0
Listed equity
MFIs
40
Bonds
Assets by sector
Structure of the capital markets and
size of the financial sector
The domestic capital market is modern but
compact.
The main stock exchange, Euronext
Lisbon, is modest in size, with market
capitalisation standing at approximately 24.4% of
GDP, significantly below the EU average of 67.6%.
Trading volumes are also limited, reflecting on the
one hand the market's small scale, and on the
other hand the low retail investors’ participation.
Non-financial corporations account for over 90%
of this capitalisation, underscoring the market’s
role in supporting key sectors like local
manufacturing. The outstanding volume of private
sector debt securities stood at 40% of GDP in
2023, with monetary financial institutions (MFIs)
contributing around half of the total. General
government bonds have remained the most
significant part of the fixed income market at
62.4% of GDP, bolstered by public investment in
infrastructure and post-pandemic recovery.
Source:
ECB, EIOPA, AMECO
The financial sector in Portugal remains
heavily bank centric.
With assets worth about
159.1% of GDP in 2023, the banking sector
dwarfs all other parts of the local financial sector.
Nevertheless, in relative size it is still far below
EU’s average of 247.2% of GDP. The banking
system is characterised by a high degree of
concentration, with a few large lenders dominating
over 80% of the market. Foreign direct ownership,
predominantly Spanish, stands at over a third of
total banking sector assets. The insurance sector,
with total assets reaching some 20% of GDP at
end-2023, plays a growing role in non-bank
intermediation and demonstrated recently robust
growth data, with direct insurance production
surging over 20% y/y in Q3 2024. Similarly, to the
local banking sector, insurance market dynamics
reveal a concentrated landscape. Pension funds
and investment funds account respectively for
6.1% and 17.6% of GDP in 2023, supported by
slowly increasing retail participation.
Resilience of the banking sector
The local banking system demonstrated
remarkable resilience over the past decade.
There are only a few traces of the sovereign debt
crisis in the balance sheets of local banks. The
sector is now boasting solid liquidity, capital (CET1
ratio at 17.8% surpassing the EU average of
16.7% and reflecting a focus on high-quality
capital), and good profitability metrics with an ROE
of 13.8% in 2023 and over 16% in 2024. This
stability ensures that Portuguese businesses
51
Pension funds
60
Other financials
Investment funds
80
Insurance corporations
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3035405_0053.png
continue to enjoy access to reliable and affordable
bank loans. Major banks have successfully met
EU-wide stress test requirements, demonstrating
resilience despite the economic challenges of the
past years. The aggregate Minimum Requirement
for Own Funds and Eligible Liabilities (MREL) rate
stood at 26.1% of risk-weighted assets by end-
2023, exceeding regulatory thresholds and
signalling preparedness for potential shocks. A
local specificity is the sector’s ongoing
deleveraging effort that has been a long-term
trend that started during the financial crisis.
Asset quality of Portuguese lenders has
improved dramatically.
The sector’s aggregate
NPL ratio dropped to 2.6% in Q4 2024 (from high
teens back in 2016-2017), still above the EU
average of 1.9%, but reflecting the substantial
progress undertaken in reducing legacy financial
crisis NPLs. Household NPLs stood at 2.5%, while
non-financial corporation (NFC) NPLs were slightly
higher at 4.9%. With nine out of ten mortgages at
variable rates, rising interest rates have posed
some risks, but asset quality has been preserved
through an array of government and banking
sector measures. The NPL coverage ratio rose to
55.7% in Q4 2024, exceeding the EU average of
42.6% by a large margin, indicating robust
provisioning for potential losses. A notable feature
is the sector’s exposure to tourism-related
lending,
which has recovered post-pandemic.
Portuguese banks maintain robust liquidity
profiles, underpinned by a solid funding base
and a prudent strategy toward debt issuance.
Local lenders exhibit low liquidity funding risk, with
the aggregate liquidity coverage ratio (LCR) at
around the 270% mark and the net stable funding
ratio (NSFR) in the 130-140% bracket for most
banks in 2024, both well above regulatory
minimums. The loan-to-deposit ratio of 70.4% is
far below the EU average of 93%, reflecting the
economy’s deleveraging effort over the past
decade and the increase in deposits. Banks
continue to hold in 2023 on average around 14%
of their total assets in government debt, which is
slightly above the EU average just shy of the 10%
mark. Debt issuance has been modest, with banks
issuing below EUR 5 bn in debt instruments both in
2023 and 2024, mostly to refinance maturing
obligations and maintain MREL buffers.
Resilience of the non-bank financial
intermediaries
Portugal’s insurance sector is a growing
component
of
non-bank
financial
intermediation.
In the third quarter of 2024, the
top three insurers occupied around 59.2% of the
market share in premiums, whereas the top ten
insurers took close to 90% of the market. The local
insurers maintain overall solid solvency levels with
coverage ratios for the solvency capital
requirement (SCR) and the minimum capital
requirement (MCR) in Q3 2024 at 219% and
579%, respectively. Both ratios substantially
increased (by a respective 15 pp and 40 pp) when
compared with end-2023 data. The sector is
overall gaining traction. For instance, health
insurance premia, have more than doubled over
the past 12 years. Insurers have also increasingly
diversified their investment portfolio searching for
better yields, shifting toward equities and variable-
income assets in recent years. The total assets of
domestic insurers equalled a fifth of the
Portuguese GDP in 2023 and grew by about 4.5%
over the volatile period between 2020-2023.
There are no material weaknesses in the
insurance sector’s risk profile.
Portugal’s
insurance supervisor, in coordination with
European Insurance and Occupational Pensions
Authority (EIOPA), conducted stress tests in 2023
on some of the main insurers in the country
confirming resilience to market and climate
shocks. However, exposure to natural disaster risks
continues to warrant close monitoring. According
to the dashboard for the insurance protection gap
for natural catastrophes published by EIOPA,
Portugal has the sixth-worst protection gap in
Europe. EIOPA’s dashboard highlights Portugal’s
high wildfire risk and medium flood exposure, and
a relatively low levels of insurance penetration
across all risks, at 6.8% of GDP in 2023, below the
EU average of 7.8%. This also implies possible
systemic repercussions for Portugal in the event of
an earthquake. Currently, merely 20% of
Portugal’s total housing stock is covered by
seismic risk insurance. Enhancing financial literacy
initiatives to increase insurance penetration
remains therefore a critical priority in this regard.
52
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Sources of business funding and the
role of banks
Portuguese firms’ financing structure differs
from the European average.
Bank loans remain
the backbone of corporate funding in Portugal,
totalling approximately 27.6% of all financing for
domestic NFCs, which is slightly above the EU
average of 27.2%. However, reliance on capital
markets is notably lower, with listed shares and
bonds accounting for 16.6% of corporate funding,
compared to the EU average of almost 23.7%.
This disparity highlights a significant reliance on
owners’ equity
and traditional banking channels
over market-based financing, which is not
surprising given the predominance of small and
micro-enterprises in Portugal. As a percentage of
GDP, corporate funding in Portugal stands at
around 205%, which is below the EU average of
230%. This lower level of overall corporate
funding relative to GDP underscores some
challenges Portuguese firms face in accessing
diverse financing sources, potentially impacting
their growth and innovation capabilities.
Graph A5.4:
Composition of NFC funding as % of
GDP
250
driven by historical challenges in accessing
external finance. Despite this, a large majority
(83%) of Portuguese firms reported that their
investment activities over the past three years
were adequate. While funding generally is not
perceived to be an issue, there remains a potential
funding gap for some SMEs and start-ups that
may lack substantial internal reserves.
Corporate credit demand is showing some
early signs of recovery.
Corporate credit growth
has been on a downward trajectory since early
2021, and began to recover gradually with modest
positive growth observed from July 2024. In fact,
the year-on-year growth of credit to NFCs was still
in negative territory in the first half 2024 but
showing signs of stabilisation as monetary
conditions became more accommodative. Demand
for corporate loans for long-term investments was
strengthening in the fourth quarter of 2024, driven
by improved economic conditions and a more
favourable interest rate environment. In parallel,
the number of firms experiencing payment
difficulties also slightly decreased (the non-
performing loans (NPL) ratio in the corporate loans
segment dropped by 10 basis points between end-
2023 and mid-2024), reflecting better liquidity
management and improved financial health within
the corporate sector.
200
% of GDP
150
Capital markets and the participation
of retail investors
The Portuguese capital market is a market
for just a few large firms.
The use of listed
equity financing among domestic small and
medium-sized enterprises (SMEs) is notoriously
low, with just 2.3% of SMEs indicating that equity
is a relevant source of funding, compared to an EU
average of 10.1%(
89
). Despite the introduction of
initiatives aimed at boosting market participation,
such as the SME Growth Market, initial public
offerings (IPOs) remain occasional and small in
scale. Overall, while there are efforts to improve
the capital market infrastructure, significant
challenges remain in achieving a more dynamic
market environment. The domestic bond market is
predominantly composed of Portuguese sovereign
(
89
) European Commission, Survey on the Access to Finance of
Enterprises, 2023..
100
50
0
PT
Loans
Listed shares
Trade credit and advances
Unlisted shares
EU
Bonds
Other equity
The sum of NFC liabilities only reflects the total for the NFC
liabilities considered. Reference period 2023.
Source:
Eurostat
Reliance on internally generated funding is
key.
According to the 2024 EIB Investment Survey,
approximately 70% of Portuguese firms'
investment needs are met through internal
funding, a few percentage points higher than the
EU average of 66%. This reliance on internal
resources reflects, on the one hand, the small size
of local firms, a feature that makes accessing
external funding more difficult, and, on the other
hand, a broader trend of financial conservatism,
53
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bonds accounting for around three quarters of the
domestic fixed income market. Regarding
corporate bonds, only a handful are actively traded
from some of the biggest Portuguese corporations.
The Portuguese recovery and resilience plan (RRP)
outlines key measures to strengthen capital
markets, including the establishment of a new
legal framework to simplify IPOs and initiatives to
promote green bonds.
Corporate investment levels in Portugal
appear adequate but rarely focus on
innovation.
Most Portuguese SMEs do not appear
to face significant financing barriers to investment.
According to the 2024 EIB Investment Survey,
83% of Portuguese firms reported that their
investment activities in the past three years were
adequate, slightly above the EU average of 80%.
However, the same survey reveals that Portugal
has one of the lowest shares of firms investing in
the development of new products and services
within the EU, while it ranks second highest in
terms of firms focusing on replacing existing
capacity, such as buildings, machinery, equipment
and IT. Despite the expected increased momentum
of investment in 2025-2026, the growth in gross
fixed capital formation is expected to be primarily
driven by public investment, with the private
sector’s focus remaining on replacing physical
capital, which does not necessarily correspond to
productive growth (
90
). There is potential for
Portuguese companies, particularly start-ups, to
increase the share of capital-market-related
funding of their financing mix.
Low financial wealth drives Portuguese
households to favour deposits over capital
markets.
Households’ financial assets in Portugal
are notably modest compared to the EU average,
both in terms of per capita financial wealth and as
a percentage of GDP. This partly explains the low
equity investments culture among Portuguese
retail investors. Households with lower financial
wealth are less likely to allocate significant
portions of their savings to capital markets,
favouring safer options like deposits or sovereign
bonds. Consequently, only 2.9% of households’
financial wealth in Portugal is invested in listed
shares, compared to the EU average of 10.1%.
Portugal also has the lowest share of household
investments in bonds and shares relative to the
combined volume of cash holdings and deposits in
(
90
) Banco de Portugal,
Economic Bulletin - October 2024.
the EU (
91
). In fact, household deposits in banks
have grown substantially, increasing by 7.6% year-
on-year as of November 2024. Nevertheless, the
successful issuance and allocation of savings
certificates
–
a long-term government fixed-debt
instrument
–
demonstrates the public appetite in
Portugal for low-risk, easily accessible capital
market instruments. By December 2024, the
outstanding monthly stock of these certificates
among
retail
investors
had
exceeded
EUR 34 billion, highlighting their popularity.
Graph A5.5:
Composition of household financial
assets per capita and as % of GDP
90
80
70
60
50
40
30
20
10
0
PT
EU
PT
EU
per capita (000 EUR) (lhs)
% of GDP GDP (rhs)
250
200
150
100
50
0
Currency and deposits
Investment funds
Listed shares
Other equity
Insurance and pension funds
Bonds
Unlisted shares
HH Debt (liability)
The sum of household assets only reflects the total for the HH
assets considered. Reference period 2023.
Source:
Eurostat
The role of domestic institutional
investors
Portugal’s investment fund industry still lags
behind its European peers despite recent
dynamic growth.
The Portuguese investment
fund industry has experienced robust growth over
the past two years, with assets increasing by 31%
from Q3 2022 to Q3 2024 (
92
). However, the
sector remains relatively small compared to its
European counterparts, accounting for only 0.25%
of total assets held by investment funds in the
euro area. This limited scale can be attributed to
several factors, including Portuguese retail
(
91
) Commission staff working document:
Monitoring progress
towards a Capital Markets Union: a toolkit of indicators
SWD(2021) 544, Overview of CMU Indicators
–
2024
update.
(
92
) Source: ECB,
Assets and liabilities of investment funds.
54
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3035405_0056.png
investors’ strong preference for bank deposits, a
relatively low saving rate, and historically high
total expense ratios (TERs) for Portuguese
undertakings for collective investment in
transferable securities (UCITS). According to the
European Securities and Markets Authority’s
(ESMA) 2024 cost and performance report, funds
domiciled in Portugal consistently rank among the
most expensive in the EU (
93
), which likely deters
broader
participation.
Another
notable
characteristic of the Portuguese investment fund
market is the significant dominance of real estate
investment funds (REITs). As reported by the
Portuguese Association of Investment Funds(
94
),
out of EUR 35.3 billion in assets under
management as of October 2024, EUR 15.3 billion
(43%) are held by REITs. This substantial share
aligns with the dramatic rise in Portuguese house
prices, which have increased by an astonishing
113% between 2010 and Q3 2024, reflecting
strong demand for real estate as an asset class.
Private pension funds play a limited role.
Pension funds are not a major player in the capital
markets and manage about EUR 40 billion at end-
2023. Pension funds do not play any major role in
the overall Portuguese pension system, with most
retirement benefits provided by the public pension
system. Occupational pension plans cover only a
small fraction of the workforce and private
pensions serve mainly as a supplementary option.
Encouraging the build-up of universal funded
supplementary pension schemes, which invest in
highly diversified financial portfolios, would further
develop domestic capital markets and make the
overall Portuguese pension system more
sustainable in the light of demographic challenges.
increase compared to 2023. Despite this growth,
the amount raised remains far from the record
levels of 2021 and 2022, when start-ups secured
EUR 1.6 billion and EUR 1.1 billion, respectively.
Portugal Ventures, the state-owned VC company
and part of Banco Português de Fomento, led the
Portuguese VC sector in 2024 in terms of the
number of transactions, completing 20 deals
worth a total of EUR 30.4 million. However, the
average value of annual private equity and VC
investment relative to nominal GDP is still very
modest in Portugal at 0.2% in 2023 (vs the EU
average of 0.4% of GDP) and has decreased since
the peak in 2020 of 0.6% of GDP. This
underdeveloped venture and growth capital
market points to a financing gap for early-stage
innovative firms in need of capital throughout their
life cycle (see Annex 3).
The depth of available venture and
growth capital
The local venture capital (VC) and growth
capital market is still very shallow.
According
to the private TTR database, Portuguese start-ups
raised EUR 886 million in 2024, marking a 55%
(
93
) ESMA Market Report:
Costs and Performance of EURetail
Investment Products 2024,
January 2025.
(
94
) Portuguese Association of Investment Funds:
Análise APFIPP
ao mercado de Organismos de Investimento Alternativo
Imobiliário,
November 2024.
55
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Table A5.1:
Financial indicators
Total assets of MFIs (% of GDP)
Common Equity Tier 1 ratio
Total capital adequacy ratio
Overall NPL ratio (% of all loans)
NPL (% loans to NFC-Non financial corporations)
NPL (% loans to HH-Households)
NPL-Non performing loans coverage ratio
Return on Equity
Loans to NFCs (% of GDP)
Loans to HHs (% of GDP)
NFC credit annual % growth
HH credit annual % growth
Stock market capitalisation (% of GDP)
Initial public offerings (% of GDP)
Market funding ratio
Private equity (% of GDP)
Venture capital (% of GDP)
Financial literacy (composite)
Bonds (as % of HH financial assets)
Listed shares (as % of HH financial assets)
Investment funds (as % of HH financial assets)
Insurance/pension funds (as % of HH financial assets)
Total assets of all insurers (% of GDP)
Pension funds assets (% of GDP)
1-3
4-10
11-17
18-24
25-27
1
Banking sector
2017
201.3
13.9
15.2
13.3
25.2
7.1
49.9
2018
190.8
13.2
15.2
9.4
18.5
5.1
52.4
2019
180.9
14.1
16.7
6.1
12.3
3.7
51.7
2020
205.6
15.4
18.1
4.9
9.8
3.4
55.4
2021
202.5
15.5
18.0
3.6
8.1
2.8
52.6
2022
176.6
15.3
18.1
3.0
6.5
2.3
55.4
2023
159.1
17.1
19.6
2.7
5.0
2.4
56.3
13.8
27.4
48.5
-1.0
-0.5
25.8
0.00
48.9
0.16
0.01
42.5
1.2
1.5
6.6
11.4
19.9
7.2
2024-Q3
156.5
17.8
20.5
2.6
4.9
2.5
55.7
16.0
25.8
46.4
-0.2
1.2
24.4
-
-
-
-
-
-
-
-
-
19.0
6.8
EU
247.2
16.7
20.1
1.9
3.5
2.1
42.6
10.1
30.1
44.4
0.5
0.3
67.6
0.05
49.6
0.41
0.05
45.5
2.7
4.8
10.0
27.8
53.4
22.8
-0.8
2.7
4.3
0.0
4.9
8.7
37.5
34.1
31.4
37.0
35.2
30.8
61.6
58.4
56.9
61.6
59.0
53.8
-0.1
1.7
1.1
10.0
4.5
0.8
-0.2
0.8
1.1
1.5
3.7
3.4
29.8
23.6
25.6
25.1
26.1
24.3
0.00
0.01
0.00
0.00
0.23
0.00
42.9
43.9
45.5
46.1
46.4
47.1
0.21
0.26
0.09
0.59
0.33
0.12
0.01
0.01
0.02
0.02
0.02
0.03
-
-
-
-
-
-
3.2
2.9
2.7
2.4
1.6
1.2
1.5
1.3
1.4
1.5
1.5
1.4
4.8
4.5
5.2
5.5
7.0
6.3
18.0
17.5
17.5
16.3
14.9
12.4
27.1
25.6
25.8
26.6
24.6
21.9
-
-
10.5
11.8
11.2
8.8
Colours indicate performance ranking among 27 EU Member States.
(1) Annualised data
Credit growth and pension funds EU data refers to the EA average.
Source:
ECB, ESTAT, EIOPA,
DG FISMA CMU Dashboard,
AMECO
There are targeted policies in place to
promote start-up funding.
To address the issue,
the Portuguese RRP includes measures to support
the financing of start-ups. In particular, it finances
the capitalisation of companies indirectly through
the above-mentioned public development bank,
Banco Português de Fomento, with a funding
allocation of EUR 1.55 billion. In addition, in
November 2024, the European Investment Fund
committed a total of EUR 90 million to three funds
that incorporate Portuguese VC, primarily to
accelerate the growth of start-up companies.
Non-banks sector
Financial literacy
Portugal’s financial literacy lags behind
that
of its European peers.
Portugal’s population lags
behind in terms of financial literacy, ranking
second to last in the financial knowledge score (
95
).
While the general trend in Portugal
–
as in other
Member States
–
shows that individuals with lower
education levels tend to have lower financial
literacy. A recent study (
96
) found that even new
students entering higher education have notably
weak financial knowledge. In particular, their
understanding of financial risks is characterised by
significant misconceptions. To address these
shortcomings, Portugal has implemented several
initiatives, including the national plan for financial
education 2021-2025 and the digital financial
literacy strategy, as well as a pilot project (2024–
2027) involving schools and communities to
reinforce financial education at the upper
secondary level. Developed by the OECD in
collaboration with Banco de Portugal and
supported by the European Commission, these
measures
–
by improving financial literacy
–
can
also increase market participation, as individuals
gain confidence to invest in bonds and equity.
(
95
) Source:
Monitoring the level of financial literacy in the EU -
July 2023 - Eurobarometer survey.
(
96
) Sarabando, P.; Matias, R..; Vasconcelos, P.; Miguel, T.
Financial
literacy of Portuguese undergraduate students in
polytechnics: does the area of the course influence financial
literacy?.
Journal of Economic Analysis, 2023, 2, 28.
56
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ANNEX 6: EFFECTIVE INSTITUTIONAL FRAMEWORK
Portugal’s institutional framework shapes
the country’s competitiveness.
Portugal is
undertaking reforms to reduce bureaucracy and to
modernise, but challenges remain. The country has
made progress on digitalisation. However, the civil
service is struggling with low attractiveness and
an ageing workforce. In the justice system, efforts
are being made to reduce the length of
proceedings, but ensuring the availability of
sufficient human resources is still a challenge.
There is also much scope to enhance regulatory
practices.
sectors as part of its recovery and resilience plan
(RRP) and in line with the Portugal 2030 strategy
(
99
), to modernise the state, improve efficiency and
enhance citizen-centric service delivery. Portugal is
also working to improve regional development and
the effectiveness of its public policies through
decentralisation (
100
).
Quality of legislation and regulatory
simplification
Performance in developing and evaluating
legislation is below the EU average.
It is
stronger for stakeholder engagement than for
identifying impacts in advance and for assessing
legislation after the fact. However, performance
remains in all three cases below the EU average,
on account of underdeveloped methodological,
systematic adoption, transparency, oversight and
quality control requirements for the above-
mentioned regulatory tools (Graph A6.2).
Moreover, there remains visible scope for Portugal
to further strengthen its mechanisms for
simplifying
regulation
and
identifying
administrative burdens (Table A6.1).
Recent reforms aim to improve the
regulatory governance.
Steps have been taken
to further strengthen Portugal’s legal framework.
CEJURE, a State Legal Centre, has been set up to
provide legal support and advice to the public
administration (
101
).
PLANAPP,
the competence
centre for planning, policy and foresight, has been
strengthened to become a central body for
planning and evaluating public policies. It supports
evidence-based policy formulation and is
responsible for regular audits and transparency
reports (
102
).
Public perceptions
Graph A6.1:
Trust in justice, regional / local
authorities and in government
0.7
0.6
0.5
0.4
0.3
0.2
0.1
Autumn
Spring
Autumn
Autumn
Autumn
Autumn
Autumn
Autumn
Summer
Summer
Autumn
Winter
Spring
Spring
Spring
Spring
Winter
Spring
Spring
0
2014 2015
2016
2017
2018
2019 2020 2022
2023
2024
Justice, legal system EU27
Justice, legal system PT
Regional or local public authorities EU27
Regional or local public authorities PT
Government EU27
Government PT
Source:
Standard Eurobarometer surveys
Trust in government and judiciary has
fluctuated over the past decade.
Among
national institutions, trust in regional and local
authorities is highest (see Graph A6.1). When
asked about improvements that can increase trust
in Portugal’s public administration, 59% of citizens
pointed to less bureaucracy (EU: 52%), and 39% to
better skilled civil servants (EU: 30%) (
97
). The
perceived quality of government has improved and
reached values above the EU average (
98
). Against
this backdrop, the country is reforming several
(
97
)
Understanding Europeans’ views on reform needs
- April
2023 - - Eurobarometer survey,
Country Fact Sheet.
(
98
)
Inforegio
–
European Quality of Government Index
(
99
)
What it is Portugal 2030
–
Portugal 2030
(
100
)To address the needs of regional governance, the
Portuguese Commissions of Coordination and Regional
Development (CCDR) have undergone changes in their
status and role.
(
101
)
CEJURE
–
State Legal Centre
(
102
) Decree Law No 67/2024.
57
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Table A6.1:
Portugal. Selected indicators on administrative burden reduction and simplification
Ex ante impact assessment of legislation
When developing new legislation, regulators are
required to …
Ex post evaluation of legislation
Is required to consider the consistency of regulations
and address areas of duplication.
Is required to contain an assessment of administrative
burdens.
Is required to contain an assessment of substantive
compliance costs.
Compares the impact of the existing regulation to
alternative options.
Periodic ex post evaluation of existing regulations is
mandatory.
Government uses stock-flow linkage rules when
introducing new regulations (e.g., one-in one-out).
A standing body has published an in-depth review of
specific regulatory areas in the last 3 years.
In the last 5 years, public stocktakes have invited
businesses and citizens to assess the effectiveness,
efficiency, and burdens of legislation.
Identify and assess the impacts of the baseline or
‘do nothing’ option.
Identify and assess the impacts of alternative non-
regulatory options.
Quantify administrative burdens of new
regulations.
Quantify substantial costs of compliance of new
regulations.
Assess macroeconomic costs of new regulations.
Assess the level of compliance.
Identify and assess potential enforcement
mechanisms.
Yes / For all primary laws
For major primary laws
For some primary laws
No / Never
(1) This table presents a subset of iREG indicators focusing on regulatory costs. The indicators refer to primary legislation.
Source:
OECD (2025), Regulatory Policy Outlook 2025 [https://doi.org/10.1787/56b60e39-en] and Better Regulation across the
European Union 2025 (forthcoming).
Graph A6.2:
Indicators of Regulatory Policy and
Governance (iREG)
4.0
3.5
3.0
2.5
2.0
inventory and assess whether such licences and
permits are still required or should be removed
(see also Annex 4).
Social dialogue
Social dialogue is highly institutionalised,
with the Economic and Social Council (CES)
playing a role in national legislation and
policymaking.
Two trade unions and four
employers’ associations are represented in the
permanent social concertation organ of the CES
and are involved in national legislation production
and policy making decisions. Most of legislation,
depending on the issue at stake, is preceded by a
CES consultation. Social partners are in principle
also consulted in advance for their views on the
design and implementation of relevant policy
measures. For instance, this was the case for the
recovery and resilience plan (RRP), for the 2030
Partnership Agreement and the key challenges to
be addressed in each European Semester cycle.
However, some civil society organisations and
social partners have raised concerns that such
involvement is a formality used to legitimise pre-
decided policies rather than a genuine platform for
discussion, while others complain about their
1.5
1.0
0.5
0.0
Primary laws Subordinate Primary laws Subordinate Primary laws Subordinate
regulations
regulations
regulations
PT_Stakeholder
engagement
PT_Regulatory Impact
Assessment
PT_Ex-post evaluation of
legislation
Methodology
Transparency
2021
Systematic adoption
Oversight and quality control
EU-27
Source:
OECD (2025), Regulatory Policy Outlook 2025 and
Better Regulation across the EU 2025 (forthcoming).
The OECD product market regulation
indicator shows that that Portugal’s licensing
system is well aligned with some best
practices, but not all of them.
For instance,
while the government keeps an up-to-date online
inventory of all the permits and licences
required/issued to businesses by public bodies, it is
not kept by a single body. There is no requirement
for the government to regularly review the
58
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Table A6.2:
Digital Decade targets monitored through the Digital Economy and Society Index
Portugal
2022
Digitalisation of public services
Digital public services for citizens
1
Score (0 to 100)
EU-27
2024
82
2023
2023
78
2022
2024
79
2023
Digital Decade
target by 2030
EU-27
100
2030
100
2030
100
2030
79
2021
2
3
Digital public services for businesses
Score (0 to 100)
82
2021
82
2022
82
2023
85
2023
79
2023
Access to e-health records
Score (0 to 100)
na
2021
63
2022
86
2023
Source:
Digital Economy and Society Index
limited involvement. The thematic ESF+
programme, as well as the multi-fund regional
programmes, have a dedicated allocation for the
capacity building of social partners (
103
).
other Member States through the Professional
Attributes Certification System (SCAP). This allows
to access public services provided by other
Member States, including those enabled by the
Once-Only Technical System, part of the EU Single
Digital Gateway (
105
).
The take-up of digital services in Portugal is
uneven.
The use of e-government services is
above the EU average and citizen perception of
public service provision has improved thanks to
efforts on digital transformation. However, the
share of eID users is markedly below the EU
average (30.4% vs 41.1% for the EU) (
106
). In line
with its RRP, Portugal is implementing measures
relating to digitalisation of public administration
(
107
). Furthermore, an integrated citizen-centred
process has been put in place for people with
disabilities, to minimise unnecessary travel and
interactions, ensuring information is only
submitted once.
Digital public services
Portugal has made some progress in the
provision of public services online.
While it
scores above the EU average on the availability of
digital public services for citizens and in access to
e-health records, it is still lagging behind on
services for businesses (Table A6.2).
Portugal is making good progress towards
seamless, automated exchange of authentic
documents and data across the EU.
It has
already successfully tested its first transactions
through the Once-Only Technical System (
104
),
which is part of the European Union’s Single
Digital Gateway. Portugal is in the process of
connecting the first authorities.
Portugal has set up and notified eID schemes
for legal persons under the eIDAS regulation
through the Digital Mobile Key and the Citizen
Card. Portuguese businesses can authenticate
themselves to access public services provided by
(
103
) For an analysis of the involvement of
Portugal’s
social
partners at national level in the European Semester and the
Recovery and Resilience Facility, see Eurofound (2025),
National-level social governance of the European Semester
and the Recovery and Resilience Facility.
( ) European Commission,
The Once Only Principle System: A
breakthrough for the EU’s Digital Single Market
104
Civil service
Portugal’s public administration faces risks
due to an ageing workforce and low public
employment attractiveness.
In 2024, the share
of government employees above 49 years old was
almost 47% of the workforce. The share of civil
(
105
) European Commission,
Once-Only Technical System
Acceleratormeter.
(
106
) European Commission,
eIDAS Dashboard
(
107
) For example, the Portuguese Ministry of Justice is developing
a chatbot to simplify access to legal proceedings with a
more accessible language.
59
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servants with higher education is rising (39.7%),
yet significantly below the 54% in the EU27 (
108
).
The participation rate of civil servants in adult
learning has been increasing in recent years. In
2024, it stood at 21.8%, vs. 18.9% in the EU27.
Undertaken
measures
to
make
public
administration more appealing, including under the
recovery and resilience plan, promote merit-based
recruitment to attract younger talent, using
streamlined, digital hiring processes with
transparent progress tracking for candidates.
Higher salaries and professional development
opportunities, along with promoting workplace
modernisation and flexibility, were also in focus.
Additionally, the performance evaluation system
has been revamped (
109
) to better support and
value civil servants' careers. The new, accessible
evaluation process emphasises performance and
merit of civil servants for a better quality of public
service and improvement of public administration.
Programmes for digital literacy, green skills (
110
)
and increasing the educational attainment (
111
) of
civil servants have been introduced.
of police and prosecution service resources
continues to pose a challenge for the efficient
prosecution of corruption cases (
114
). Complex
criminal proceedings, including those related to
high-level corruption, are lengthy, often leading to
crimes becoming time-barred. There are
reflections on how to adapt general criminal
procedure legislation to allow for efficient
handling of these cases (
115
). Furthermore, there
are concerns regarding the transparency of
decision-making in public procurement. 24% of
companies (EU average 27%) think that corruption
has prevented them from winning a public tender
or a public procurement contract in practice in the
last three years (
116
). A criminal investigation
leading to the dissolution of Parliament revealed
integrity risks linked to the National Interest
Projects (PINs), which constitute an exceptional
regime linking governments and businesses (
117
).
Portugal has not implemented a public
register for lobbyists, unlike most Member
States.
Stakeholders have urged the government
to introduce relevant measures on lobbying as a
matter of priority (
118
). Legislation on revolving
doors (
119
) introduced stricter penalties and
extended the rules also to the companies hiring
the persons in question (
120
).
Integrity
A far higher percentage of companies than
the EU average consider corruption to be
widespread and a problem in doing business.
In Portugal, 83% of companies consider that
corruption is widespread (EU average 64%) and
51% consider that corruption is a problem when
doing business (EU average 36%) (
112
). Moreover,
only 22% of companies believe that people and
businesses caught for bribing a senior official are
appropriately punished (EU average 31%) (
113
).
However, corruption cases are being investigated
as a matter of priority, including ongoing cases
concerning foreign bribery. Portugal has adopted
measures which are expected to help ensure
sufficient resources for preventing, investigating
and prosecuting corruption. However, the shortage
(
108
) Eurostat. 2025.
European Union Labour Force Survey.
(
109
) Law Decree No 12/2024.
(
110
)
Início
–
Portugal Digital; Portaria No 21/2023 | DR.
(
111
)
Doutor - AP - FCT
(
112
) Flash Eurobarometer 543 on businesses’
attitudes towards
corruption in the EU (2024).
(
113
) Ibid.
Justice
The efficiency of the justice system has
improved but challenges remain, in particular
in administrative and tax courts.
In civil and
commercial cases, the average length at first
instance has increased (267 days in 2023,
compared to 238 days in 2022), and the clearance
(
114
) See the 2024 country-specific chapter for Portugal of the
Rule of Law Report, pp. 18-19.
(
115
) Ibid., pp. 12-13.
(
116
) Flash Eurobarometer 543 on businesses’
attitudes towards
corruption in the EU (2024).
(
117
) See the 2024 country-specific chapter for Portugal of the
Rule of Law Report, p. 23.
(
118
) Ibid., pp. 22-23.
(
119
) Law No 25/2024, of 20 February, amending Law 52/2019
(Rules on the exercise of functions by political and high
public office holders).
(
120
) See the 2024 country-specific chapter for Portugal of the
Rule of Law Report, pp. 19-20, with further references.
60
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rate dropped to 96% in 2023 (compared to 103%
in 2022). In first-instance administrative and tax
courts, while there have been improvements in the
case-backlog, and the disposition time has been
decreasing since 2020, it remains comparatively
high, at 597 days. In second-instance courts, the
disposition time increased further, with 1 200 days
needed to resolve a case in 2023 (compared to
1 064 in 2022), among the lengthiest in the EU,
and the clearance rate dropped to 71% (compared
to 78% in 2022). Efforts are being made to reduce
the length of proceedings, including in the context
of the RRP. While the overall quality of the justice
system is good, there are serious concerns about
resources, in particular regarding legal clerks. In
February 2024, over 1 100 posts in first-instance
ordinary courts and 59 posts in first-instance
administrative and tax courts remained vacant
(
121
). The shortage of human resources is
considered to be impacting the efficiency and
quality of the justice system. The level of
digitalisation is advanced, with widespread use of
digital technologies by the courts and prosecution.
However, online access to judgments remains
limited, especially for first-instance decisions. As
regards judicial independence, no systemic
deficiencies have been reported. (
122
)
(
121
) Situation on 27 February 2024. Ministry of Justice, staff
map.
(
122
) For more detailed analysis of the performance of the justice
system in Portugal, see the upcoming 2025 EU Justice
Scoreboard and 2024 Rule of Law Report.
61
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SUSTAINABILITY
ANNEX 7: CLEAN INDUSTRY AND CLIMATE MITIGATION
Portugal
faces
significant
challenges
regarding its clean industry transition and
climate mitigation.
Its modest manufacturing
capacity in wind, solar, and electrolyser
technologies shows potential, especially in the
battery sector due to large lithium deposits.
However, strategic industrial policy and R&D
investments lag behind the EU average. The
automotive industry is strong, but greening efforts
need more infrastructure investment. Portugal's
reliance on imported critical raw materials poses
sustainability challenges, prompting circular
economy initiatives. Manufacturing emissions
trends highlight the need for additional industry
decarbonisation efforts. This annex reviews the
areas in need of urgent attention in Portugal’s
clean industry transition and climate mitigation,
looking at different dimensions.
Portugal participates in three hydrogen
IPCEIs:
Hy2Tech, Hy2Use, Hy2Infra. Between
2021 and 2023, it also received EUR 62 million for
hydrogen projects from the EU Innovation Fund.
A lack of strategic orientation in industrial
policy and of a dedicated regulatory
framework regarding net-zero industry
means that there are few signals and little
scale to support net zero manufacturing.
In
terms of investment support, relevant schemes
involve two grant frameworks approved by the
European Commission in 2024 under the
Temporary Crisis and Transition Framework (1 350
billion) to support investment in the production of
certain net zero technologies, namely batteries,
solar panels, wind turbines, heat pumps,
electrolysers and equipment for carbon capture
usage and storage. Additional investment and
efforts to increase innovation capacity and
coordination are necessary to compete in net zero
innovation.
Portugal’s automotive and
mobility sector is
one of the most important industrial value
chains in the Portuguese economy and one of
its leading exporters (11% of total exports).
Portugal hosts over 220 automotive supplier
companies and four major car manufacturers
(European original equipment manufacturers,
OEMs). The automotive industry employs 5.6% of
the Portuguese workforce. This translates into 7.7
vehicles produced per direct automotive
manufacturing employee (EU average: 5.4). In
total, Portugal produces over 300 000 vehicles a
year (2.14% of all EU vehicle production), with a
total turnover of EUR 5.2 billion. Most of these
(over 96%) are exported to other EU Member
States (Germany, France, Italy and Spain), the UK
and the USA. The automotive components
production, with an EUR 9.1 billion turnover,
represents most of the value added of the
automotive industry in Portugal and exports
mainly to the main vehicle manufacturing member
states (Spain (27%), Germany (22%), France
(12%)), the USA (6%), as well as the UK (5%).
Portuguese efforts to green and electrify the
vehicle fleet require increased green
infrastructure investment.
In 2023, 61.9% of
new registrations in Portugal were petrol-powered
cars (including hybrids), ranking 19
th
in the EU. This
shows Portugal making some progress in greening
Strategic autonomy and technology
for the green transition
Portugal ’s manufacturing capacity across all
net-zero technologies remains modest but
with significant development potential in the
battery and hydrogen sector.
In 2023,
Portugal’s manufacturing capacity amounted to
2.4 - 5.55 GW for wind turbine towers and 3.5
–
3.75 GW for wind turbine blades; between 450
and 500 MW/y (8-9% of EU capacity) for
electrolysers; and between 50 and 100 MW/y
(negligible share of total EU capacity) for solar
PV(
123
).
Portugal has the largest lithium deposits in
Europe, which could reduce dependencies on
critical raw materials for European battery
manufacturers.
Approval was granted in May
2024 to the UK firm Savannah Resources and
exploitation is expected to start next year. Paired
with the announcement of a lithium-ion battery
factory by CALB in Siles (expected production
capacity of 15 GW/h), this could enable a wider
uptake of battery manufacturing in Portugal.
(
123
) European Commission: Directorate-General for Energy,
The
net-zero manufacturing industry landscape across the
Member States 2025.
62
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and electrifying the vehicle fleet. There is still a
high need for green infrastructure investments,
especially in terms of charging infrastructure.
The strength of Portugal’s automotive sector
is based on a close cooperation
between higher
education institutions and training centres, R&D
institutions, private companies and industry
associations. All under coordination of the
Portuguese government, which considers the
industry to be a priority sector.
CRMs from becoming waste and explores ways in
which they can be substituted with non-critical
materials. The recycling rate for e-waste, a key
source of critical raw materials, was 57% in 2023,
well below the EU average of 81%. The reuse and
recycling rate for end-of-life vehicles is exactly at
the EU average (89% in 2022). This points to the
need to avoid the loss of critical raw materials,
notably as the car industry shifts to -battery
electric vehicles.
Portugal produces several critical raw
materials needed for the development of net
zero industry.
These include lithium (the only EU
source of lithium ores in 2021), tungsten, copper
and feldspar. Portugal’s raw materials resource
productivity is significantly below the EU average
(1 454 EUR/Kg vs 2 454 EUR/Kg). CRMs are
essential for producing high-tech products,
including electric vehicles, wind turbines, and
electronics. The production of these materials is in
the form of ore concentrates, which is one of the
reasons for Portugal’s raw materials resource
productivity being below the EU average. Given the
mineral potential of the country there is room to
improve productivity. In 2023, Portugal budgeted
USD 16.5 m for the exploration of raw materials
(compared to USD 18.8 m in 2022). The main ones
being lithium (USD 7.9 m), copper (USD 4.3 m) and
zinc (USD
4 m). Portugal’s strategic dependence on
raw materials is below the EU average (0.20 vs
0.23).
The circular use of material would help
reduce Portugal’s dependency on imports.
The
use of recycled materials has remained extremely
low (2.8%) compared to the EU average (11.8%)
over the last decade.
Critical raw materials
Portuguese manufacturing depends heavily
on imports of critical raw materials (CRMs)
needed for the green and digital transitions.
The main critical raw material imports include
copper (from Turkey, Norway, and Brazil),
phosphorus (from Algeria and Morocco),
aluminium (primarily from Turkey) and phosphate
rock (from Morocco). This implies significant
challenges regarding sustainability and resilience,
such as supply chain risks, environmental
degradation, and social concerns. With 29.6% of
material inputs to manufacturing coming from
imports in 2023 (EU average: 22%), Portugal is
particularly vulnerable to supply chain disruptions.
Portugal is implementing policies to
strengthen supply chains and the uptake of
circular solutions for critical raw materials.
The eMaPriCE project was developed during
2021/2022 with the objective of identifying
opportunities for circular economy strategies to be
implemented to prevent CRMs ending up as waste.
It also looks at options for substituting these CRMs
with non-critical raw materials.
Portugal’s upcoming Circular Economy Action
Plan includes measures to promote the use
of recycled materials over raw material
extraction.
One key action proposed is to study
potential policies and financial incentives that can
promote circularity and reduce reliance on critical
raw materials. Implementation of CEAP is
supported by the 2030 National Waste
Management Plan, aiming to reintegrate materials
into the economy, covering areas like food,
construction, plastics, textiles and CRMs.
Furthermore, the Strategic Plan for Urban Waste
(PERSU 2030) also outlines strategies to prevent
Climate mitigation
Portuguese manufacturing is relatively
greenhouse emissions intensive.
As in the EU
overall, about one fifth of Portugal’s total
greenhouse
gas
emissions
come
from
124
manufacturing ( ). Industry emits 400 g CO2eq
(
124
)
In 2023. Manufacturing includes all divisions of the “C”
section of the NACE Rev. 2 statistical classification of
economic activities. In the remainder of this section, unless
indicated otherwise, data on manufacturing refer to the
divisions of the NACE section C excluding division C19
(manufacture of coke and refined petroleum products), and
63
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of greenhouse gases per euro of gross value
added (GVA), about 50% more than the EU
average). From 2017 to 2022, the emissions
intensity of manufacturing in Portugal increased
by 13%, compared to a fall of 20% in the EU
overall. At 46% and 54% respectively, the shares
of energy- and non-energy-related emissions in
Portugal’s manufacturing industry (the latter are
related to industrial processes and product use)
remain broadly comparable with the shares in the
EU overall, 43% and 57%.
In recent years, improvements in the
intensity of Portugal’s manufacturing output
have been lacking, regarding both energy and
process and product use-related emissions.
Between 2017 and 2022, the energy-related
greenhouse emissions intensity of Portuguese
manufacturing remained broadly constant, at 185
g CO2eq per euro of GVA, about 40% above the
EU average in 2022 (
125
). Concerning industrial
processes and product use, the emissions intensity
from these sources of Portugal’s manufacturing
increased by 6%, to 160 g CO2eq/€ (60% above
the EU average), while it decreased by 23% in the
EU overall. In the meantime, the share of
renewables and electricity
in manufacturing’s final
energy consumption increased slightly, by 3
percentage points, to 57%. In this regard, Portugal
comes sixth highest in the EU. The energy intensity
of manufacturing increased in this period too, by
21%, to reach 1.8 GWh per euro of gross value
added
–
up from 1.5 GWh in 2017 and about two
thirds higher than the EU average of 1.1 GWh in
2022.
Graph A7.1:
GHG emission intensity of manu-
facturing and energy-intensive sectors, 2022
4
3.5
3
KG CO
2
eq / €
2.5
2
1.5
1
0.5
0
C-C19
C17
Portugal
C20
EU-27
C23
C24
Source:
Eurostat.
Except the paper products sector, the
greenhouse
emissions
intensity
of
energy-intensive sectors in Portugal is
comparatively
low.
Energy-intensive
126
industries ( )
account for 16% of Portugal’s total
manufacturing gross value added (2022). Among
these industries, in 2022, the manufacture of
paper and paper products recorded a
comparatively high emissions intensity, at 1.2 kg
CO2eq/€ of GVA. This was above the weighted EU
average of 0.7 kg. Despite comparatively low
electricity prices prevailing in Portugal lately (
127
),
output from greenhouse gas emissions-intensive
industries has declined since 2021, in particular
for the manufacturing of chemicals and chemical
products (by more than half) and manufacturing
of paper and paper products (by 15%) (
128
).
the year 2022. The source of all data in this section is
Eurostat; data following the UNFCCC Common Reporting
Framework (CRF) are from the European Environment Agency
(EEA), republished by Eurostat.
(
125
) For the GHG emissions intensity of GVA related to energy use
and industrial processes and product use respectively, GHG
emissions are from inventory data in line with the UNFCCC
Common Reporting Format (CRF), notably referring to the
source sectors CRF1.A.2
–
fuel combustion in manufacturing
industries and construction and CRF2
–
industrial processes
and product use. The CRF1.A.2 data broadly correspond to
the NACE C and E sectors, excluding C-19. GVA data (in the
denominator for both intensities) are aligned with this
sectoral coverage. Therefore, they are not fully consistent
with the data referred to in other part of this section.
(
126
) Notably, the manufacture of paper and paper products
(NACE division C17), of chemicals and chemical products
(C20), “other” non-metallic
mineral products (C23; this
division includes manufacturing activities related to a single
substance of mineral origin, such as glass, ceramic products,
tiles, and cement and plaster), and basic metals (C24). To
date, these industries are energy-intensive
–
i.e. consuming
much energy both on site and/or in the form of purchased
electricity
–
and greenhouse gas emissions intensive, in
various combinations.
(
127
) For a detailed analysis of energy prices, see Annex 8 on the
affordable energy transition.
(
128
) The Iberian Exception, implemented in 2022, was a
temporary mechanism allowing Spain and Portugal to cap
natural gas prices used for electricity generation, thereby
reducing electricity costs for consumers while addressing the
energy market disruptions caused by Russia’s
invasion of
Ukraine.
64
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Graph A7.2:
Manufacturing industry output: total
and selected sectors, index (2021 = 100), 2017-
2023
is projected to overachieve its effort sharing
target, a 28.7% reduction, by 10.7 percentage
points.
Graph A7.3:
Greenhouse gas emissions in the
effort sharing sectors, 2005 and 2023
50
45
40
35
130
120
110
100
90
80
MtCO2e
2017
2018
2019
2020
2021
2022
2023
30
25
20
15
10
70
60
Manufacturing
Manufacture of paper and paper products
Manufacture of chemicals and chemical products
Manufacture of other non-metallic mineral products
Manufacture of basic metals
5
0
2005
Domestic transport (excl. aviation)
Agriculture
Waste
2023
Buildings (under ESR)
Small industry
Source:
Eurostat.
Portugal has started supporting the clean
transition of manufacturing.
To address these
challenges, Portugal has implemented various
policies including deployment of renewable energy
and the promotion of renewable hydrogen and
biogas, as outlined in the country’s
National
Energy and Climate Plan (NECP). This includes a
(revised) national hydrogen strategy, a biomethane
action plan, a system of guarantees of origin for
the injection of renewable gases into the grid and
a competitive auction for the centralised
purchasing of renewable gases.
Portugal is projected to reach its 2030 effort
sharing target with the climate mitigation
policies it currently has in place (
129
).
In 2023,
greenhouse gas emissions from Portugal’s effort
sharing sectors are expected to have been 18.6%
below the level of 2005 (see graph A7.3). By
2030, current policies are projected to reduce
them by 31.8% relative to 2005 levels. Additional
policies considered in Portugal’s final updated
NECP are projected to involve reductions by a
further 7.5 percentage points (
130
). Hence Portugal
(
129
)
The national greenhouse gas emission reduction target is
set out in Regulation (EU) 2023/857 (the Effort Sharing
Regulation). It applies jointly to buildings (heating and
cooling); road transport, agriculture; waste; and small
industry (known as the effort sharing sectors).
(
130
)
The emissions from effort sharing sectors for 2023 are
based on approximated inventory data. The final data will
be established in 2027 after a comprehensive review.
Projections on the impact of
current policies (‘with existing
measures’, WEM) and additional policies (‘with additional
Source:
European Environment Agency.
Sustainable industry
Despite progress, Portugal needs to make
further
efforts
to
improve
waste
management and develop the potential of
the circular economy.
Portugal adopted a
national Circular Economy Action Plan in 2017,
and a new one is still under preparation. New
national legislation on waste management was
approved in 2020. The new national waste
management plan (PNGR 2030), the Strategic Plan
for Municipal Waste (PERSU 2030) and the
Strategic Plan for non-urban Waste (PERNU 2030)
were adopted in 2023. The new regional waste
management plans for Madeira and Azores were
adopted, in 2021 and 2023, respectively. However,
overall, progress in this field has been limited,
although the situation varies by region.
Portugal is far below the EU average on
circular economy and waste management
indicators.
Portugal’s circular use of materials
had a rate of 2.8% in 2023, well below the EU
average of 11.8%. The resource productivity is
also below the EU average with EUR 1.6 per kg of
material consumed (EU average: EUR 2.7 per kg).
measures’, WAM) as per Portugal’s final updated national
energy and climate plan.
65
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Portugal missed the EU target of recycling 50% of
municipal waste by 2020 (its rate was 27%) and it
is at high risk of missing the new EU waste targets
for 2025 (
131
). Therefore, Portugal needs to
implement these new plans, as well as adopt the
pending measures, including additional initiatives
and further investment.
Current investment to become a more
circular economy has been insufficient.
Portugal is estimated to need total additional
investment of EUR 2.5 billion a year for the
circular economy transition, including waste
management (
132
).
Portugal has been making considerable
progress in reducing air pollution, which is
now decoupled from GDP growth.
However,
this is a mixed picture. While emissions of several
air pollutants have fallen in recent decades, air
quality in Portugal continues to give cause for
concern in some parts of its territory, mainly as
regards NO
2
.
Portugal’s
industry still releases large
amounts of water pollutants.
Some 800
industrial installations are required to have a
permit based on the Industrial Emissions Directive.
Portugal has the 11th highest amount of
emissions of heavy metals to water, and ranks 6th
for emissions intensity (below the EU average
intensity of 0.864 kg / billion EUR GVA). The main
contributors to emissions to water in Portugal are
the pulp, paper and wood industry for heavy
metals, nitrogen, total organic carbon, total
phosphorus and waste management for heavy
metals.
The impact of air pollution on human health
remains significant.
The latest available annual
estimates for Portugal (for 2022) by the European
Environment Agency attribute 3 600 deaths a year
(or 35 400 years of life lost (YLL)) to fine
particulate matter (PM
2.5
); 710 deaths a year (or
6 900 YLL) to nitrogen dioxide (NO
2
) and 1 400
deaths a year (or 13 900 YLL) to ozone (
133
). The
adequate implementation of the national climate
(
131
)
European Commission,
2023 Waste early warning report.
(
132
) European Commission, DG Environment,
Environmental
investment needs & gaps assessment programme,
2025
update. Expressed in 2022 prices.
(
133
)
EEA, 2024,
Harm to human health from air pollution in
Europe: burden of disease status, 2024.
and energy plan (NECP), with the investment
included for sustainable energy and transport,
would largely deliver the necessary investment for
clean air and noise. The costs from all pollutants
are estimated at EUR 4.7 billion (
134
).
(
134
)
Latest available annual estimates by the European
Environment Agency.
66
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Table A7.1:
Key clean industry and climate mitigation indicators: Portugal
Strategic autonomy and technology for the green transition
Net zero industry
Operational manufacturing capacity 2023
- Solar PV (c: cell, w: wafer, m: module), MW
- Wind (b: blade, t: turbine, n: nacelle), MW
Automotive industry transformation
Motorisation rate (passenger cars per 1000 inhabitants), %
New zero-emission vehicles, electricity motor, %
Critical raw materials
Material import dependency, %
Climate mitigation
Industry decarbonisation
GHG emissions intensity of manufacturing production, kg/€
Share of energy-related emissions in industrial GHG emissions
Energy-related GHG emissions intensity of manufacturing
and construction, kg/€
Share of electricity and renewables in final energy consumption
in manufacturing, %
Energy intensity of manufacturing, GWh/€
Share of energy-intensive industries in manufacturing production
GHG emissions intensity of production in sector [...], kg/€
- paper and paper products (NACE C-17)
- chemicals and chemical products (NACE C20)
- other non-metallic mineral products (NACE C23)
- basic metals (NACE C24)
Reduction of effort sharing emissions
GHG emission reductions relative to base year, %
- domestic road transport
- buildings
2005
Effort sharing: GHG emissions, Mt; target, gap, %
Sustainable industry
Circular economy transition
Material footprint, tonnes per person
Circular material use rate, %
Resource productivity, €/kg
Zero pollution industry
Years of life lost due to PM2.5, per 100,000 inhabitants
Air pollution damage cost intensity, per thousand € of GVA
Water pollution intensity, kg weighted by human factors per bn € GVA
256
249
242
204
29.9
1.4
503
-
702
571
27.5
0.9
2018
17.0
2.2
1.2
48.6
Portugal
2019
17.2
2.3
1.3
2020
15.4
2.5
1.3
2021
18.2
2.7
1.2
2022
16.0
3.3
1.5
2023
16.5
2.8
1.6
1.64
1.51
3.61
0.48
1.60
1.35
3.23
0.50
2018
-14.4
-36.6
1.77
1.69
3.12
0.57
2019
-11.8
-36.5
1.66
1.44
3.27
0.56
2020
-25.5
-36.5
1.42
1.52
2.88
0.49
2021
-17.9
-20.4
-38.2
2021
39.9
2017
0.35
45.3
181.8
53.9
1.48
2018
0.35
45.5
180.4
53.9
1.51
Portugal
EU-27
50-100 (m)
3500-3750 (b), 2400-5550 (t)
2017
490
0.85
2017
2018
511
1.95
2018
31.4
2019
525
3.08
2019
30.7
- Electrolyzer, MW
- battery, MWh
2020
535
5.44
2020
30.4
2021
541
9.24
2021
27.8
2022
549
11.64
2022
31.3
450-500
-
2023
558
18.21
2023
29.6
Trend
2018
539
1.03
2018
24.2
2021
561
8.96
2021
22.6
Portugal
2019
0.37
44.1
190.7
54.6
1.59
2020
0.48
44.5
233.9
55.1
2.01
2021
0.44
44.5
214.3
54.4
1.89
2022
0.4
43.9
185.4
57.0
1.80
16.0
1.17
1.27
2.83
0.43
2022
-18.2
-14.9
-40.6
2022
39.8
-
-
-
-
2023
-18.6
-9.7
-45.5
2023
39.6
2023
 
46.4
-
58.2
1.76
EU-27
2017
0.34
44.8
158.4
43.3
1.29
2022
0.27
42.5
132.9
44.2
1.09
7.3
-
-
-
-
0.73
1.25
2.53
2.79
2018
1.4
21.4
0.68
1.26
2.24
3.49
2023
5.2
32.9
WAM
10.664
Target
-28.7
Trend
WEM
3.13
EU-27
2018
14.7
11.6
2.1
2021
15.0
11.1
2.3
Source:
Net zero industry:
European Commission:
The net-zero manufacturing industry landscape across Member States: final
report,
2025.
Automotive industry transformation:
Eurostat.
Critical raw materials:
Eurostat.
Climate mitigation:
See
footnotes in the "climate mitigation" section; reduction of effort sharing emissions:
EEA greenhouse gases data viewer;
European
Commission,
Climate Action Progress Report,
2024.
Sustainable industry:
Years of life lost due to PM2.5: Eurostat and EEA,
Harm to human health from air pollution in Europe: burden of disease status,
2024. Air pollution damage: EEA,
EU large industry
air pollution damage costs intensity,
2024. Emissions covered: As, benzene, Cd, Cr, Hg, NH3, Ni, NMVOC, NOX, Pb, dioxins, PM10,
PAH, SOX. Water pollution intensity: EEA,
EU large industry water pollution intensity,
2024. Releases into water covered from
cadmium, lead, mercury, nickel. Other indicators: Eurostat.
67
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ANNEX 8: AFFORDABLE ENERGY TRANSITION
This annex outlines the progress made and
the ongoing challenges faced in enhancing
energy competitiveness and affordability,
while advancing the transition to net zero.
It
examines the measures and targets proposed in
the final updates to the national energy and
climate plans (NECPs) for 2030.
While Portugal has shown progress in the
share of renewable energy in its electricity
mix and increasing its interconnection
capacity, there are considerable challenges
to be addressed, especially regarding
inadequate
resources
in
the
public
administration,
energy
efficiency
and
flexibility solutions.
generally followed EU trends, with electricity
network costs being lower and taxes being higher
than EU average (with the exception of non-
household consumers), while household gas prices
faced higher network costs and taxes, in contrast
to lower charges for non-households.
Graph A8.1:
Monthly average day-ahead wholesale
electricity prices and European benchmark
natural gas prices (Dutch TTF)
Energy prices and costs
Table A8.1:
Retail energy price components for
household and non-household consumers, 2024
(i) the Title Transfer Facility (TTF) is a virtual trading point for
natural gas in the Netherlands. It serves as the primary
benchmark for European natural gas prices.
(ii) CWE gives average prices in the central-western European
market (Belgium, France, Germany, Luxembourg, the
Netherlands and Austria).
Source:
S&P Platts and ENTSO-E
(i) For household consumers, consumption band is DC for
electricity and D2 for gas. Taxes and levies are shown
including VAT.
(ii) For non-household consumers, consumption band is ID for
electricity and I4 for gas. Taxes and levies are shown
excluding VAT and recoverable charges, as these are typically
recovered by businesses.
Source:
Eurostat
Portugal’s retail electricity prices in 2024
rose for both households (+16%) and non-
household consumers (+15%) yet remained
below the EU average.
Notably, electricity prices
for non-households were the third lowest in the
EU. In contrast, retail gas prices declined across
both consumer categories, although household gas
prices remained slightly above the EU average. The
components of retail energy prices (energy and
supply, network costs, and taxes and levies)
Thanks to a large share of renewables
(87.7%) in its electricity mix, wholesale
electricity prices in Portugal averaged 63.3
EUR/MWh in 2024(
135
), the EU’s fifth-lowest
wholesale electricity prices (EU average of
84.7 EUR/MWh).
The Iberian Peninsula (PT&ES)
experienced stronger fluctuation in prices than the
EU average. Prices in Portugal decreased to as low
as 13.2 EUR/MWh in April due to strong output of
renewables (+55% in February-May 2024
compared to same period in 2023). Prices picked
up in the second half of the year amid rising
natural gas costs and limited non-fossil flexibility.
In November, prices spiked further in the Iberian
Peninsula due to the Dunkelflaute in the Central
Western European (CWE) region which negatively
(
135
)
Fraunhofer (ENTSO-E data)
68
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impacted day-ahead prices
neighbouring markets.(
136
)
in
CWE
and
Flexibility and electricity grids
Being part of the south-west Europe capacity
calculation region (CCR)(
137
), Portugal is
increasing cross-border trade capacity to
Spain.
Member States should ensure that a
minimum of 70% of technical cross-border
capacity is available for trading. The general trend
in this CCR is a slight improvement in the
fulfilment of this requirement. Portugal shows the
highest interconnection capacity rate in the south-
west region and, in May 2024, Portugal and Spain
are implementing a new interconnection between
Beariz, Fontefría and Ponte de Lima.
The further expansion of Portugal’s cross-
border interconnection capacity, along with
the reinforcement of its national grid, will
enable the country to integrate renewable
energy production more effectively, and
enhance grid flexibility and export capacity.
In July 2024, Portugal and Spain started the
construction of a new interconnection between
Beariz, Fontefría and Ponte de Lima. The new
interconnector is included in the first PCI (project
of common interest) and PMI (project of mutual
interest) list and is expected to be commissioned
in late 2025, after some initial delays. Moreover,
the internal line between Pedralva and Sobrado,
which was part of the fifth PCI list and scheduled
for completion by 2029, will support the necessary
network expansion. This will allow for better
integration of renewables, thus making it possible
to distribute electricity from solar more effectively
across the territory. Based on the final updated
NECP, Portugal should achieve the 15% electricity
interconnection target in 2030. In 2025,
Portugal’s
overall interconnection level increased from
11.47% to 14.01%(
138
).
The
efforts
to
develop
hydrogen
infrastructure will support the development
of a national and European hydrogen market
and allow Portugal to contribute as an
exporter to the renewable hydrogen corridor
from the Iberian Peninsula to Germany.
This
flagship corridor, designed to export approximately
2 Mt of hydrogen from the Iberian Peninsula to
other Member States, in particular Germany, is
enabled by two Portuguese projects on the first
PCI and PMI list and expected to be commissioned
in 2029 and 2030: the H2 interconnection
between Portugal and Spain with a capacity of
0.75 million tonnes (Mt) per year (H2 Med/CelZa
project); and the internal hydrogen infrastructure
(Portuguese
‘hydrogen
backbone’
project).
According to the final updated NECP, Portugal also
intends to deploy several hydrogen valleys across
its territory and enable the storage of hydrogen in
the two additional cavities to be added to the
Carriço US storage facility, which is to become
operational in 2027-2028. This initiative will
further contribute to the development of the
hydrogen value chain in Portugal and the EU.
Permitting procedures for grid infrastructure
remain essential to ensure a correct balance
between demand and supply.
In Portugal, the
permitting procedure for energy infrastructure
takes on average 36 months and is governed by
environmental and sector-specific legislation. This
duration is comparable to that of other Member
States but on the longer side, thus, there is room
for acceleration. Stakeholders have identified as
key causes for delays the lack of sufficient staff in
the permitting authorities and opposition by local
communities and municipalities in cases where
local benefits are less evident. Additionally,
environmental assessment procedures are also
prone to delays, often due to unexpected requests
for additional documentation and information.
The grid is also facing constraints with unused
booked capacity and lack of transparency on the
available distribution grid capacity also makes
difficult for developers to plan new projects.
(
136
)
Yearly electricity data, Ember (consumption and
generation data throughout the paragraph)
(
137
)
The south-west Europe CCR covers Portugal, Spain and
France. A CCR is a group of countries which calculate cross-
border electricity flows together.
(
138
) ENTSO-E Winter Outlook 2024-2025
The Portuguese operational electricity
storage capacity reported in the final
updated NECP is expected to be around
3.9 GW for pumped hydro and 2.0 GW for
battery storage by 2030.
Portugal is currently
building several storage projects, such as the
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conversion of a generating group at Alto Lindoso
to reversible operation Portugal has already taken
steps to promote the installation of electricity
storage, including the adoption of Decree-Law
No 15/2022, which regulates the licensing of
autonomous storage plants. Tender procedures are
being conducted for battery storage and other
measures, such as incentivising behind-the-meter
storage and smart charging strategies and should
continue until 2026.
Portugal’s regulatory framework presents
barriers to the development of flexible
resources.
It allows for demand-side response
(DSR) and storage to sell and buy electricity in the
day-ahead and intraday markets. However, DSR
and storage are not allowed to participate in
ancillary services and are not eligible to provide
congestion management services to transmission
system operators (only industrial and commercial
consumers were piloted in 2022). Aggregators,
including those that operate independently, are
excluded from participating in these markets and
services.
In 2023, electricity accounted for 25.9% of
Portugal’s final energy consumption, above
the EU average of 22.9%, and this share has
seen a slight increase in the last decade(
139
).
When it comes to households, electricity accounts
for 41.5% of final energy consumption, while in
industry it represents 33.2% (see also Annex 7).
For the transport sector, this share remains
negligible at 0.8%. Further progress in
electrification across sectors is required for cost
effectively decarbonising the economy and
bringing the benefits of affordable renewable
generation to consumers. Between 2022 and
2023, heat pump sales in Portugal saw an
increased by 9 730 heat pumps, however Portugal
remains well below the EU average in this regard.
Renewables and long-term contracts
Portugal has made progress in promoting
renewable energy and increasing the share
of such energy in final energy consumption
by 2030.
In particular, Portugal has focused on
bringing about the electrification of consumption,
increasing installed capacity and renewable
electricity generation, and it is taking steps to
ensure electric vehicle penetration notably by
reviewing the regulatory framework and putting in
place other more sustainable mobility solutions. In
2024, renewable energy sources (RES) accounted
for 87.7% of the electricity mix. (vs EU overall RES
share of 47%), increasing from 75%(
140
). Installed
renewables capacity grew by 10.6% in 2024,
reaching 20 476 MW. As regards the steady
acceleration of solar deployment, the total
installed capacity in 2024 was 5 808 MW (+1 768
MW, an increase of 43% compared to 2023) while
installed wind capacity stagnated (+45 MW, an
increase of 0.8%) reaching 5 583 MW in 2024(
141
).
Moreover, in 2023, 35.1% of gross final energy
consumption came from renewable sources, from
34.7% in 2022. In early January 2025, Portugal
also announced a plan to install 2 GW of offshore
wind capacity by 2030 and four sites for this have
already been identified.
(
139
)
CAGR (compound annual growth rate) of -0.1%
between 2013 and 2023 and minimum/maximum share of
25.2% and 26.2%, respectively.
(
140
) Yearly electricity data, Ember.
(
141
) Renewable capacity statistics 2025, IRENA
Portugal’s large-scale
smart meter roll-out
(86% in 2023) is one of the conditions that
enables consumers to be empowered to take
action.
Portugal also had a switching rate of
electricity supplied or contract higher than the EU
average between suppliers and tariffs between
2022 and 2023. Nevertheless, most households
are on fixed-term price contracts, which has an
impact on flexibility provision. The household retail
market is both regulated and involves market-
based offers. Despite regulatory requirements,
household consumers in Portugal did not have
access to dynamic-price contracts as of 2023.
Portugal also has a relatively low level of
prosumers, which has fallen to below 5%.
Renewable energy communities (RECs), which
enable collective and citizen-driven energy actions,
can be a key contributor to Portugal’s energy
transition. However, Portugal limits RECs to the
electricity sector and mandates electricity
production for self-consumption only, therefore
preventing RECs to offer commercial energy
services. Moreover, there is a lack of citizens
empowerment in energy communities, since their
control is often managed by private companies.
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Graph A8.2:
Portugal's installed renewable
capacity (left) and electricity generation mix
(right)
There has been a slowing of energy
efficiency gains in Portugal despite untapped
potential.
In 2023, primary energy consumption
(PEC) decreased by 0.3% to 20.71 Mtoe. Final
energy consumption (FEC) increased by 2.9% to
17.20 Mtoe. Compared to 2022, FEC decreased in
the industrial sector by 4.2%. In the residential,
transport and services sector, FEC increased by
1.7%, 8.3%, and 1.4%, respectively. Under the
recast Energy Efficiency Directive (Directive (EU)
2023/1791), Portugal should try to reach a PEC of
16.71 Mtoe and an FEC of 14.37 Mtoe by 2030.
Portugal aims to reduce the energy
consumption of the residential sector by
11% by 2030, but progress between 2018
and 2022 was inadequate.
Although there was
an improvement in 2023, the current pace is still
insufficient to meet the objective. To get back on
track, it would be beneficial if Portugal were to
significantly intensify its efforts to reduce the
energy consumption of buildings.
Portugal has not notified the Commission of
its comprehensive heating and cooling
assessment
identifying potential for the
application of high-efficiency cogeneration and
efficient district heating and cooling in line with
Article 25(1) of the Energy Efficiency Directive.
There is no estimated completion date for this.
The decarbonisation of the heating sector is
advancing.
There was a marked increase in sales
of heat pumps, signalling progress. The ratio of
prices between gas and electricity has
substantially decreased (almost 50% between
2021 and 2023), which when combined with
available finance assistance measures further
facilitates the switch to decarbonisation. However,
additional progress and actions may be necessary
to meet de-carbonisation objectives. This could
include measures to support the supply chain (e.g.
capacity building for installers), support renovation
(e.g. subsidies, or financial schemes), or target
specific sectors that are lagging behind.
Portugal continues to rely mostly on grant-
based funding schemes for energy efficiency,
and the use of financial instruments remains
limited.
No new schemes were created for the
financing of energy efficiency in 2024, but several
previously implemented schemes remain in place.
For instance, the Environmental Fund manages a
set of programmes to increase energy efficiency in
"Other" includes solid biofuels, renewable municipal
waste, geothermal energy, biogas and geothermal energy
Source:
IRENA, Ember
Portugal started to take steps towards
developing a regulatory framework for
renewable energy and shortening its
procedures, with a special focus on
environmental impact assessments (EIAs),
but challenges remain.
The country working on
the digitalisation front with a view to having all
steps of the permitting process carried out online,
such as creating the environmental impact
assessment. Speeding up the transposition process
and staffing the relevant entities with sufficient
human resources and skills will further improve
the situation. Current legal framework is rather
complex leading to different interpretations of the
different national bodies with responsibilities in
this area.
Portugal still does not have in place a legal
and regulatory framework to promote and
facilitate the use of Power Purchase
Agreements (PPAs) in line with Regulation
(EU) 2024/1747(
142
).
In the meantime, PPAs are
signed of 0,42 GW.
Energy efficiency
(
142
)
European PPA Market Outlook 2024, Pexapark
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buildings, targeting residential, services and
central government buildings. As part of ongoing
efforts to promote energy efficiency, Portugal
established the necessary legal framework in
2024 for the creation of one-stop shops, known as
‘citizen energy spaces’, which will provide energy
efficiency services to the public. This framework is
expected to come into effect in 2025.
Portugal has committed substantial amounts
of money to energy renovation, including
over EUR 2.4 billion from the Recovery and
Resilience Facility.
However, the current level of
absorption is still low and faster assessment of
applications by the Environmental Fund would
ensure a faster absorption rate. Corrective
measures to efficiently and effectively assess
applications and disburse the funds for the
objectives agreed would be important.
Fossil fuel subsidies
In 2023, environmentally harmful (
143
) fossil
fuel subsidies without a planned phase-out
before 2030 represented 0.70%(
144
) of
Portugal’s GDP(
145
), above the EU weighted
average of 0.49%.
Tax measures accounted for
94% of this volume, while direct grants and
income/price support represented 4% and 0.3%,
respectively. Fossil fuel subsidies without a
planned phase-out before 2030 and which do not
specifically address, in a targeted way, energy
poverty nor genuine energy security concerns
included fuel tax reductions on unleaded gasoline
and road diesel (“Famílias Primeiro”) as well
as tax
exemptions for natural gas used in certain
industrial processes and diesel fuel used by freight
companies and for agriculture machinery.
Additionally, Portugal’s 2023 Effective Carbon
Rate(
146
) averaged EUR 80.3 per tonne of CO₂,
below the EU weighted mean of EUR 84.80.
Security of supply and diversification
Portugal has strengthened the security of its
gas supply, limited its energy imports
dependency, while increased renewables’
share in its energy mix.
Portugal has made
significant progress in reducing its dependence on
Russian energy, but further efforts are still
required as the country continues to import
Russian energy to some extent. Notably, in the gas
sector, Portugal has achieved a substantial
reduction in imports compared to the period
preceding the start of the invasion of Ukraine by
Russia. Specifically, Portugal's imports of Russian
liquefied natural gas decreased from 0.740 bcm in
2021 to 0.233 bcm in 2024. This decline is a
result of Portugal's intensified efforts to diversify
its energy supply, with a focus on prioritizing LNG
imports from alternative sources, such as the
United States and Nigeria.
(
143
) Direct fossil fuel subsidies that incentivise maintaining or
increasing in the availability of fossil fuels and/or use of
fossil fuels.
(
144
) Numerator is based on volumes disclosed by the Portuguese
authorities via the 2025 NECPR reporting. For all Member
States, it includes public R&D expenditures for fossil fuels as
reported by the IEA (Energy Technology RD&D Budgets) and
excludes, for methodological consistency, excise tax
exemption on kerosene consumed in intra-EU27 air traffic.
(
145
) 2023 Gross Domestic Product at market prices, Eurostat.
(
146
) The Effective Carbon Rate is the sum of carbon taxes, ETS
permit prices and fuel excise taxes, representing the
aggregate effective carbon rate paid on emissions.
On 28 April 2025, Portugal and Spain faced
an unprecedented power outage, which also
affected parts of France.
According to EU law,
ENTSO-E will lead an independent investigation
into the causes of the blackout. The European
Commission will inform all Member States of the
progress of the investigation through the
Electricity Coordination Group.
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Table A8.2:
Key Energy Indicators
Portugal
2021
Household consumer - Electricity retail price (EUR/KWh)
Energy & supply [%]
Network costs
Taxes and levies including VAT
VAT
Household consumer - Gas retail price
Energy & supply
Network costs
Taxes and levies including VAT
VAT
Non-household consumer - Electricity retail price
Energy & supply
Network costs
Taxes and levies excluding VAT
Non-household consumer - Gas retail price
Energy & supply
Network costs
Taxes and levies excluding VAT
Wholesale electrity price (EUR/MWh)
Dutch TTF (EUR/MWh)
0,2129
34,1%
19,8%
46,1%
16,9%
0,0766
36,0%
35,9%
28,1%
17,9%
0,1089
45,4%
16,2%
25,2%
0,0268
72,3%
7,0%
2,6%
111,5
n/a
EU
2023
0,2180
92,0%
24,6%
-16,6%
15,7%
0,1395
54,0%
20,5%
25,5%
18,2%
0,1000
88,8%
20,2%
-33,3%
0,0553
80,4%
2,8%
-2,5%
88,6
n/a
2022
0,2210
59,4%
24,7%
15,9%
16,5%
0,0981
45,6%
28,0%
26,4%
18,1%
0,1341
80,1%
18,2%
-19,8%
0,0786
78,2%
2,3%
1,0%
168,0
n/a
2024
0,2524
53,4%
16,8%
29,8%
15,5%
0,1254
44,2%
25,0%
30,9%
18,0%
0,1148
59,1%
14,5%
10,1%
0,0438
73,2%
6,7%
2,1%
63,5
n/a
2021
0,2314
36,6%
26,7%
36,7%
14,5%
0,0684
43,7%
22,5%
33,8%
15,5%
0,1242
43,0%
15,8%
30,4%
0,0328
66,2%
7,7%
12,5%
111,0
46,9
2022
0,2649
54,3%
25,3%
20,3%
13,4%
0,0948
61,0%
17,3%
21,7%
11,6%
0,1895
66,5%
10,7%
9,9%
0,0722
77,3%
3,8%
6,1%
233,2
123,1
2023
0,2877
55,6%
24,8%
19,6%
13,8%
0,1121
64,5%
17,1%
18,4%
10,2%
0,1971
63,0%
11,9%
11,2%
0,0672
77,3%
5,3%
7,3%
99,1
40,5
2024
0,2879
47,8%
27,2%
25,0%
14,6%
0,1128
53,9%
18,3%
27,8%
13,6%
0,1661
55,8%
15,5%
15,4%
0,0517
68,7%
7,1%
11,6%
84,7
34,4
2017
Gross Electricity Production (GWh)
Combustible Fuels
Nuclear
Hydro
Wind
Solar
Geothermal
Other Sources
Gross Electricity Production [%]
Combustible Fuels
Nuclear
Hydro
Wind
Solar
Geothermal
Other Sources
Net Imports of Electricity (GWh)
As a % of electricity available for final consumption
Electricity Interconnection [%]
Share of renewable energy consumption - by sector [%]
Electricity
Heating and cooling
Transport
Overall
59.432
38.344
-
7.632
12.248
992
217
0
64,5%
0,0%
12,8%
20,6%
1,7%
0,4%
0,0%
-2.684
-5,6%
8,7%
54,2%
41,0%
7,9%
30,6%
2018
59.636
32.155
-
13.628
12.617
1.006
230
-
53,9%
0,0%
22,9%
21,2%
1,7%
0,4%
0,0%
-2.657
-5,4%
8,3%
52,2%
40,9%
9,0%
30,2%
2019
53.154
27.687
-
10.243
13.667
1.342
215
-
52,1%
0,0%
19,3%
25,7%
2,5%
0,4%
0,0%
3.399
7,0%
9,2%
53,8%
41,7%
9,1%
30,6%
2020
53.078
25.214
-
13.633
12.299
1.716
217
-
47,5%
0,0%
25,7%
23,2%
3,2%
0,4%
0,0%
1.456
3,1%
8,0%
58,0%
41,5%
9,7%
34,0%
2021
50.980
21.894
-
13.455
13.216
2.237
179
-
42,9%
0,0%
26,4%
25,9%
4,4%
0,4%
0,0%
4.753
9,9%
13,7%
58,4%
42,7%
8,6%
34,0%
2022
48.808
23.011
-
8.839
13.244
3.519
195
-
47,1%
0,0%
18,1%
27,1%
7,2%
0,4%
0,0%
9.253
18,7%
10,9%
61,0%
45,5%
8,7%
34,7%
2023
49.043
15.662
-
14.868
13.145
5.160
208
-
31,9%
0,0%
30,3%
26,8%
10,5%
0,4%
0,0%
10.233
20,4%
13,2%
63,0%
47,1%
11,2%
35,2%
2024
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
11,5%
-
-
-
-
2020
Import Dependency [%]
of Solid fossil fuels
of Oil and petroleum products
of Natural Gas
Dependency from Russian Fossil Fuels [%]
of Natural Gas
of Crude Oil
of Hard Coal
65,3%
-6,5%
97,6%
99,3%
11,3%
0,0%
0,0%
2021
66,9%
4,5%
97,9%
100,0%
13,6%
0,0%
0,0%
2022
71,3%
107,4%
98,7%
104,0%
5,1%
0,0%
0,0%
2023
66,9%
81,2%
99,3%
97,5%
8,5%
0,0%
0,0%
2020
57,5%
35,8%
96,8%
83,6%
41,0%
25,7%
49,1%
2021
55,5%
37,2%
91,7%
83,6%
40,9%
25,2%
47,4%
2022
62,5%
45,9%
97,8%
97,6%
20,7%
18,4%
21,5%
2023
58,3%
40,8%
94,5%
90,0%
9,3%
3,0%
1,0%
2017
Gas Consumption (in bcm)
Gas Consumption year-on-year change [%]
Gas Imports - by type (in bcm)
Gas imports - pipeline
Gas imports - LNG
Gas Imports - by main source supplier [%]
Nigeria
United States
Russia
Trinidad and Tobago
6,3
24,4%
6,3
2,6
3,7
33,9%
8,5%
0,0%
0,0%
2018
5,7
-8,8%
5,8
2,0
3,8
40,6%
8,4%
0,0%
0,0%
2019
6,1
5,8%
6,1
0,5
5,6
53,5%
21,4%
1,6%
2,0%
2020
6,0
-1,4%
5,9
0,5
5,5
52,6%
18,8%
11,3%
1,4%
2021
5,8
-3,7%
5,7
0,1
5,6
51,3%
32,9%
13,6%
0,0%
2022
5,6
-3,5%
5,8
0,1
5,7
50,3%
34,5%
5,1%
6,6%
2023
4,4
-20,4%
4,3
-
4,3
44,1%
42,5%
8,5%
5,0%
Source:
Eurostat, ENTSO-E, S&P Platts
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ANNEX 9: CLIMATE ADAPTATION, PREPAREDNESS AND ENVIRONMENT
Portugal needs to take further action on
climate change adaptation and preparedness,
increase water resilience and reduce its
economy's impact on nature.
Anticipating and
adapting to the adverse effects of climate change,
such as floods, coastal erosion, droughts, heat
waves and forest fires, remains a core challenge
for Portugal, which is one of the EU's most
severely affected countries. Due to climate change
these natural hazards are expected to become
more frequent and extreme. Measures and
investments in risk prevention and preparedness,
climate change adaptation, water resilience,
nature-based solutions and sustainable agriculture
practices are therefore necessary to achieve
sustainable growth.
end of the century, compared to 2-4 events
historically (
149
).
Climate risks directly affect Portugal’s
economy and society.
Between 1980 and 2023,
Portugal suffered EUR 16 billion in economic
losses due to weather- and climate-related
extreme events, with just 3% of the losses insured.
This makes Portugal one of the EU Member States
with the lowest insurance coverage against
extreme events. Portugal also recorded more than
10 000 fatalities due to extreme events over that
period (
150
). European-level estimates suggest that
parts of Portugal could see a 40-fold increase in
mortality from heatwaves if no adaptation and
mitigation actions are taken (
151
). This would
disproportionately affect vulnerable populations
already at risk of energy poverty and not able to
remain sufficiently cool during such events.
In recent years, Portugal has implemented
several national policy initiatives related to
adaptation and preparedness.
A national
governance structure for adaptation is in place,
and was consolidated in Portugal’s Climate
Law,
adopted in December 2021. Key strategic
documents at national level comprise the national
climate change adaptation strategy (ENAAC),
adopted in 2015 and the action programme for
climate change adaptation from 2019. In 2024,
Portugal also finalised a national roadmap for
adaptation 2100, which will inform the review of
the ENAAC, planned for 2025. Portugal has also
been implementing ecological restoration actions
in rivers across the country, under the coordination
of the Portuguese Environment Agency (APA). A
national plan focused on future interventions is
currently being prepared (PRO~RIOS 2030).
Portugal has made use of several EU funds
to improve its preparedness,
including the
Cohesion
Fund,
the
European
Regional
Development Fund (ERDF), the Common
Agricultural Policy (CAP) funds and the Recovery
and Resilience Facility (RRF).
Climate adaptation and preparedness
Portugal is particularly vulnerable to
heatwaves, droughts and wildfires, which are
set to intensify due to climate change.
Over
the past 20 years, freshwater availability has
decreased by 20-30% in most river basins (
147
).
The frequency of severe droughts is forecast to
increase significantly in Portugal due to climate
change, a recent example being the 2022 drought
that affected over 43% of Portugal’s total area.
Key challenges include managing the variability of
water availability (both temporal and territorial),
maintaining ecological flow during droughts and
restoring water bodies. Between 2006 and 2023,
an average of over 93 000 ha burned each year in
Portugal, a notable example being the fires of
2017, which affected over 500 000 ha and
resulted in more than 100 fatalities (
148
). By the
end of the century, the number of days of extreme
fire danger and the probability of mega-fires are
set to rise by a factor of two to three. Heatwaves
also pose a significant socioeconomic problem for
Portugal, affecting people’s livelihoods and
aggravating the drought and forest-fire risks.
Climate projections show that the number and
duration of heatwaves are set to increase
significantly, with up to 13 events per year by the
(
147
)
Agência Portuguesa do Ambiente, 2023,
Avaliação das
disponibilidades hídricas por massas de água e aplicação do
índice de escassez WEI+.
(
148
)
Matos Soares, P. et al., 2024,
RNA 2100
–
Sectoral Impacts
Modelling
–
Forest Fires.
(
149
)
Matos Soares, P. et al., 2024,
RNA 2100
–
RNA 2100
–
Climate Projections, Extremes, and Indices
–
Mainland
Portugal.
(
150
)
EEA, 2024,
Economic losses from weather- and climate-
related extremes in Europe.
(
151
)
EEA, 2022,
Climate change as a threat to health and well-
being in Europe: focus on heat and infectious diseases,
p. 23
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Climate adaptation is also addressed at sub-
national level.
The Portuguese Climate Law has
strengthened sub-national adaptation practices by
requiring all municipalities and intermunicipal
communities to develop climate action plans with
mitigation and adaptation measures. A survey
carried out in July 2023 as part of the preparation
of the national roadmap for adaptation 2100
identified 70 climate change adaptation
documents at municipal level, as well as 22
intermunicipal climate change adaptation plans in
force (
152
). Furthermore, the national roadmap for
adaptation 2100 reviewed the integration of
climate adaptation into existing municipal
masterplans and provided guidelines and best
practices for mainstreaming adaptation.
total renewable freshwater resources available,
shows that, especially in summer months, the
country’s total water consumption exceeds its
renewable freshwater resources. The highest WEI+
value (39) was reached in the third quarter of
2022 and the second highest value (36) in the
third quarter of 2019. Agriculture is the largest
consumer of water, with water abstraction in the
agricultural sector accounting for 75% of total
consumption in 2022, putting a significant strain
on the country’s water resources, particularly in
regions already suffering from serious water
scarcity. For a more detailed analysis of regional
water scarcity please see Annex 17.
Portugal is taking steps to face these
challenges in the water sector.
In February
2024 Portugal adopted a new national strategic
plan for water supply, wastewater and pluvial
water management, PENSAARP 2030. The
Portuguese Government presented in March 2025
a far-reaching
national water strategy (“Water
that Unites”) that aims to improve the
sustainable
management of water resources throughout the
country
by
promoting
integrated
water
governance, water efficiency and climate
resilience. The government also announced the
revision of the National Water Plan to account for
the update of the strategic priorities and the
investments it identified to strengthen water
resilience. Other measures are under way to help
increase water resilience on the supply side, such
as the Algarve Regional Water Efficiency Plan
under the Recovery and Resilience Plan.
Portugal’s delay in submitting its river basin
and flood risk management plans has
hindered the Commission’s ability to
evaluate and report on them.
Portugal did not
submit the third river basin management plan
(RBMP) and second flood risk management plan
(FRMP) by March 2022, as required under the
Water Framework Directive and the Floods
Directive. As a result of this late reporting in April
2024, the Commission has not been in a position
to assess the plans and include its assessment in
its report to the European Parliament and to the
Council issued in February 2025 for most of the
Member States.
The investment needs for water protection
and management, as illustrated in Graph
A7.2, highlight a significant financing gap of
EUR 371 million per year by 2027.
Roughly
44% of the gap can be attributed to unaddressed
Water resilience
Water resilience is a matter of major
importance for Portugal. Despite the
progress made in recent years, many
challenges remain in terms of water
management,
especially in the areas of water
governance, water body rehabilitation and water
efficiency. Further infrastructure investment is
needed, including in wastewater collection and
treatment, reduction of leaks in the networks and
general water supply, improving monitoring
(quality and quantity), as well as nature-based
solutions and river restoration. Portugal should
take advantage of the potential of water reuse.
For this reason, under the 2024 European
Semester, Portugal received the CSR-3 on water
management and adaptation to climate change.
Portugal’s water productivity, or the efficiency
with
which a country uses its water resources, is
considerably lower than in other Member States,
standing at EUR 34 per m
3
of abstracted water in
2022 (
153
). An adequate and improved water
pricing policy to recover the cost of all water
services could harness water-saving potential. The
water exploitation index plus (WEI+), a measure of
how much water is being used compared with the
(
152
)
Direção Geral do Território, 2023,
WP7B - Review of
guidelines on climate change adaptation in spatial plans and
programmes.
(
153
) Measured as GDP in 2010 chain linked volumes over total
fresh surface water abstracted in cubic metres. For
comparison, France has a water productivity of EUR 87 per
m
3
of abstracted water.
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financing needs in wastewater infrastructure.
Increasing investment will be even more important
as the Urban Wastewater Treatment Directive was
revised and strengthened in 2024 (
154
). EU funding,
such as that from the European Regional
Development Fund under the 2021-2027 cohesion
policy and to some degree under the Recovery and
Resilience Plan already helps to meet
Portugal’s
investment needs for water protection and
management.
Graph A9.1:
Direct dependency (1) on ecosystem
services (2) of the gross value added generated
by economic sector in 2022
0%
Agriculture
Forestry
Fishery and acquaculture
Mining and metals
Construction
Water utilities
Healthcare delivery
Aviation travel and tourism
Food beverages and tobacco
Supply chain and transport
Public services and others
Electricity
Chemical and materials industry
Electronics
Oil and gas
Real estate
Heat utilities
Automotive
Retail consumer goods and…
Information technology
Banking and capital markets
Insurance and asset…
Digital communications
High
Medium
Low
20%
40%
60%
80% 100%
Biodiversity and ecosystems
There is clear room for improvement on
biodiversity and nature protection and
restoration.
Portugal boasts a rich biodiversity.
21.2% of Portuguese territory belongs to the EU
Natura 2000 network (the EU average is 18.6%).
However, some species and habitats, particularly
in the marine environment, are not sufficiently
protected. Portugal should therefore extend its
Natura 2000 network with additional designations,
particularly for marine sites. Progress has recently
been made in the Azores. Furthermore, Portugal
needs to adopt the management plans for the
sites already designated, identifying the site-
specific conservation objectives and measures and
providing the necessary technical, human and
financial resources. Considering both Natura 2000
and other nationally designated protected areas,
Portugal legally protects 22.4 % of its terrestrial
areas (EU-27 coverage 26.1%) and 4.5% of its
marine areas (EU coverage 12.3%). This is below
the EU 2030 target of 30% under the EU
Biodiversity Strategy. Overall, the status of natural
habitats and species covered by the Habitats
Directive has improved in Portugal, although many
are still in a poor or unfavourable condition.
According to the latest available data, 24% of
habitats (EU-28 average 14.7%) and 27% (EU-28
average 27%) of species are reported as having
good conservation status.
(1) Dependency based on the sector’s own operations,
excluding value chain operations within countries and across
international value chains. A high dependency indicates a high
potential exposure to nature-related shocks or deteriorating
trends, which means that the disruption of an ecosystem
service could cause production failure and severe financial
loss.
(2) Ecosystem services are the contributions of ecosystems to
the benefits that are used in economic and other human
activity, including provisioning services (e.g. biomass
provisioning or water supply), regulating and maintenance
services (e.g. soil quality regulation or pollination), and cultural
services (e.g. recreational activities).
Source:
Hirschbuehl et al., 2025,
The EU economy's
dependency on nature.
(
154
) Directive 2024/3019, of 27 November 2024. The deadline
for transposition is 31 July 2027.
Nature degradation creates significant risks
to Portugal's economy and competitiveness,
as it is a Member State with a high
dependency on ecosystem services.
Portugal's
overall direct dependency on ecosystem services is
55%, much higher than the EU average of 44%,
showing that Portugal is particularly prone to be
economically affected by biodiversity loss. Several
sectors, such as agriculture, fisheries, construction
and water utilities (see Graph A7.1), are
particularly dependent on ecosystem services, with
100% of the gross value added of these sectors
directly dependent on ecosystem services.
Compared to other Member States, the supply
chain and transport, as well as the electricity
sector, exhibit a particularly high dependency on
ecosystem services. This means that failure to
maintain ecosystems' capacity to deliver services
could entail significant costs or even stop
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production in these sectors. Protecting and
restoring key ecosystems would ensure that the
long-term competitiveness of these economic
sectors is preserved.
Graph A9.2:
Investment needs and gaps in EUR
million, in 2022 constant prices
LULUCF target, additional carbon removals of -1.0
million tonnes of CO
2
equivalent (CO
2
eq) are
needed (
155
). The latest available projections show
a surplus to target of -11.9 million tonnes of
CO
2
eq for 2030 (
156
). Portugal is therefore on track
to meet its 2030 target.
Portuguese agriculture is a source of
greenhouse gas emissions with an impact on
air, water and soils.
In 2022, agriculture was
responsible for a total of 7 million tonnes of
CO
2
eq. This includes 5 million tonnes of CO
2
eq
from livestock. However, GHG emissions from
agriculture and livestock in Portugal are below the
EU average and have been decreasing since 2018.
Portugal's utilised agricultural area (UAA)
increased slightly, by 6%, from 3.8 million
hectares in 2018 to 3.9 million hectares in 2022.
However, this increase did not translate into a
growth in nutrient losses from agriculture, mainly
from mineral fertilisers and manure. This is
reflected in the country’s nitrogen balance, which
has been decreasing since 2018. Moreover, the
livestock density index was 0.63 in 2020, below
the EU average of 0.75, and ammonia emissions
showed a decreasing trend between 2018 and
2022. During 2017-2022, pesticides at levels
exceeding the thresholds were detected in 13% of
surface water bodies, well below the EU average
of 29%.
Portugal is transitioning to a sustainable
food system by implementing policies to
reduce the environmental impact of
agriculture, but food waste remains a
challenge.
Portugal aims to reach 19% of UAA
under organic farming by 2030. To mitigate the
environmental impact of agriculture, the
Portuguese
authorities
have
implemented
measures to promote water resilience under the
CAP Strategic Plan, including by prioritising
investment projects that help to reduce water
consumption. The plan also supports the increase
in the share of organic farming, integrated
production and the use of soil covers and organic
fertilisers,
promotes
crop
rotation
and
diversification, and helps to reduce nutrient losses,
and promotes other sustainable agriculture
practices. These measures are crucial to the long-
(
155
) National LULUCF targets of the Member States in line with
Regulation (EU) 2023/839.
(
156
) Climate Action Progress Report 2024 COM/2024/498.
1,600
1,400
1,200
1,000
800
600
400
200
-
Biodiversity
Baseline
Gap
Water
Source:
European Commission, DG Environment,
Environmental investment needs & gaps assessment
programme, 2025 update.
Portugal requires EUR 1 470 million in
investment per year
to effectively conserve and
restore its natural capital, mitigate the impacts of
climate change and preserve the country’s rich
biodiversity (see Graph A7.2). The current level of
financing for biodiversity and ecosystem
conservation in Portugal is EUR 665 million per
year, meaning an investment gap of EUR 805
million per year. This shortfall puts at risk the
country’s commitment to global biodiversity
agreements and undermines its long-term
economic and social development.
Sustainable agriculture and land use
Portugal’s carbon removals are in line with
the level of ambition needed to meet its
2030 target for land use, land use change
and forestry (LULUCF).
Portugal’s forests are
responsible for a major share of net carbon
removals and seem to have partially recovered
from the decreased natural carbon sink over the
period 2009-2017 resulting from severe forest
fires, among other phenomena. To meet its 2030
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3035405_0079.png
term competitiveness of Portugal’s agri-food
system and its bioeconomy, which play a
significant economic role. The bioeconomy,
encompassing the production and processing of
biological products, contributed EUR 13.2 million of
added value to the country’s gross domestic
product in 2021. Agriculture accounted for EUR 3.3
million, while the food industry contributed
EUR 2.5 million (
24
). Food waste, however, remains
a challenge with 185 kg wasted per person in
2022, largely driven by household practices and
ranking as the fourth highest in the EU.
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Table A9.1:
Key indicators tracking progress on climate adaptation, resilience and environment
Climate adaptation and preparedness:
Drought impact on ecosystems
[area impacted by drought as % of total]
Forest-fire burnt area
(1)
[ha, annual average 2006-2023]
Economic losses from extreme events
[EUR million at constant 2022 prices]
Insurance protection gap
(2)
[composite score between 0 and 4]
Heat-related mortality
(3)
[number of deaths per 100 000 inhabitants in 2013-
2022]
Sub-national climate adaptation action
[% of population covered by the EU Covenant of
Mayors for Climate & Energy]
Water resilience:
Water Exploitation Index Plus, WEI+
(4)
[total water consumption as % of renewable
freshwater resources]
Water consumption
[million m
3
]
Ecological/quantitative status of water bodies
[% of water bodies failing to achieve good status]
Surface water bodies
Groundwater bodies
Biodiversity and ecosystems:
Conservation status of habitats
(6)
[% of habitats having a good conservation status]
Common farmland bird index
2000=100
Protected areas
[% of protected land areas]
Sustainable agriculture and land use:
Bioeconomy's added value
(7)
[EUR million]
Landscape features
[% of agricultural land covered with landscape
features]
Food waste
[kg per capita]
Area under organic farming
[% of total UAA]
Nitrogen balance
[kg of nitrogen per ha of UAA]
Nitrates in groundwater
(8)
[mgNO
3
/l]
Net greenhouse gas removals from LULUCF
[Kt CO
2
-eq]
2018
12 001
-
2019
12 017
-
2018
23.7
93.2
-
2019
-
95.0
-
(5)
Portugal
2018
0.03
93 731
180
-
134
2019
3.16
93 731
607
-
134
2020
0.01
93 731
101
-
134
2021
0.01
93 731
3
-
134
2022
43.19
93 731
1 190
1.88
134
2023
6.8
93 731
42
1.88
EU-27
2018
6.77
2021
2.76
24 142
62 981
60
64
67
72
67
67
41
44
Portugal
2018
8.0
2019
8.7
2020
8.0
2021
8.0
2022
10.1
2023
-
EU-27
2018
4.5
2021
4.5
2 757
2 847
2 811
2 831
2 890
-
-
-
-
-
-
-
Portugal
2020
-
94.2
-
-
-
-
-
-
-
-
-
EU-27
59%
93%
2021
-
99.3
22
2022
-
-
22
2023
-
-
-
2018
14.7
72.2
-
2021
-
74.4
26
Portugal
2020
11 900
-
2021
13 242
-
2022
2023
EU-27
2018
634 378
2021
716 124
9
-
-
5.7
43.4
18.3
(9)
-
7.4
43.6
18.0
4 499 -
176
8.1
43.6
21.5
4 707 -
181
19.3
38.1
22.6
6 021 -
185
19.3
35.2
-
5 925
-
-
7.99
-
-
-
256 077 -
240 984
-
-
3 497 -
(1) The data show the average for the timespan 2006-2023 based on EFFIS - European Forest Fire Information System.
(2) Scale: 0 (no protection gap)
–
4 (very high gap). EIOPA, 2024, Dashboard on insurance protection gap for natural catastrophes.
(3) van Daalen, K. R. et al., 2024, The 2024 Europe report of the Lancet Countdown on health and climate change: unprecedented
warming demands unprecedented action. The Lancet Public Health.
(4) This indicator measures total water consumption as a percentage of the renewable freshwater resources available for a given
territory and period. Values above 20% are generally considered to be a sign of water scarcity, while values equal or greater than
40% indicate situations of severe water scarcity.
(5) European Commission, 2024, seventh Implementation Report from the Commission to the Council and the European
Parliament on the implementation of the Water Framework Directive (2000/60/EC) and the Floods Directive (2007/60/EC) (Third
River Basin Management Plans and Second Flood Risk Management Plans).
(6) For this indicator, the EU average includes the figure for the UK under the previous configuration, EU-28.
(7) European Commission, 2023, EU Bioeconomy Monitoring System dashboards.
(8) Nitrates can persist in groundwater for a long time and accumulate at a high level through inputs from anthropogenic sources
(mainly agriculture). The EU drinking water standard sets a limit of 50 mg NO
3
/L to avoid threats to human health.
(9) Net removals are expressed in negative figures, net emissions in positive figures. Reported data are from the 2024
greenhouse gas inventory submission. 2030 value of net greenhouse gas removals as in Regulation (EU) 2023/839
–
Annex IIa.
Source:
Eurostat, EEA.
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FAIRNESS
ANNEX 10: LABOUR MARKET
Portugal's labour market has demonstrated
resilience and progress in recent years, with
most population groups feeling the benefits.
The country still faces structural challenges that
have a detrimental impact on its competitiveness
and economic growth, such as persistently low
productivity, relatively high youth unemployment
and labour and skills shortages. Despite the
substantial inflow of foreign-born workers, the
acute demographic decline, unless reversed, will
have an adverse effect on the socioeconomic
situation
and
cohesion.
Addressing
skill
mismatches and labour shortages together with
job quality specially for young people remain
major challenges to attain a more robust and
inclusive labour market.
Portugal’s labour market proved to be
resilient in the aftermath of the pandemic,
although bottlenecks remain.
Both the
employment and activity rates remained above the
EU average, reaching 78.5% and 83.7%
respectively in 2024 (vs EU: 75.8% and 80.4%).
This confirms decade-long growth in the
employment rate, which has been consistently
rising (except in 2020) and exceeding the EU
average since 2017. At the current pace Portugal
is on track to meet its 2030 employment-rate
target of 80%. However, the unemployment rate
remained unchanged (6.5% in 2024) and is above
the 5.9% EU average since 2023. Similarly, the
long-term unemployment rate remained above the
EU average (2.4% vs 1.9% in 2024), and although
it went down 0.1 pps from the 2023 rate, getting
this section of the population into work remains a
priority. Moreover, the disability employment gap
increased by 7.3 pps between 2023 and 2024, and
lies at 21.3%.
Long-term youth unemployment (3.0%) is
higher than for the general population and
higher than the EU average (2.1%).
Regional
disparities in overall unemployment are not very
pronounced: in 2023, the highest rate was 7.2% in
the Lisbon Metropolitan Area. However, youth
unemployment (ages 15-24) is much higher in
certain regions: Alentejo (22.4%), Lisbon
metropolitan area (23.6%) and the autonomous
regions of the Azores and Madeira. For the
autonomous regions, there is a dearth of reliable
secondary data collection, a situation that it would
be beneficial to address. These regional disparities
are partly due to structural weakness, especially in
the case of the islands, not only because of their
remote location but also due to the prevalence of
smaller, less competitive and less innovative firms
offering few quality job opportunities for young
people. Looking ahead, employment growth is
forecast to fall further back in 2025 and 2026,
while the unemployment rate is expected to
decrease slightly (6.3% in 2025 and 6.2% in
2026). Some sectors such as manufacturing and
construction still report labour and skills shortages,
despite a low rate of job vacancies, which also
pushes up wage pressure. (
157
)
Graph A10.1:
Key labour market indicators
25
86
84
20
82
80
78
(%)
15
76
74
10
72
70
5
2019
2020
Activity rate (20-64) - rhs
Unemployment rate (15-74) - lhs
Youth unemployment rate (15-24) - lhs
2021
2022
2023
2024
68
Employment rate (20-64) - rhs
Long-term unemployment rate (15-74) - lhs
Source:
Eurostat
Youth unemployment remains a long-
standing structural challenge for Portugal’s
labour market.
Portugal’s youth unemployment
rate (age 15-24), stood at 21.6% in 2024 (vs EU:
14.9%) and is among the highest in the EU, a
persistent situation over the last decade. Even with
improvements in Portugal’s labour market
following the implementation of targeted policy,
the employment prospects of young people remain
modest. The unstable employment status of young
people also affects their educational paths and
attainment, career prospects, mobility and access
to housing, ability to gain independence and
ultimately, the overall demographics of the
population. For the 15-29 age bracket, the level of
unemployment is lower (14.2% vs EU: 11.3%), but
the pattern is similar. Harnessing the labour-
market potential of young people is therefore
crucial. In 2023, the share of the extended labour
(
157
)
Economic forecast for Portugal
80
(%)
 kom (2025) 0222 - Ingen titel
3035405_0082.png
force(
158
), for the 15-29 age bracket, was higher
than the EU (22.9% vs 20.9%), roughly 213 000
individuals, approximately twice the figure for
people aged 20-64 (11.3%). Calculations
published by the national public employment
services (PES)(
159
) reveal that only 1% of young
people registered as unemployed were unavailable
to look for a first or a new job. This demonstrates
that young people are willing and ready to find
work.
Although young highly qualified workers are
more sought after, it is beneficial to cater
for those less qualified, with a view to
promoting social mobility and career
progression.
According to a 2024 report form the
Portuguese Youth Employment Observatory(
160
), of
three groups of young job seekers - namely, those
with lower levels of educational attainment, post-
secondary graduates in fields with lower
employability and migrants - those with lower
levels of qualifications faced the most significant
barriers. This group accounted for around 36% of
registered unemployed young people but benefited
less from active labour market policies (ALMPs)
which tended to target young people with higher
qualifications and obtained fewer posts. Young
people born outside the country are also
underrepresented among beneficiaries of ALMPs,
at just 7.7% of the total number of participants.
The relatively high level of youth unemployment in
Portugal contrasts with the current rate of young
people not in employment, education or training
(NEETs), which in 2024 stood at 8.7%, 2.3 pps
below the EU average (11.0%). Most recent reports
on the participation of young people in the Youth
Guarantee scheme reveal improvements in several
areas such as the number of people remaining on
the scheme beyond four months and the
acceptance of offers within four months of
registration.
Graph A10.2:
Labour market outcomes of young
people
25
20
(%)
15
10
5
2018
2019
2020
2021
2022
2023
2024
Youth unemployment rate (15-24): EU 27
NEETrate (15-29): EU 27
Youth unemployment rate (15-24): PT
NEETrate (15-29): PT
Source:
Eurostat
Youth employment is characterised by
precariousness and segmentation.
Despite
considerable investment and reforms, Portugal has
still not managed to improve the quality of youth
employment or provide greater stability and career
prospects. In 2024, Portugal had one of the
highest proportions of young people (age 15-29)
on temporary contracts in the EU, as a percentage
of employees (36.7% vs EU: 30.9%). Following
significant amendments to the Labour Code and
considerable investments and reforms, the country
has managed to reduce overall labour market
precariousness, with the proportion of temporary
contracts for those aged 20–64 dropping to 13.5%
in 2024 (EU: 10.0%), 5.3 pps lower than in 2018.
However, the situation for young people remains
unchanged, with the proportion of temporary
contracts among young people consistently
exceeding the EU average. Discontinued measures
such as investment in the Sustainable
Employment Commitment, funded by the recovery
and resilience plan (RRP) (and other initiatives such
as ATIVAR.PT and AVANÇAR, both co-financed by
the ESF and ESF+) were unable to make significant
improvements to job prospects for young people.
The government is rolling out a new package
of ALMPs targeting a wide range of
unemployed individuals, including low and
highly skilled workers, young people, persons
with disabilities and migrants.
These include
programmes such as INICIAR, Estágios + TALENTO
(professional traineeships), and Emprego +
TALENTO and + EMPREGO. There are also with
increased financial incentives for permanent hiring.
The cost of living in Portugal, and in particular
access to affordable housing in the two biggest
metropolitan areas of Lisbon and Porto (see Annex
11), is a major obstacle for young people, even for
those on average or above-average income. Young
people live in their parental home until, on
(
158
) Total number of people employed, unemployed, seeking
work but not immediately available and available to work
but not seeking
(
159
)
Annex (Young jobseekers registered with the PES:
Characteristics, trajectories and placements)
(
160
)
Young jobseekers registered with the PES: Characteristics,
trajectories and placements
81
 kom (2025) 0222 - Ingen titel
3035405_0083.png
average, the age of 28.9 (vs EU: 26.2) in 2024.
This leads to a later start in life, which affects
Portugal’s demography in
the medium and long
term.
Recent reports from youth representative
organisations also indicated that working
conditions were increasingly precarious and
salary levels insufficient to ensure a decent
life(
161
). According to national data, 75% of young
people between the ages of 18 and 35 years
earned less than EUR 1000 per month and 25%
were below the poverty line in 2023(
162
). Through
support from the RRP Portugal is implementing
ambitious reforms and is investing in its vocational
education and training (VET) system (see Annex
12). However, gains remain minimal in terms of
reducing temporary employment and increasing
permanent employment among young people. One
potentially beneficial measure to improve long-
term outcomes for youth, social cohesion and the
future of the economy is a national pact for young
people to be agreed by all decision makers, social
partners and stakeholder groups.
Labour shortages, especially in highly skilled
jobs, are becoming more evident.
Portugal is
facing significant supply-side challenges in
meeting labour-market demand: factors include
skills shortages, demographic issues and structural
challenges such as low basic skills and poor
educational outcomes, all of which could
undermine the country’s competitiveness.
A
significant increase in high-skilled labour demand
(44%), is expected, which represents a major
challenge for a country with a structural skills
deficit due to low levels of educational attainment.
This may be further exacerbated if the current
levels of participation in education and training
remain low (see Annex 12). This increase in
demand for highly skilled labour is in line with the
job openings forecast for the period up to 2035
for Portugal: high-skilled non-manual occupations
(51%), skilled non-manual occupations (29%),
skilled manual occupations (14%) and elementary
occupations (5%). A projected 3% decline in the
labour force between 2020 and 2035 - driven by
an ageing and shrinking population (expected to
decrease by 2.5%) - coupled with increasing
specialisation in certain sectors, will affect the
(
161
)
CNJ - Position statement: State Budget 2025
(
162
)
CNJ - Position statement: State Budget 2025
composition of employment in Portugal, leading to
a higher demand for skilled workers.
Labour and skills shortages are having a
particularly adverse effect on sectors that
are essential for the green and digital
transition.
Surveys suggest that in the last two
years 62% of employers found it very difficult or
difficult to find and hire workers with the right
skills, notably for VET and post-secondary
qualifications(
163
). Numerous sectors are affected,
including construction, ICT (although ICT specialists
account for 5.2% of total employment in 2024,
compared to 5.0% in the EU), healthcare and
renewable energy, where employers are finding it
increasingly difficult to fill vacancies. According to
CEDEFOP’s
Skill Forecast 2023 for Portugal,
covering the period 2021 to 2035, there will be
around 3 million job vacancies, of which 95%
involve replacing workers and the rest new job
vacancies. The fastest-growing sectors are
expected to be ICT (31% increase), followed by
electricity, gas, steam and air conditioning supply
(19%). For the same period, the more commonly
demanded occupations (with the highest number
of new jobs created) will be business and
administration associate professionals (around
71 000), personal care workers (around 67 000)
and business and administration professionals
(around 66 000).
Integrating the rapidly growing migrant
population requires a great deal of
coordination.
From 2022 to 2023 the number of
foreign-born residents increased almost 34%
(from around 782 000 to 1 045 000) of whom
80.5% are working age, i.e. between 20 and
64.(
164
) Moreover, the migratory balance of the
country has been positive since 2017, with
significant increases particularly in 2022 and
2023.(
165
) The integration of non-EU nationals is a
challenge for Portugal, not least because of
current labour shortages and the fact that almost
40% of migrants with higher education attainment
have jobs below their qualifications (compared
with 27% for those born in the country).(
166
)
(
163
)
Flash Eurobarometer
(
164
) AIMA, Report on Migration and Asylum
(
165
) Statistics Portugal, Demographic Statistics
(
166
) European Labour Force Survey
–
2017-2022
82
 kom (2025) 0222 - Ingen titel
3035405_0084.png
PES are facing a significant increase in
registered unemployed migrants.
In 2023, such
people accounted for 18.4% of total registered
unemployment and according to more recent data
there was a 21.5% increase between November
2023 and November 2024 (
167
). The INTEGRAR
programme is a key measure to address this
challenge: it introduces a coordinated partnership
network (led by the
Instituto de Emprego e
Formação Profissional
- IEFP) to implement a
series of measures intended to improve access to
work and integration for migrants. Other measures
include labour mobility agreements with non-EU
countries (e.g. India, Morrocco, Cape-Verde and
Mozambique),
awareness
campaigns
for
employers and the
GIP Imigrante
services to help
immigrants into work. Portugal is also putting
forward a comprehensive national plan (Plano
de
Ação para as Migrações)
that includes several
policy measures to ensure regulated inflows of
migration, to attract foreign talent and to ensure
that migrants are integrated with dignity.
When it comes to addressing labour market
challenges one key element is enhancing the
efficiency of PES.
The main PES in Portugal is
the IEFP (Portuguese Employment and Training
Institute), which is putting forward several
initiatives to address improvement opportunities.
These include harnessing human resources,
reinforcing dedicated teams for employer
partnerships, and more effective integration of
training and employment services in organisations.
The average age of the IEFP’s workforce is
currently around 53. It is in the process of
recruiting 300 staff members to bring down that
average.
Other HR measures include promoting work-
life balance, professional development (with
initial and continuous training plans) and
incentives for internal mobility supported by
mentoring and reskilling programmes.
The
IEFP
is promoting its strategy with employers (and
will adopt a new one by the first half of 2025) by
increasing visits to employers and with an internal
training plan to help workers to improve their skills
when approaching employers. Other measures to
modernise the PES goes include simplifying
language, diversifying the channels for providing
services, virtual assistants for ALMPs and more
(
167
) IEFP, I.P.
–
Monthly Statistics of Registered Unemployment
digital-skills training. The deployment of all these
initiatives has the potential to improve the
efficiency of PES, not only from an internal
perspective but also in terms of the quality of
services provided to employers and to the
unemployed.
Average wage trends in Portugal remain
steady.
Nominal wage growth is expected to
reach 8.0% in 2024 and 3.6% in 2025, following
increases of 5.6% in 2022 and 8.0% in 2023,
slightly above the euro area and EU averages for
all years (
168
). After a drop of 1.5% in 2022, real
wages rebounded by 2.8% in 2023 and are set to
continue increasing by 5.2% and 1.5% in 2024
and 2025, respectively, rates slightly above the EU
average. This recovery in real wages reflects both
lower inflation and higher nominal wage growth,
recouping the losses incurred in 2022. The
statutory minimum wage also increased by around
16% between January 2022 and July 2024, an
increase of 4% in real terms. Nevertheless, at
9.2% in 2024, in-work poverty remains higher
than the EU average (8.2%). In the 2025 state
budget the government amended personal income
tax for young people (IRS
Jovem),
expanding its
coverage to young people up to the age of 35
regardless of their level of education, extending
the duration of exemptions from 5 to 10 years
and increasing the income threshold for
exemptions.
(
168
) For nominal wage growth, compensation per employee is
considered. It includes: i) Wages and salaries payable in cash
or in kind; and ii) Social contributions payable by employers.
For real gross wages, the deflator used is HICP. Real wages
using this deflator then can differ from real wages shown in
AMECO (that uses private consumption as deflator). Data for
2024 and 2025 are based on the European Commission
Autumn 2024 economic forecast.
83
 kom (2025) 0222 - Ingen titel
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ANNEX 11: SOCIAL POLICIES
Portugal continues to face considerable
social policy challenges.
The limited capacity of
social benefits to reduce poverty and inequality
pose risks for Portugal’s sustainable and inclusive
growth and prosperity. There is potential to further
strengthen social protection access, adequacy and
efficiency, thus helping to achieve the 2030
national poverty reduction target. Despite some
improvements, particularly in informal care, access
to care services remains insufficient in the face of
rising demand due to rapid demographic ageing,
with public spending falling below the EU average.
The
persistent
housing
crisis
reached
unprecedented levels in 2023, namely in terms of
purchase and rental prices and the ratio between
those prices and the disposable income of
families. Market trends, paired with a lack of social
and affordable housing, puts pressure on families’
living standards and has negative knock-on effects
on the job market. Energy poverty in Portugal is
significantly above the EU average, with
concerning trends across multiple areas.
The effectiveness of social benefits remains
very limited.
The impact of social transfers
(excluding pensions) on income poverty reduction
was significantly below the EU average in 2024
(22.4% vs 34.4% for the EU). The poverty-reducing
effect of social benefits (excluding pensions)
remains below that seen before the crisis in 2019
(4.2 percentage points (pps) vs 5.7 pps) and is half
of the EU average (8.6 pps). These developments
are not compensated by the level of social
benefits in kind (
169
), which accounted for just
7.8% of the GDP in 2021, well below the EU
average of 10%. Moreover, in 2023 expenditure on
social protection stood at 16.6% (vs 19.2% in the
EU). In 2024, inequalities remained above the EU
average, as measured by the income quintile share
ratio (S80/S20), at 5.2 compared to the EU
average of 4.6.
Portugal’s Gini coefficient
decreased (from 33.7 in 2023 to 31.9 in 2024),
but remains above the EU average of 29.3. The
allocation of additional resources can improve
social protection effectiveness and living
conditions, but this depends on targeting support
where it is most needed and closing coverage
gaps, while maintaining fiscal sustainability. The
single social benefit reform included in the
recovery and resilience plan (RRP) scheduled for
2026 seeks to increase coverage, simplify and
widen take-up and reduce duplicate payments.
(
169
)
Social Protection Committee Annual Report 2024
Further targeted improvements in the area of
social protection policies and investments should
also be considered to reduce poverty. The
government plans to adopt measures to guarantee
the long-term sustainability of the social security
system. To this end, it has created a working group
tasked with presenting solutions by 2026.
Graph A11.1:
Impact of social benefits (excluding
pensions) on poverty reduction
40
35
% of reduction of AROP
30
25
20
15
10
2019
2020
2021
2022
2023
2024
EU 27
PT
(1) Percentage of reduction of population at risk of poverty
Source:
Eurostat
Access to social protection is still insufficient
for some categories of workers.
Gaps remain
notably for some types of non-standard workers.
Individuals with very short-term contracts are the
most
affected,
lacking
coverage
for
unemployment, sickness, maternity, paternity,
work accidents and occupational illness benefits. In
2023, effective access remained considerably low
for temporary workers (14.9% vs 39.2% in the
EU), part-time workers (8.2% vs 33.3% in the EU),
and the self-employed (4.7% vs 12.7% in the EU).
The percentage of unemployed people receiving
benefits is also relatively low (23.4% vs 52.4% in
the EU). In response to these challenges, Portugal
has introduced several measures to improve
access to effective and adequate social protection
for the self-employed and for workers in the
cultural sector. Nonetheless, sustained efforts are
needed to close the gap on effective social
protection for workers on non-standard contracts.
The adequacy of minimum income in Portugal
remains insufficient.
In 2023, only 65.9% of
people aged 18-64 at risk of poverty (AROP) and
living in quasi-jobless households received
benefits, compared 83.5% in the EU). Efforts to
increases the
rendimento social de inserção
(the
minimum income under the social integration
income scheme) to offset inflation over the last
three years have proven been insufficient in
reverting a long cycle of decline in its adequacy. In
2023, the minimum income amounted to just 42%
of the poverty threshold, below the peak of 46%
84
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reached in 2012 (
170
). Despite the recent update to
the minimum income benefit to account for
inflation, its level remains well below the poverty
threshold. Additional measures are needed to
increase the adequacy of minimum income
schemes, along with active inclusion policies, as
outlined in the Council Recommendation on
minimum income.
Poverty levels remain stable, which calls for
sustained efforts to reach the national
poverty reduction target by 2030.
The
percentage of people at risk of poverty or social
exclusion (AROPE) slightly decreased compared to
2023 and lies at 19.7% in 2024. AROPE levels are
disproportionally high among certain groups,
including persons with disabilities and non-EU-
born individuals. Progress toward the national
2030 target of reducing the number of people
facing poverty and social exclusion risks by
765 000 has been limited. Timely and full
implementation of the national strategy to combat
poverty (2021-2030) and its associated action
plan will be key. It is also crucial to ensure
synergies
and
complementarities
with
investments, namely from the European Social
Fund Plus (ESF+) and the Recovery and Resilience
Plan (RRP), while ensuring coordination with
targeted strategies, such as the national European
Child Guarantee (ECG) action plan and the national
disability strategy. Additionally, it is vital to adjust
the strategy against poverty in response to recent
findings, when necessary (
171
). Despite some
improvement in the outermost regions,the AROPE
rate remains notably high in the Azores, at 28.4%
in 2024.
The risk of poverty or social exclusion among
children has decreased.
In 2024, the AROPE rate
for children decreased by 1.9 pps reaching 20.7%
compared to the EU average of 24.2%. By 2030,
Portugal aims to reduce the number of children at
risk of poverty or social exclusion by 161 000,
down from 380 000 in 2019. To date, 29 000
fewer children are at risk, highlighting considerable
scope for further action. Portugal is implementing
the ECG to mitigate the impact of poverty on
children. The 2024 implementation report shows
progress in early childhood education and care, but
(
170
) Rendimento mínimo em Portugal, 20 anos de RMG/RSI.
(
171
) An evaluation of the national strategy to combat poverty
(2021-2030) was completed in 2023, but it was not
released to the public.
gaps remain in areas such as inclusive education
and the adaptation of facilities, materials and
teaching methods for children with disabilities
remain. Improving children’s access to healthcare
is also crucial, particularly as only 37% of children
at risk of poverty or social exclusion report having
‘very good health’ (37%), was well below the EU
average of 63%.
Despite some improvements, the provision of
long-term care (LTC) services remains
insufficient.
Demographic developments are
driving increased demand for LTC services, with
24.1% of the Portuguese population aged 65 and
over in 2024. Portugal is the fastest-ageing
country in Europe, and its healthy life expectancy
at 65 is low, particularly for women, who have an
average of just 7.3 years, compared to the EU
average of 9.2 years in 2022. LTC services are
underfunded, limiting their availability and
affordability. In 2022, public LTC spending
accounted for 0.5% of GDP well below the EU
average of 1.7%. The largest share of public LTC
spending went to residential care (57.5%),
followed by home care (41.8%). However, funding
for home care remains insufficient, as only 15.9%
of those with severe difficulties receiving home
care in the previous year, compared to 28.6% in
the EU(
172
). Despite some progress in recent years,
the system still falls short in promoting autonomy
and independence for users. The MAVI scheme,
designed to support independent living, provides
personal assistance to people with disabilities.
Although the pilot scheme has been successful, it
remains underfunded relative to demand, and
efforts should be made to expand it
nationally (
173
).
The LTC sector still faces staff shortages
and lack of career opportunities.
Although the
LTC workforce has increased from 0.8 to 1.1
workers per 100 people aged 65 and over,
Portugal still relies heavily on informal carers.
Approximately 12.3% of the total population is
estimated to act as informal carers. While recent
improvements in the status of informal carers,
including a simplified recognition process and
(
172
) First report on the implementation of the Council
Recommendation on access to affordable high-quality long-
term care
–
Portugal, 2024.
(
173
) Following
a survey,
only 26% of people currently have
personal assistance, and 53% of these are not satisfied with
the number of hours they receive.
85
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enhanced support are positive steps, effective
implementation is crucial, particularly in the area
of respite care. Simultaneously, there is a pressing
need to increase the number and quality of formal
carers, by providing training to improve their skill
set, ensuring decent remuneration, and offering
career development opportunities and improved
working conditions.
House purchase prices have been growing
substantially over the last decade.
House
prices have more than doubled since 2015. They
increased by 8.2% in 2023 and are estimated to
be overvalued by around 25-30%. The growth
continued in 2024 (+9.8% year-on-year in Q3-
2024). This cumulated growth has been driven by
strong tourism demand, significantly supported by
short-term rentals, low interest rates, a high level
of property investment by foreigners, and a low
level of residential construction and of investment
on affordable housing. Mortgage interest rates
increased from 0.8% in 2021 to 4.0% in 2023,
impacting total amount of mortgage credit, which
fell 1.4%. The adjustment to the higher interest
rate environment is having a greater impact on the
quantity of transactions, with the number of house
transactions decreasing by 19.8% in 2023 after
stabilising in 2022. However, building permits
continued to increase by 5.4% in 2023.
Overall
housing
affordability
has
deteriorated over the past decade.
The
standardised house price-to-income ratio has
jumped by almost 50% since 2015 and stands
around 30% above its long-term average. Taking
into account the cost of mortgage funding, the
borrowing capacity of households worsened
significantly over the last ten years as well, since
the average household now needs a significantly
higher share of its annual income for mortgage
payments.
Portugal continues to face a housing
accessibility crisis and rental affordability
worsened.
Since the past decade, Portugal has
seen a sharp rise in housing costs, both for
purchase and for rent. Rental prices hit a 30-year
high with a 7.3% year-on-year increase in
December 2024. Despite the country having a high
homeownership rate, the ratio of new rents to
incomes increased significantly over the last
decade with increases of 9.3% year-on-year.
Housing remains largely inaccessible to young
people, vulnerable groups, and increasingly to the
middle- and lower-income cohorts, who face
substantial rental costs. In 2024, the housing cost
overburden rate (share of people with over 40% of
their household income spent on housing)
increased by 2 pps compared to 2023, reaching
6.9%, while it decreased in the EU overall (EU:
8.2%). Renters are particularly affected with
30.3% facing housing cost overburden compared
to 19.2% in the EU. Renters in the vulnerable
groups require stronger short-term measures to
alleviate the cost of renting, and to ensure a
balanced and accessible rental market in the most
affected cities. The reasons exposed above for this
situation are paired in the rental market with low
price and rent control or regulation and the
pressure felt from the short-term tourist
accommodation market, particularly in popular
urban and holiday areas.
Affordability issues exacerbates negative
social and job-market outcomes.
Recent
studies show that rental prices are increasing
faster than average wages, particularly in Lisbon,
where on average 52% of a person’s wage is
required to cover rent, limiting the ability of people
to rent independently (
174
). The municipalities
surrounding the capital are experiencing a spillover
effect, with more people relocating to these areas,
which also lack sufficient affordable and social
housing. Similarly, the Algarve region and the
Porto metropolitan area are facing significant
housing pressure. Since last year, there are
growing reports of noticeable increase of informal
settlements, surging in the suburban areas of
Lisbon, populated by low-income and migrant
cohorts(
175
). The financial strain felt by workers
and households, paired with deteriorating of
standard of living conditions, can affect
competitiveness in the medium term, thus
hindering job-market mobility and in particular the
capacity to attract and retain qualified workers.
Social housing stock is insufficient to meet
demand, requiring substantial measures.
While Portugal has an ambitious target to increase
public housing stock to 5% of total housing by
2026 and to provide rental or home-purchase
support for the most vulnerable groups and
(
174
) Report on impact of rental cost in Portugal for locals: Tornou-
se incomportável arrendar em Portugal,
Miguel Salema,
Prosper Research Center, Católica-Lisbon University.
(
175
) Municipalities and local housing associations alike report the
increase of number of people living in informal settlements,
with prevalence in the suburban areas of Lisbon.
86
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households, current efforts may fall short of
delivering the necessary systemic and short-term
solutions. Portugal has a very low stock of public
housing, at less than 2%, while in 2022 vacant
dwellings, excluding seasonal and holiday homes,
accounted for around
12% of the country’s total
housing stock (
176
). The Portuguese RRP is
responsible for record investments in the public
housing sector and is aiming to around 20 000
new or renovated housing units, while the
government will finance 33 000 more units by
2030. However, with only 3% delivered by
September 2024, this raises strong doubts as to
the capacity to meet the targets set by the end of
the RRP lifespan in 2026. The Portuguese
government recently introduced measures, such as
fiscal benefits and public guarantees, to help
young people access property, though their impact
on the low- and medium-income cohorts is yet to
be seen. In 2023, Portugal introduced targeted
initiatives to support vulnerable or lower-income
households with rental costs, including stepped-up
measures like Porta 65+ and extraordinary rent
support. While these measures have an immediate
effect on the ability of the most vulnerable to pay
rent, they are not a systemic solution. Portugal
should consider long-lasting measures to control
the rapid rise in rental prices. This could be
achieved by i) further regulating short-term
tourism rentals in pressured areas, by ii) enacting
rent regulation measures to protect the most
affected groups, and iii) by assessing the supply of
vacant, derelict or underused homes both in the
public and private stocks in the most affected
cities promoting their availability, The Portuguese
government is expected to prepare a new housing
strategy based on an assessment of investment
needs and taking into account the delays in
granting building permits and in social and
affordable housing construction. It is crucial for
this assessment to provide an updated and
complete overview of national and local housing
investments and reforms. This should also include
a reliable timeline for completion of builds and a
comprehensive plan to address housing shortages,
, based on robust statistical data. It should also
further promote a Housing First national approach.
A new strategy aims to provide long-lasting
solutions to rising homelessness.
In 2023, the
(
176
) The OECD reports on public housing stock monitoring reveals
Portugal has one of the lowest stocks of the group.
OECD
Affordable Housing Database
(reports PH4.2 and HM1.1).
number of people in homelessness on the
mainland reached around 13 000, a 23% increase
from 2022, with about 7 700 of them sleeping
rough. Lisbon is the municipality with the highest
number of people experiencing homelessness,
followed by rural municipalities where the trend is
heightened by seasonal agricultural work and job
precariousness. Migrants face severe difficulties in
finding adequate housing, with 20% of people in
homelessness not being Portuguese or EU
nationals. Another worrying statistic is that in
2023 38% of homeless people were under 30
years old, while in 2022 that figure was already as
high as 18%, pointing to a worsening of the
precarious conditions affecting this group. The new
and ambitious 2025-2030 national strategy for
the integration of people in homelessness aims to
provide an intersectional response, and for the
first time includes a nation-wide
‘Housing First’
initiative with 600 housing units to be made
available. The strategy also focuses on the
reintegration of people in homelessness through
employment and personalised support. The
Government must guarantee adequate and
continued financing of measures currently
supported by EU funds to promote the social and
labour market reintegration of people in
homelessness. Actions at municipal level have
delivered
prevention
and
emergency
accommodation programmes, with strong support,
monitoring and coordination by NGOs.
Energy poverty in Portugal is significantly
above the EU average, with concerning
trends across multiple areas.
The percentage
of the population unable to keep their homes
adequately warm in 2024 was 15.7.%, which is
6.5 pps higher than the EU average (
177
).
Additionally, 29% of households experienced
issues such as leaks, damp or rot in their dwellings
in 2023, far surpassing the EU average of 15.5%.
In 2024, the percentage of households in arrears
on utility bills is 4.3%, which is lower than the EU
average of 6.9%, but still an area of concern.
Portugal also faces one of the highest winter
mortality excess rates in the EU, underscoring the
severe impact of energy poverty. Portugal’s
national long-term strategy to combat energy
poverty aims to eradicate energy poverty by 2050.
(
177
) A recent
survey by Lisboa-E-Nova,
Agência de Energia e
Ambiente de Lisboa, published in January 2024, shows that
63.2% of the population are unable to keep the house
adequately warm in the winter. This rate is 56.5%, when it
comes to keeping the house comfortably cool in the summer.
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The focus of the strategy will be on reducing the
percentage of households spending more than
10% of their income on energy. The government
has launched several initiatives, including the ‘Vale
Eficiência’
programme,
which
supports
economically vulnerable households by improving
the energy efficiency of housing. The National
Energy Poverty Observatory, established in 2024,
will monitor trends and inform policy development.
While short-term measures like the social tariff
provide financial assistance to vulnerable
households, long-term initiatives focus on
improving building energy performance and
efficiency. However, the national energy and
climate plan lacks specific targets for energy
poverty, and the assessment of policies to address
this issue is incomplete. While the overall
population in 2023 faced fewer affordability
challenges for cars compared to the EU average
(4.7% vs 5.6%), vulnerable income groups, such as
those at risk of poverty, are disproportionately
impacted by both the inability to afford cars
(13.1%) and the high costs of personal transport
fuels. There has been a gradual shift from reliance
on private cars to public transportation, but the
use of public transport remains below the EU
average, suggesting room for further improvement
in sustainable transport use. Finally, the future
European Social Climate Fund will be a key
financial instrument in helping Portugal direct
support to the most vulnerable in the green
transition.
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ANNEX 12: EDUCATION AND SKILLS
Portugal’s competitiveness is hindered by
weaknesses in skills development including
basic skills, skills mismatches and a low
adult learning participation rate, despite
significant investments.
The evolving labour
market, driven by green and digital transitions,
puts pressure on education and training systems
to equip both young people and adults with
relevant skills. Basic skills are declining, with about
one third of students failing to reach minimum
standards in mathematics. More 15-year-olds fail
to meet basic standards, limiting future upskilling
opportunities. Higher education and vocational
training are not fully aligned with labour market
needs, leading to skills mismatches. Although
Portugal’s workforce is more educated than a
decade ago, many skilled young people struggle to
find quality jobs. Participation in adult learning
remains low, despite the vast array of measures
supported by European funds such as ESF, ESF+,
and the recovery and resilience plan (RRP). To
boost productivity and innovation, improving
educational outcomes and skills development is
crucial.
Portugal has reached the EU-level target for
early childhood education and care (ECEC)
participation, but efforts to achieve
universal access need to continue.
The
participation of children between the age of three
and the compulsory schooling age in ECEC
increased from 90.5% in 2021 to 96.3% in 2022,
exceeding the EU average (93.3%) and the EU-
level target of at least 96%. In 2022, ECEC
participation ranged from 100% in the
autonomous region of Madeira to 91.4% in the
Lisbon metropolitan area. However, young children
at risk of poverty or social exclusion participate
less in ECEC than those not at risk. To achieve
universal access to preschool education,
investments to expand the ECEC network continue,
supported through Portugal's PARES programme
(Programa
de Alargamento da Rede de
Equipamentos Sociais)
to extend the social
equipment network, which is financed by the
Recovery and Resilience Facility (RRF). Supported
by the Technical Support Instrument (TSI), Portugal
is now developing a national quality framework for
ECEC (2024-26).
The high share of students underperforming
in mathematics and low share of top
performers pose a risk to future productivity
and competitiveness.
Student performance in
basic skills has declined significantly since 2018
and in line with the EU/OECD trend. The
underachievement rate is particularly high in
mathematics. Portuguese students perform better
in reading and science with underachievement
rates below the EU average. At the same time, the
share of top performers significantly dropped in
maths and reading and is now among the lowest
levels in the EU. In science, the rate has remained
unchanged over the past decade and is now lower
than the EU average. Other international studies
conducted in Portugal, namely TIMSS 2019 (before
the pandemic) and PIRLS 2021 (after the
pandemic), also recorded worse results compared
to previous editions (2015 and 2016, respectively).
Graph A12.1:
Underachievement rates by field,
PISA 2012, 2018 and 2022 (%)
35
30
25
20
%
15
10
5
0
PT
EU
PT
Reading
2018
2022
EU
PT
Science
2030 EU target
EU
Mathematics
2012
Source:
OECD (2023).
While the socio-economic gap in basic skills
is smaller than in other EU countries, it is
widening.
Underachievement has risen among
disadvantaged students. It has grown by
7.5 percentage points (pps) for students from the
bottom quarter of the socio-economic distribution,
reaching 46.9% in 2022, slightly below the EU
average (48.0%). This has widened the socio-
economic gap by 4.9 pps since 2018, in line with
EU trends. Foreign-born students are more likely to
underachieve in mathematics than native-born
students, similarly to other EU countries. Portugal
is implementing several measures to strengthen
student performance. Over the last 25 years,
Portugal's programme for priority intervention
educational areas (Programa
Territórios Educativos
de Intervenção Prioritária -
TEIP) has helped
increase inclusive education, improve basic skills,
and reduce early leaving from education and
training (ELET) rates among school students. In
2023, the fourth generation of the TEIP (TEIP4)
was launched for the next six academic years,
strengthening and refocusing previous measures
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while granting greater autonomy to educational
communities.
In
2021
Portugal
launched
another
comprehensive plan to compensate for the
learning losses and negative effect of the
pandemic.
The ‘21|23 Escola+’ plan was rolled
out for two academic years, with an allocation of
over EUR 900 million, supported by Cohesion
Policy funds. The plan has been extended to the
academic year 2023/2024. The new ‘23|24
School+’ plan aims to have all Portuguese schools
set up and implement their own learning recovery
plans in a variety of fields. A new plan to replace
the existing one after 2024 has been approved
(Council of Ministers Resolution no. 140/2024, of
17 October) putting special focus on Integrating
migrant students (as a response to the growing
number of non-Portuguese speaking students).
Graph A12.2:
Employment rate of recent graduates
by educational attainment (annual)
100,
Several measures aim to increase the
attractiveness the teaching profession and
improve working conditions.
The teaching force
is ageing, and the shortage of teachers is
worsening as few young people enter the
profession(
178
). In 2023, the government approved
a new management and recruitment regime for
primary and secondary school teaching staff,
which made it possible to offer fixed-term
contracts to more than 8 000 teachers. It also
approved a regulation fixing the terms for
implementing career progression mechanisms for
ECEC educators and teachers in basic and
secondary education, which benefited around
60 000 teachers. A Decree Law altered the legal
framework for professional qualification for
teaching in preschool, basic and secondary
education. An agreement was also reached with
trade unions on frozen service time being
recovered in two years and ten months.
Tertiary educational attainment (TEA) has
risen steadily in the past decade but remains
below the EU average.
In 2024, 43.2% of young
people aged 25-34 held a tertiary degree, below
the EU average (44.2%) and the EU-level target
(45%). The TEA rate is much higher than in 2013
(30%). There are still significant regional
differences in TEA rates (from 19.6% in the Azores
to 48.4% in the Lisbon metropolitan area in 2023).
There are also differences by country of birth
(from 35.4% of foreign-born people to 44.8% of
native-born people; EU averages: 39.3% and
45.2%, respectively in 2024). While according to
national statistics, more young people are enrolled
in higher education studies, the number of higher
education STEM graduates decreased in 2022
compared to the previous year. In Portugal, 30.5%
of pupils enrolled in medium-level vocational
education and training (VET) in 2023 were in STEM
fields, compared to 36.3% across the EU.
The Portuguese population has historically
had a low level of qualifications, hindering
productivity and competitiveness, although
there has been significant progress in recent
years.
In 2023, around 39% of people aged 15-
64 had an International Standard Classification of
(
178
)https://economy-
finance.ec.europa.eu/document/download/c6e61ba3-868f-
4de4-833b-
a398213472b6_en?filename=SWD_2024_622_1_EN_Portu
gal.pdf
80,
60,
40,
2019
2020
Low skilled: EU27
2021
2022
2023
2024
Low skilled: PT
Medium skilled (VET): PT
High skilled: PT
Medium skilled (VET): EU27
High skilled: EU27
Low skilled (Less than primary, primary and lower secondary
education (levels 0-2)), medium skilled (VET) (Upper
secondary and post-secondary non-tertiary education (levels
3 and 4)
–
vocational), and high skilled (Tertiary education
(levels 5-8)).
Source:
Eurostat
Regional variations in early school leaving
remain significant.
In 2024, the ELET rate
dropped to 6.6% (EU: 9.3%), well below the EU
target. Nevertheless, it is strongly influenced by
place of residence. Regional disparities in ELET
rates persist, ranging in 2024 from over 19.8% in
the Azores to 5.2% in the North region. In 2024,
ELET rates did not significantly differ according to
the degree of urbanisation and showed a reduction
notably in rural areas (2.8 pps less than in 2023).
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Education (ISCED) level of 2 or lower, significantly
above the EU average of 24.2%. This is a major
improvement from 2014, when the share was
56.4%, reflecting a reduction of over 15 pps. This
current large pool of persons with low educational
attainment (particularly for the older segments of
the population) is a challenge for the
competitiveness and productivity of the country. It
also hinders the participation and access of less-
qualified individuals to higher-skilled jobs in the
medium and long term, ultimately limiting their
career progression.
Policy efforts seek to improve the matching
between VET offer and labour market
demand.
In Portugal, 38.7% of pupils in medium-
level education attend programmes with a
vocational orientation (2023 data). More than
three out of four (77.8% in 2024) recent VET
graduates had experienced work-based learning
(compared to 65.3% EU-wide). Still, recent VET
graduates have an employment rate below the EU
average (75.5% as compared to 80.0% in 2024).
The implementation of the tripartite agreement on
VET signed in 2021 is lagging, but one of its most
important measures
–
the revision of the national
catalogue of qualifications
–
should be finalised by
January 2026. Once completed, this will put more
emphasis on skills (rather on training content), will
feature more high-skilled training offers and
qualifications no longer integrate the workload.
Portugal's main forecasting tool for skills needs is
its SANQ system for anticipating qualification
needs, which serves as a solid base for VET
provision all over the country. More regular
updates of the forecasts (currently every 3 years)
would help strengthen responsiveness and
adaptability to changes in skills demand and feed
into curricular updates.
The RRF and the ESF+ provide significant
financial support for VET measures to
promote quality employment for youth.
Component 6 of the RRP includes reforms and
investments in labour and skills, with the VET
reform being a key element. This reform is
complemented by the RRP EUR 710 million
investment to modernise VET provision and
establishments. Its goal is to install and modernise
365 specialised technological centres and enlarge
the network of PES training centres. A total of 104
technological centres and 59 training centres were
constructed or refurbished by the end of March
2025.
VET providers report that the large-scale
RRP investment, alongside the VET system
reform,
has
brought
significant
improvements
while
also
requiring
adaptation in methodology, organisation and
teacher training.
To fully harness these benefits,
further efforts from VET training providers will be
needed to upskill their teaching workforce.
Portuguese mainland VET schools have
implemented quality assurance systems aligned
with ISO or European Quality Assurance in VET
norms, enhancing their management and
operations. ESF+ support to VET activities has
been substantial and constitutes the main training
typology of operation supported in both
programming periods (2014-2020 and 2021-
2027). The ESF+ programme
PESSOAS 2030
allocates around EUR 1.5 billion for VET, with a
target of 366 000 participants by 2029 (100 000
participants had been supported by June 2024).
High youth unemployment and labour
shortages (see Annex 10) mean the VET offer
must be as closely aligned as possible with
the labour market demand to avoid
unnecessarily financing courses with low
employability prospects.
The government
intends to reorganise the VET system to further
align it with companies’
skills demand and the
technological transition. It also intends to review
and systematise VET legislation and reform of the
system that certifies training providers.
Adult participation in learning activities is
declining, creating a significant barrier for
the low-skilled adult population.
Older age
groups are more affected by low educational
attainment (ISCED 2), with 61.9% of individuals
aged 55-64 having this level of education in 2024,
compared to just 16.2% of those aged 20-34.
Given the rapidly changing labour market, the twin
transitions and concerning demographic trends in
Portugal, adult learning opportunities should be
expanded to maximise the limited labour
resources, facilitate reskilling, and ultimately boost
national
productivity and
competitiveness.
Outreach and participation pose a significant
challenge to Portugal’s goal of having at least
60% of adults participate in training annually by
2030. 2022 data (
179
) shows participation dropping
(
179
) Data from the Adult Education Survey 2022, special
extraction excluding guided-on-the-job training.
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to 33.4% from 38% in 2016, putting at risk the
attainment of the goal. Increased outreach to
significantly improve the participation could be
beneficial.
The
QUALIFICA
programme remains the main
way to improve the qualifications of adults
and their employability.
Under the supervision
of the National Agency for Qualification and VET
(ANQEP), which promotes double certification
qualifications (non-tertiary) and both initial and
lifelong learning, Portugal continues to implement
the QUALIFICA programme across the country,
with over 300 centres. The RRP invests
EUR 225
million
in
the
‘Adult
Incentive
Programme’ to increase the qualification levels of
the adult population. This includes local training
programmes to improve basic levels of literacy,
numeracy and digital skills, increase participation
and
completion in ‘Recognition, Validation and
Certification of Skills’ processes and developing
short higher education courses. By December
2024, 68 402 certifications were provided via
RVCC (68% of the 2025 target of 100 000) and
11 231 adults participated in local training
programmes (around 50% of the 2025 target of
22 500). The ESF+ main thematic programme
PESSOAS 2030
allocates around EUR 178 million
for adult education through the
QUALIFICA
centres
with a target of 700 000 participants by 2029 and
also supports education and training for adults
(Educação
e Formação de Adultos -
EFA), a double
certification approach that allows low-qualified
adults to improve their basic skills.
Skills shortages and mismatches will hinder
the economy unless education and training
systems become more efficient.
Reported
labour shortages (see Annex 10) underscore the
need to improve skills matching in Portugal, in
addition to addressing the skills deficit and
workforce shortages highlighted by national
authorities. Despite the reported labour shortages,
the low job vacancy rate (1.3% in 2024) suggests
that the available positions may be of poor quality,
especially for young people, indicating a mismatch
between the demand for labour and the
opportunities offered by public employment
services.
Portugal has been investing heavily in
education and training across various
development areas, supported by European
funding.
However, challenges remain in efficiently
anticipating labour market needs for different skill
levels, with proper diagnostics, orientation tools,
and stakeholder engagement. The SANQ
forecasting system has been important in better
aligning demand and supply, particularly at
regional level. However, it could benefit from
improvements, especially in terms of the regularity
of its implementation. Portugal faces a lack of
proper skills anticipation mechanisms for higher
education, a challenge it aims to address with
support from the TSI and the OECD through a
project to identify good practices and
recommendations, with results expected by July
2026.
The digital transformation is progressing
well.
Women already represented 22.7% of the
ICT specialists in 2024 (EU average: 19.5%) and
the share of the adult population with at least
basic digital skills is currently slightly above the EU
average (56.0% vs 55.6%). The ESF+ and RRF help
provide digital education and training all over the
country with examples of digitally-oriented
measures under different components of the RRP
and digital skills training included in various
operations funded by the ESF+. Portugal intends to
make digital skills an area that intersects with all
types of education and training activities.
Compared to the digital transition, the green
transition is lagging.
Portuguese authorities say
the integration of green skills into training
programmes is progressing more slowly, mainly
due to a lack of demand for this type of training.
In 2024, labour shortages were reported in
Portugal for several occupations requiring specific
skills related to the green transition, including
agricultural and forestry production managers,
forestry labourers, and civil engineers (
180
). On the
other hand, environmental education in Portugal is
already a mandatory subject for all school levels.
Interesting projects such as ‘Educating
for the Blue
Generation’, partnerships with NGOs and specific
short-term teachers training programmes might
help speed up this transition.
(
180
) European Labour Authority 2025 European Employment
Services (EURES) Report on labour shortages and surpluses
2024, based on data from EURES National Coordination
Offices. Skills and knowledge requirements align with the
European Classification of Occupations, Skills and
Competences (ESCO) taxonomy on skills for the green
transition, with examples analysed using the ESCO green
intensity index.
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ANNEX 13: SOCIAL SCOREBOARD
Table A13.1:Social
Scoreboard for Portugal
Social Scoreboard for Portugal
Adult participation in learning (during the last 12 months, excl. guided on
the job training, % of the population aged 25-64, 2022)
Early leavers from education and training
(% of the population aged 18-24, 2024)
Equal opportunities and
access to the labour market
Share of individuals who have basic or above basic overall digital skills
(% of the population aged 16-74, 2023)
Young people not in employment, education or training
(% of the population aged 15-29, 2024)
Gender employment gap
(percentage points, population aged 20-64, 2024)
Income quintile ratio
(S80/S20, 2024)
Employment rate
(% of the population aged 20-64, 2024)
Dynamic labour markets
and fair workingconditions
Unemployment rate
(% of the active population aged 15-74, 2024)
Long term unemployment
(% of the active population aged 15-74, 2024)
Gross disposable household income (GDHI) per capita growth
(index, 2008=100, 2023)
At risk of poverty or social exclusion (AROPE) rate
(% of the total population, 2024)
At risk of poverty or social exclusion (AROPE) rate for children
(% of the population aged 0-17, 2024)
Impact of social transfers (other than pensions) on poverty reduction
(% reduction of AROP, 2024)
Social protection and
inclusion
Disability employment gap
(percentage points, population aged 20-64, 2024)
Housing cost overburden
(% of the total population, 2024)
Children aged less than 3 years in formal childcare
(% of the under 3-years-old population, 2024)
Self-reported unmet need for medical care
(% of the population aged 16+, 2024)
Critical situation
To watch
Weak but improving Good but to monitor
On average
Better than average
Best performers
33,4
6,6
56,0
8,7
5,7
5,20
78,5
6,5
2,4
110,8
19,7
20,7
22,4
21,3
6,9
59,4
2,5
(1) Update of 5 May 2025. Members States are categorised based on the Social Scoreboard according to a methodology agreed
with the EMCO and SPC Committees. Please consult the Annex of the Joint Employment Report 2025 for details on the
methodology (https://employment-social-affairs.ec.europa.eu/joint-employment-report-2025-0).
Source:
Eurostat
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ANNEX 14: HEALTH AND HEALTH SYSTEMS
Portugal’s
health
system
performs
comparatively well, with high life expectancy
at birth and low rates of treatable and
preventable mortality.
However, Portugal faces
challenges with access to healthcare, shortages of
healthcare workers and an uneven geographical
distribution of healthcare resources. These
challenges need to be addressed if the country is
to ensure the health of its population and social
fairness, while boosting the competitiveness of its
economy.
Life expectancy at birth in Portugal
rebounded above its pre-COVID-19 level and
was higher than the EU average in 2023.
There is a striking gender gap, however, with
women expected to live 5.8 years longer than men.
That said, they can expect to live around 2.2 years
less than men in good health. Portugal fares
comparatively well in avoiding deaths from
treatable causes. Diseases of the circulatory
system (‘cardiovascular diseases’) and cancer are
the leading causes of death, but with mortality
rates lower than the EU average.
Graph A14.1:
Life expectancy at birth, years
82.5
hospitals and groups of primary healthcare centres
in any given geographical area into a single
management structure. Additionally, the ongoing
health system reform foresees the creation of new
‘Model C family health units’, which are operated
by private healthcare providers integrated into the
national health service (NHS) framework and are
designed to expand access in primary healthcare
delivery. Public spending as a proportion of total
health expenditure in Portugal was among the
lowest in the EU in 2022. This translated into one
of the highest proportions of out-of-pocket
payments for healthcare in the EU (29.7% in
2022, more than twice the EU average). Portugal
is directing a considerable amount of funding
under its recovery and resilience plan (RRP) and
2021-2027 cohesion policy programmes towards
medical equipment, and new and renovated
facilities for hospitals, primary healthcare and
community care centres. In 2022, investment in
health capital formation, as a share of total health
expenditure, was among the highest in the EU. Due
to ageing, the projected increase in public
spending on healthcare raises concerns about
fiscal sustainability (see Annex 1).
Graph A14.2:
Treatable mortality
per 100 000 population
91.3
89.2
91.7
79.1
81.9
81.5
81.5
81.8
81.4
93.3
89.7
81.3
80.4
80.1
80.6
82.9
79.1
74.5
74.5
2019
2020
2021
Portugal
EU
2022
2023
2018
2019
2020
Portugal
EU
2021
2022
Source:
Eurostat (demo_mlexpec)
Age-standardised death rate
(mortality that could be
Health expenditure per capita in Portugal is
low, as is the share of spending covered by
public funds.
Despite recent increases, health
spending per inhabitant in 2022 (adjusted for
differences in purchasing power) was around one
quarter lower than the EU average. The largest
proportion of health expenditure went towards
outpatient care, with a share above the EU
average. This, together with a relatively low
number of hospital beds (285 per 100 000
population in 2022, lower than the EU average),
illustrates Portugal’s organisational focus on
primary healthcare. This matches the health
system reform trend observed in other countries.
Portugal is now expanding its concept of ‘local
health units’ throughout the country to integrate
avoided through optimal quality healthcare)
Source:
Eurostat (hlth_cd_apr)
As regards public health, investment in
disease prevention remains low.
In 2022,
spending on prevention in Portugal accounted for
3.2% of total spending on health, much lower than
the EU average of 5.5%. While the rate of
preventable mortality in Portugal is lower than the
EU average, nearly one third of deaths are linked
to behavioural risk factors. Alcohol consumption
remains relatively high, and overweight and
obesity are a growing public health concern.
Portugal’s RRP includes measures
to promote
physical activity in the population, with
investment directed towards: (i) a national
campaign and technological platform to promote
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Table A14.1:Key
health indicators
2019
Cancer mortality per 100 000 population
Mortality due to circulatory diseases per 100 000 population
Current expenditure on health, purchasing power standards, per capita
Public share of health expenditure, % of current health expenditure
Spending on prevention, % of current health expenditure
Available hospital beds per 100 000 population**
Doctors per 1 000 population*
Nurses per 1 000 population*
Mortality at working age (20-64 years), % of total mortality
Number of patents (pharma / biotech / medical technology)
Total consumption of antibacterials for systemic use,
daily defined dose per 1 000 inhabitants****
244.9
279.0
2 283
60.9
1.8
288
5.3
7.1
14.0
15
19.3
2020
240.5
285.0
2 332
64.3
1.9
286
5.5
7.3
13.4
21
15.2
2021
226.1
247.9
2 659
62.8
3.2
288
5.6
7.5
13.3
23
15.3
2022
219.5
237.9
2 823
62.5
3.2
285
5.7
7.5
13.0
12
18.8
2023
n.a.
n.a.
n.a.
61.7
n.a.
n.a.
n.a.
n.a.
13.2
24
19.7
EU average*
(latest year)
234.7 (2022)
336.4 (2022)
3 684.6 (2022)
81.3 (2022)
5.5 (2022)
444 (2022)
4.2 (2022)*
7.6 (2022)*
14.3 (2023)
29 (2023)***
20.0 (2023)
*The EU average is weighted for all indicators except for doctors and nurses per 1 000 population, for which the EU simple
average is used based on 2022 (or latest 2021) data except for Luxembourg (2017). Doctors’ density data refer to practising
doctors in all countries except Greece, Portugal (licensed to practise) and Slovakia (professionally active). Density of nurses: data
refer to practising nurses (EU recognised qualification) in most countries except France and Slovakia (professionally active) and
Greece (hospital only). **‘Available hospital beds’ covers somatic care, not psychiatric
care. ***The EU median is used for patents.
Source:
Eurostat database; European Patent Office; ****European Centre for Disease Prevention and Control (ECDC) for 2023.
physical activity; (ii) extending school sports to the
community; and (iii) encouraging physical activity
in the workplace.
There are challenges in accessing healthcare,
with geographical and income-related
disparities in unmet needs for medical care.
In 2024, the proportion of the Portuguese
population reporting unmet needs for medical care
was equal to the EU average (2.5%). Such unmet
needs in Portugal are mainly due to financial
reasons and waiting times, with lower income
groups disproportionally affected. The difference
between income groups in Portugal is among the
highest in the EU. Furthermore, and specifically
among people who declared having medical needs,
the gap between people below and above the
poverty threshold (defined as 60% of the median
equivalised income) is higher in Portugal than the
EU average. Moreover, comparatively higher unmet
needs for medical care are reported in rural areas.
This may be linked to long travelling times to
healthcare facilities (see Annex 17), but also to
shortages in healthcare workers being more
pronounced in some rural areas. A range of
measures under the RRP and the cohesion policy
aim to improve access to healthcare, including
investments in: (i) hospital infrastructure and
medical equipment; (ii) new primary healthcare
centres; (iii) digitalisation of healthcare; and (iv)
accessibility of health services in less developed
regions.
Persistent shortages of health workers in
Portugal limit the provision of healthcare.
Shortages are apparent in nursing and several
medical specialties (such as gynaecology,
obstetrics, paediatrics, general surgery, emergency
services and mental health) as well as in certain
regions, especially in the south. A shortfall of
general practitioners (GPs) has resulted in an
insufficient coverage of primary healthcare:
around 1.6 million people (corresponding to more
than 15% of the country’s population) are not
registered with a GP. Working conditions for health
professionals are a significant issue, with low pay
and limited career prospects acting as a deterrent
to working in the NHS, particularly for nurses. A
significant number of nurses and, importantly,
around 60% of nursing graduates choose to
emigrate to countries that offer better pay and
working conditions. Recruitment of doctors is
equally challenging. Only around half of the doctor
positions advertised between 2020 and 2024 by
the NHS have been filled (see Annex 10).
Incentives such as salary top-ups have not fully
succeeded in filling positions, particularly in
general and family medicine. Hospitals also face
difficulties in recruiting and retaining doctors.
The government is considering measures to
improve the planning and management of human
resources in the NHS. In 2024, all family health
units (a primary healthcare structure in Portugal)
converted to ‘Model B’, which allows GPs to have a
higher number of registered patients. This
transition is expected to decrease the number of
NHS users who have not been assigned a GP,
which will in turn increase access to primary
healthcare. Furthermore, according to a recent
study (
181
), more than 29 000 additional health
professionals (including around 3 000 additional
(
181
)
‘The
NHS Healthcare Workforce in Portugal
–
Overview and
recent evolution’, PLANAPP
–
Centre for Planning and
Evaluation of Public Policies, October 2024.
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doctors and around 14 000 additional nurses)
would be needed to bridge regional gaps in the
density of human resources in the NHS. This
implies a 20% increase in the NHS workforce in
the hospital and primary healthcare sectors. The
small increases in the number of health workers
seen in recent years are not sufficient to bridge
this
gap and respond to the population’s needs for
healthcare. Portugal participates in the HEROES
joint action (
182
) under EU4Health, through which
EU countries share knowledge and experience on
health workforce planning.
The
potential of Portugal’s
health system to
drive innovation and foster industrial
development in the EU medical sector is not
being fully exploited.
Portugal is among the EU
countries reporting considerable public spending
on health research and development. However,
this is not fully reflected in the number of
European patents granted: 24 in 2023 in the
combined
areas
of
pharmaceuticals,
biotechnologies and medical technologies (
183
),
lower than the EU-level median of 29. Clinical trial
activity in Portugal is also limited (
184
).
Portugal aims to scale up the digitalisation
of its health system, with support from EU
programmes.
The shares of people accessing
their personal health records online or using online
health services (excluding phone) instead of in-
person consultations both increased between
2020 and 2024, but there is room for further
deployment. Investments to boost the digital
transformation of the health sector in Portugal are
planned under the RRP and the cohesion policy in
2021-2027. Measures focus on: (i) digitalising
clinical records; (ii) improving the health data
network; (iii) ensuring interoperability between
different information systems; (iv) improving the
portability of data between primary healthcare,
hospital and integrated continued care facilities;
(v) facilitating the use of data in decision support
systems; (vi) expanding the availability of
telemedicine; and (vii) providing training on digital
skills. The principal aim of these investments is to
improve access to and the quality of healthcare
services. In addition, Portugal participates in joint
actions and benefits from direct grants under
EU4Health, which aim to improve the semantic
(
182
)
JA HEROES | Health workforce planning project.
(
183
) European Patent Office,
Data to download | epo.org.
(
184
) EMA (2024),
Monitoring the European clinical trials
environment,
p. 9.
interoperability of health data and facilitate the
implementation of the European Health Data
Space.
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HORIZONTAL
ANNEX 15: SUSTAINABLE DEVELOPMENT GOALS
This Annex assesses Portugal’s progress on
the Sustainable Development Goals (SDGs)
along the dimensions of competitiveness,
sustainability,
social
fairness
and
macroeconomic stability.
The 17 SDGs and their
related indicators provide a policy framework
under the UN’s 2030 Agenda for Sustainable
Development. The aim is to end all forms of
poverty, fight inequalities and tackle climate
change and the environmental crisis, while
ensuring that no one is left behind. The EU and its
Member States are committed to this historic
global framework agreement and to playing an
active role in maximising progress on the SDGs.
The graph below is based on the EU SDG indicator
set developed to monitor progress on the SDGs in
the EU.
Portugal is improving on SDGs related to
competitiveness
(SDGs 4, 8, 9) but still needs
to catch up with the EU average on both
decent work and economic growth (SDG 8)
and innovation and industry (SDG 9).
Basic
Graph A15.1:
Progress towards the SDGs in Portugal
digital skills among the adult population are
progressing (56% in 2023) and stand above the
EU average (55.6%). The Portuguese labour
market is performing relatively well compared to
the EU average, with a high employment rate
(78.5%, vs an EU average of 75.8%, in terms of
population aged 20 to 64 in 2024). A decline in
long-term unemployment, which fell to 2.4% in
2024 (in terms of active population; EU: 1.9%) was
also observed. Despite slow improvement, R&D
and innovation remains a key concern. Only 1.69%
of GDP was allocated to R&D in 2023 (EU: 2.24%)
while the number of patent applications submitted
to the European Patent Office per million
inhabitants remains very low: 39 in 2024 (EU:
156).
Portugal’s ambitious recovery and resilience
plan has the potential to transform its business
sector and R&I system. These measures aim to
improve the business-academia link, increase R&D,
and reform vocational education and training.
Portugal is improving overall on the SDGs
related to
sustainability (SDGs
2, 7, 9, 12, 13,
For detailed datasets on the various SDGs, see the annual Eurostat report ‘Sustainable
development in the European Union’;
for
details on extensive country-specific data on the short-term progress of Member States:
Key findings
–
Sustainable development
indicators - Eurostat (europa.eu).
A high status does not mean that a country is close to reaching a specific SDG, but signals that it
is doing better than the EU on average. The progress score is an absolute measure based on the indicator trends over the past
five years. The calculation does not take into account any target values, as most EU policy targets are only valid for the aggregate
EU level. Depending on data availability for each goal, not all 17 SDGs are shown for each country.
Source:
Eurostat, latest update of 28 April 2025. Data refer mainly to the period 2018-2023 or 2019-2024. Data on SDGs may
vary across the report and its annexes due to different cut-off dates.
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14) but is moving away from the SDG on
sustainable cities (SDG 11). It performs well
on SDG 7 (Affordable and clean energy) but
needs to catch up with the EU average on
sustainable industry and infrastructure
(SDG 9),
responsible
consumption
and
production (SDG 12), life below water (SDG
14), and life on land (SDG 15).
In 2022, 19.3%
of the utilised agricultural area in Portugal was
under organic farming (EU: 10.5%). The share of
renewable energy in gross final energy
consumption increased from 30.2% in 2018 to
35.2% in 2023, standing well above the EU
average (24.6% in 2023). The environmental
impact of agriculture is lower than the EU average,
but the level of nitrate in ground water is
increasing (from 18.5 mg NO
3
per litre in 2017 to
23.4 mg in 2022), higher than the EU average
(20.7 in 2022). On sustainable agricultural
production, Portugal performs very well in organic
farming (19.3% of the utilised agricultural area vs
10.5% in the EU in 2022), while the use of
chemical pesticides remains higher than the EU
average (60 vs 54 out of 100, in 2022). However,
it has diminished substantially since 2017 (89).
Portugal protects less than 5% of its marine areas
(EU: 12.3% in 2022). Circular economy indicators
are also well below EU averages, with a low rate
of recycling of municipal waste (30.6% in 2023, vs
48.2% for the EU in 2023) and a circular material
use rate that, even if slightly improved since 2018,
is only around one fifth of the EU average. The
share of public transport (buses and trains) in total
passenger transport and the use of rail and inland
waterways in freight transport are well below the
EU average. Various measures in Portugal’s RRP
aim to further contribute to emission savings.
These include investments in energy storage and
renewables, renewable hydrogen, energy efficiency
renovations, the extension of metro lines,
increased use of bioproducts in industry, and the
decarbonisation of industry.
Portugal is improving on SDGs assessing the
social fairness
of society and the economy
(SDGs 1, 4, 5, 7, 8) but is moving away from
the SDGs on inequalities (SDG 10) and, to a
lesser extent, on health and well-being (SDG
3). However, the status of inequalities
remains better than EU average.
In 2023, the
poverty rate (persons at risk of poverty or social
exclusion) was slightly below the EU average
(20.1%, vs 21.3% for the EU), while the share of
population at risk of monetary poverty after social
transfers was higher (17%, against 16.2% for the
EU). Portugal performs well for people living in
households with very low work intensity (6.3% of
the population aged less than 65 in 2023, vs 8%
at EU level) and on the housing cost overburden
rate (4.9% of population in 2023 vs 8.8% at EU
level). On the in-work-at-risk-of-poverty rate,
Portugal is above the EU average (10%, vs 8.3% in
2023). Even if the urban-rural gap has slightly
decreased since 2018, it remains far above the EU
average (6.1% vs 0.2% in 2023). The same trend
applies to energy poverty, as in 2023 20.8% of the
population reported that they were unable to keep
their homes sufficiently warm (EU: 10.6%). The
citizenship gap (difference between EU and non-
EU nationals) narrowed for early leavers from
education and for training but increased for
employment. Despite some improvements, such as
the smoking prevalence rate which dropped from
26 (in 2017) to 21 (2023) vs 24 at EU level, in
terms of % of population aged 15 and over, most
of the health and well-being indicators are still far
from the EU average. These include those on road
traffic deaths (6.1 vs 4.5 per 100 000 persons, in
2023), the obesity rate (15.8 vs 14.8 as % of
population aged 18 or over, in 2022) and healthy
life expectancy (59.1 years in 2022 vs 63.6 years
for the EU in 2021). Education and training
indicators are better than the EU average, with the
tertiary education attainment rate (population
aged 25-34) increasing from 38% in 2019 to
43.2% in 2024 (vs an increase of the EU average
from 39.6% to 44.2%). The same is true for the
participation of adults in learning, which stood at
16.1% in 2024 (EU: 13.3%). Portugal also
performs better than the EU average on gender
equality, with a low gender employment gap, and
a gender pay gap below the EU average (8.6 in
2023 vs 12 at EU level, as % of average gross
hourly earnings of men). The share of women in
senior management and in government has
progressed in the last few years, surpassing the
EU average. The RRP includes measures aimed
towards a more equal and healthy society. These
include reforms of primary care services and
simplification of the social benefit system, and
investments in community-based social services,
social housing, and student accommodation, as
well as household support for energy efficiency
renovations.
While Portugal is improving on some SDG
indicators related to
macroeconomic stability
(SDGs 8, 17), it is moving away from the
target for peace, justice, and strong
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institutions (SDG 16).
It is closing its gap with
the EU average in terms of the investment share
of GDP, with 19.8% in 2024 (EU: 21.7%). However,
central government expenditure on the law courts,
a key indicator of the quality of the justice system,
remains below the EU average (in 2023, EUR 73
per capita in Portugal vs EUR 121.7 per capita at
EU level). The share of the population reporting
crime, violence or vandalism increased from 6.5%
in 2018 to 6.9% in 2023 (EU: 10%), and the death
rate from homicide and the victims of human
trafficking are increasing (0.92 in 2022 vs 0.69 in
2017, and 3.9 in 2023 vs 1.2 in 2018,
respectively, per 100 000 persons). The RRP
includes measures to improve the efficiency of
administrative and tax courts and to improve the
management of public finances, for example, by
introducing new IT solutions.
As the SDGs form an overarching framework, any
links to relevant SDGs are either explained or
depicted with icons in the other annexes.
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ANNEX 16: CSR PROGRESS AND EU FUNDS IMPLEMENTATION
Portugal faces structural challenges in a
wide range of policy areas, as identified in
the country-specific recommendations (CSRs)
addressed to the country as part of the
European Semester.
They refer, among other
things, to ensuring the fiscal sustainability of the
pension system, reducing the administrative and
regulatory burden on businesses, improving the
effectiveness of tax system and the efficiency of
administrative and tax courts, reducing the overall
reliance on fossil fuels and investing in sustainable
transport, accelerating the deployment of
renewables and investment in energy efficiency,
strengthening capacities for energy storage,
electricity transmission and the distribution grid,
and improving water and waste management.
The Commission has assessed the 2019-2024
CSRs considering the policy action taken by
Portugal to date and the commitments in its
recovery and resilience plan (RRP).
At this
stage, Portugal has made
at least ‘some progress’
on 69% of the CSRs (
185
),
and ‘limited progress’ on
29% (Table A16.2).
EU funding instruments provide considerable
resources to Portugal by supporting
investments and structural reforms to
increase competitiveness, environmental
sustainability and social fairness, while
helping to address challenges identified in
the CSRs.
In addition to the EUR 22.2 billion
funding from the Recovery and Resilience Facility
(RRF) in 2021-2026, EU cohesion policy funds (
186
)
are providing EUR 22.6 billion to Portugal
(amounting to EUR 31 billion with national co-
financing) for 2021-2027 (
187
) to boost regional
competitiveness and growth. Support from these
instruments combined represents around 16.7% of
2024 GDP (
188
). The contribution of these
(
185
) 7% of the 2019-2024 CSRs have been fully implemented,
5% substantially implemented, and some progress has been
made on 57%.
(
186
) In 2021-2027, cohesion policy funds include the European
Regional Development Fund, the Cohesion Fund, the
European Social Fund Plus and the Just Transition Fund. The
information on cohesion policy included in this annex is
based on adopted programmes with the cut-off date of 5
May 2025.
(
187
) European territorial cooperation (ETC) programmes are
excluded from the figure.
(
188
) RRF funding includes both grants and loans, where
applicable. GDP figures are based on Eurostat data for 2024.
instruments to different policy objectives is
outlined in Graphs A16.1 and A16.2. This
substantial support comes on top of financing
provided to Portugal under the 2014-2020
multiannual financial framework, which financed
projects until 2023 and has had significant
benefits for the economy and Portuguese society.
Project selection under the 2021-2027 cohesion
policy programmes has accelerated, while
significant volumes of investment are yet to be
mobilised.
The
Portuguese
RRP
contains
128
investments and 43 reforms to stimulate
sustainable growth, foster the green and
digital transitions, improve skills and
qualifications and increase territorial and
social cohesion.
A year before the end of the RRF
timespan, implementation is well on its way with
51% of the funds disbursed. Portugal has fulfilled
33% of the milestones and targets in its RRP (
189
).
Increased efforts are needed to ensure completion
of all RRP measures by 31 August 2026. Speeding
up implementation requires addressing challenges
in terms of administrative capacity, public
procurement rules and lengthy permitting
procedures affecting, in particular, large
investment projects.
Portugal also receives funding from several
other EU instruments,
including those listed in
Table A16.1. Most notably, the common
agricultural policy (CAP) provides Portugal with an
EU contribution of EUR 6.1 billion (
190
) under the
CAP strategic plan for 2023-2027. Operations
amounting to EUR 4.2 billion (
191
) have been signed
under the InvestEU instrument backed by the EU
guarantee, improving access to financing for
riskier operations in Portugal.
(
189
) As of mid-May 2025, Portugal has submitted 6 payment
requests, the last one being under assessment.
(
190
)
An overview of Portugal’s formally approved strategy to
implement the EU’s common agricultural policy nationally
can be found at:
https://agriculture.ec.europa.eu/cap-my-
country/cap-strategic-plans/portugal_en
(
191
) Data reflect the situation on 31.12.2024.
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Graph A16.1:
Distribution of RRF funding in
Portugal by policy field
Green transition
Digital transformation
Smart, sustainable and
inclusive growth
Social & territorial cohesion
Health & resilience
Next generation
(1) Each RRP measure helps achieve the aims of two of the
six policy pillars of the RRF. The primary contribution is shown
in the outer circle, while the secondary contribution is shown
in the inner circle. Each circle represents 100% of the RRF
funds. Therefore, the total contribution to all pillars displayed
on this chart amounts to 200% of the RRF funds allocated.
Source:
European Commission
reconstruction of the Port of Lajes das Flores in
the Azores following destructive storms. The JTF is
being used to diversify the local economy in three
regions affected by the closure of coal-fired power
plants and refineries. This includes supporting
business investment, research and innovation in
SMEs,
self-employment,
innovative
entrepreneurship and reskilling. The European
Social Fund Plus (ESF+) supports vocational
education and training in the mainland, with
EUR 1.5 billion enabling the participation of
366 000 people, of which 110 000 had been
supported already by December 2024. The aim is
that 84.5% of participants in such courses either
find employment or continue their studies. In
addition, by April 2025, ESF+ had already
supported 109 000 participants in adult education
centres known as ‘Qualifica Centres’. The target is
to reach 700 000 adult participants, with 90% of
them achieving certified qualifications.
Other
funds
are
contributing
to
competitiveness in Portugal, for instance
through open calls.
The Connecting Europe
Facility has financed strategic investments in the
rail and road transport, including in the
development of alternative fuel infrastructure, as
well as in maritime, inland waterways and air
infrastructures. It also supports investments to
increase the capacity, resilience and security of
backbone digital infrastructure by deploying
submarine cables improving the connection to the
Azores and Madeira and advanced the deployment
of 5G in smart communities, enabling remote
healthcare and smart emergency services. Horizon
Europe has supported research and innovation,
from scientific breakthroughs to scaling up
innovations, with Climate, Energy and Mobility; and
Digital, Industry and Space as top priorities in
Portugal. The Technical Support Instrument (TSI)
has assisted Portugal in the implementation of the
new institutional framework for the integration of
migrants; a training framework in the area of
wildfires; and a more integrated approach to
health care at local level. In 2024, the TSI also
assisted Portugal to implement RRP measures for
strengthening policy costing methodologies and
medium-term budgeting practices.
Portugal’s RRP also contains ambitious
measures
to
improve
the
business
environment and competitiveness.
Measures
covered by payment requests submitted over the
past year include major reforms and investments
to develop the capital market, improve the
Graph A16.2:
Distribution of cohesion policy
funding across policy objectives in Portugal
Smarter Europe
Greener Europe
Connected Europe
Social Europe
Europe closer to citizens
JTF specific objective
Source:
European Commission
Cohesion policy funds aim to increase the
productivity
and
competitiveness
of
Portugal’s firms and improve the business
environment.
For example, the European
Regional Development Fund (ERDF) and the Just
Transition Fund (JTF) will provide support to
17 000 enterprises, with the ERDF providing
access to very high-capacity broadband for nearly
20 000 firms and enabling over 300 public
institutions to develop a wide range of digital
services, products and processes. The calls
launched have seen strong demand in areas like
research & development, innovation productive
investments, internationalisation of small and
medium-sized enterprises (SMEs), and business
adaptation to change. Strategic infrastructure
projects have been launched, for example the
Mondego Mobility System (in Coimbra) and the
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effectiveness of public services and support the
digitalisation of businesses and the justice and tax
systems. Capital markets and securities codes
were revised to promote the capitalisation of
companies and incentivise access to equity,
business growth, debt financing and investor
participation in capital markets. Legislation was
adopted to implement functional changes in the
public administration and the reorganisation of
public services. A new permanent technical tax
policy unit
known as ‘U-TAX’
will help simplify and
monitor tax benefits. Investments were made to
digitalise rural property taxation processes and in
platforms to digitalise the justice system, in digital
invoices and digital certification, and in digital
innovation hubs to support the digitalisation of
companies and public administration. A total of
200 Industry 4.0 projects were selected for
support to foster the digital transformation of
businesses.
EU funds are playing a significant role in
promoting environmental sustainability and
green transition in Portugal during the
current seven-year EU budget (multiannual
financial framework).
The ERDF and JTF will
aim to create over 9 100 MW of additional
production capacity for renewable energy.
Meanwhile, the ERDF and the Cohesion Fund are
investing in clean mobility, through the
improvement of railway infrastructure, the
expansion of metro lines, clean buses, and clean
ferries and ports, including the greening of key
transport infrastructure in the outermost regions
of Azores and Madeira, which is benefiting almost
half a million people. Portugal is also investing
substantial cohesion policy funding in improving
preparedness for and management of disasters,
especially climate-related risks. Significant ERDF
resources are being devoted to building resilience
in the face of water scarcity and improving the
efficiency of water and wastewater supply
systems, including in the more affected regions
such as Alentejo, Algarve and Madeira. Water
management, in terms of quantity and quality,
plays also an important role in the CAP strategic
plan. To improve water-use efficiency, support is
going towards renovating old infrastructure and
equipment used in collective and on-farm
irrigation systems, covering up to 4.5% of the
agricultural area under support. More than EUR 32
million of funding under the CAP will be invested in
restoring forestry potential following natural
hazards, including forest fires. In the Portuguese
CAP strategic programme, more than EUR 580
million are reserved for farmers committing to
more ambitious actions under eco-schemes such
as carbon sequestration, organic fertilisation,
organic farming and integrated production. 19% of
the agricultural area will be farmed organically by
2030. Around EUR 1.7 billion have been allocated
for environmental and climate objectives under
rural development to support climate change
adaptation, soil practices, improving grassland
quality and fire protection.
Portugal’s RRP, including the REPowerEU
chapter, has a comprehensive set of reforms
and investments for the green transition.
Measures covered by the payment requests
submitted over the last year include: (i) the entry
into operation of a deposit and refund system for
non-reusable plastic bottles, ferrous metals and
aluminium; (ii) the creation of energy efficiency
one-stop shops for the public; (iii) scaling up the
production capacity of renewable hydrogen and
renewable gases; and (iv) the launch of a call for
projects to produce renewable hydrogen and other
renewable gases for a new installed energy
capacity of at least 77 MW.
Promoting fairness, social cohesion and
access to basic services are key priorities of
EU funding in Portugal.
For example, the ERDF
will be used for new and modernised education
facilities with classroom capacity for over 52 000
students. Investments planned for healthcare
facilities are expected to benefit over 4.5 million
people a year. ESF+ is also investing in vocational
education and training and paid traineeships to
integrate young people into the labour market in
the outermost regions of Azores and Madeira.
Similarly, the ESF+ is helping low-income students
access higher education across the country where
the overall aim is to reach 500 000 participants,
with 183000 already supported by December
2024. The ESF+ has also successfully supported
1.2 million pupils with learning difficulties,
enabling them to continue their educational path.
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Portugal’s
RRP contains several reforms and
investments related to fairness and social
policies.
Measures covered by payment requests
submitted over the last year include: (i) delivery of
1 500 dwellings to eligible households with the
greatest needs; (ii) access for 1 000 health centres
to the risk stratification instrument, allowing them
to intervene proactively in populations with higher
clinical risk and social vulnerability; and (iii) the
creation of the National Energy Poverty
Observatory to help improve energy efficiency in
the residential sector for households experiencing
energy poverty.
Table A16.1:Selected
EU funds with adopted allocations - summary data (million EUR)
Instrument/policy
RRF grants (including the RepowerEU allocation)
RRF loans
Allocation 2021-2026
16 325,1
5 890,8
Disbursed since 2021 (1)
8 492.2
2 903.7
Disbursed since 2021 (3)
(covering total payments to the
Member State on commitments
originating from both 2014-
2020 and 2021-2027
programming periods)
11 905,1
6 136,5
1 569,3
4 129,9
69,4
265,1
Instrument/policy
Allocation 2014-2020 (2)
Allocation 2021-2027
Cohesion policy (total)
European Regional Development Fund (ERDF)
Cohesion Fund (CF)
European Social Fund (ESF, ESF+) and the Youth Employment
Initiative (YEI)
Just Transition Fund (JTF)
Fisheries
European Maritime, Fisheries and Aquaculture Fund (EMFAF)
and the European Maritime and Fisheries Fund (EMFF)
Migration and home affairs
Migration, border management and internal security - AMIF,
BMVI and ISF (4)
The common agricultural policy under the CAP strategic
plan (5)
Total under the CAP strategic plan
European Agricultural Guarantee Fund (EAGF)
European Fund for Agricultural Development (EAFRD)
23 547,5
12 707,9
2 781,1
8 058,5
22 602,4
11 496,7
3 105,3
7 776,5
223,8
392,5
392,6
149,0
Allocation 2023-2027
6 092,3
3 814,5
2 277,8
186,6
87,0
Disbursements under the
CAP Strategic Plan (6)
1 621,3
1 344,3
277,0
(1) The cut-off date for data on disbursements under the RRF is 31 May 2025.
(2) Cohesion policy 2014-2020 allocations include REACT-EU appropriations committed in 2021-2022.
(3) These amounts relate only to disbursements made from 2021 onwards and do not include payments made to the Member
State before 2021. Hence the figures do not comprise the totality of payments corresponding to the 2014-2020 allocation. The
cut-off date for data on disbursements under EMFAF and EMFF is 29 April 2025. The cut-off date for data on disbursements
under cohesion policy funds, AMIF, BMVI and ISF is 5 May 2025.
(4) AMIF - Asylum, Migration and Integration Fund; BMVI - Border Management and Visa Instrument; ISF - Internal Security Fund.
(5) Expenditure outside the CAP strategic plan is not included.
(6) The cut-off date for data on EARDF disbursements is 5 May 2025. The information on EAGF disbursements is based on the
Member State declarations until March 2025. Disbursements for the Direct Payments (EAGF) started in 2024.
Source:
European Commission
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Table A16.2:Summary
table on 2019-2024 CSRs
Portugal
2019 CSR 1
Achieve the medium-term budgetary objective in 2020, taking into
account the allowance linked to unusual events for which a
temporary deviation is granted. Use windfall gains to accelerate the
reduction of the general government debt ratio.
Improve the quality of public finances by prioritising growth-
enhancing spending while strengthening overall expenditure control,
cost efficiency and adequate budgeting, with a focus in particular on
a durable reduction of arrears in hospitals.
Improve the financial sustainability of state-owned enterprises, while
ensuring more timely, transparent and comprehensive monitoring.
2019 CSR 2
Adopt measures to address labour market segmentation.
Improve the skills level of the population, in particular their digital
literacy, including by making adult learning more relevant to the
needs of the labour market.
Increase the number of higher education graduates, particularly in
science and information technology.
Improve the effectiveness and adequacy of the social safety net.
2019 CSR 3
Focus investment-related economic policy on research and
innovation,
railway transport and port infrastructure,
low carbon and energy transition and extending energy
interconnections, taking into account regional disparities.
2019 CSR 4
Allow for a swifter recovery of the collateral tied to non-performing
loans by increasing the efficiency of insolvency and recovery
proceedings.
Reduce the administrative and regulatory burden on businesses,
mainly by reducing sector-specific barriers to licensing.
Develop a roadmap to reduce restrictions in highly regulated
professions.
Increase the efficiency of administrative and tax courts, in particular
by decreasing the length of proceedings.
2020 CSR 1
In line with the general escape clause, take all necessary measures
to effectively address the pandemic, sustain the economy and
support the ensuing recovery. When economic conditions allow,
pursue fiscal policies aimed at achieving prudent medium-term fiscal
positions and ensuring debt sustainability, while enhancing
investment.
Strengthen the resilience of the health system
and ensure equal access to quality health and long-term care.
2020 CSR 2
Support employment and prioritise measures to preserve jobs.
Guarantee sufficient and effective social protection and income
support.
Support the use of digital technologies to ensure equal access to
quality education and training
and to boost firms’ competitiveness
Assessment in May 2025
Some progress
No longer relevant
Relevant SDGs
SDG 8, 16
Some progress
SDG 3, 8, 16
Some progress
Some progress
Some progress
Some progress
Some progress
Some progress
Some progress
Some progress
Limited progress
Some progress
Some progress
Some progress
Limited progress
Substantial progress
Some progress
Some progress
SDG 9
SDG 8
SDG 4
SDG 4
SDG 1, 2, 10
SDG 9, 10, 11
SDG 10, 11
SDG 7, 9, 10, 11, 13
SDG 8
SDG 8, 9
SDG 9
SDG 8, 16
No longer relevant
SDG 8, 16
Some progress
Limited progress
Some progress
Some progress
Some progress
Some progress
Some progress
SDG 3
SDG 3, 8, 10
SDG 8
SDG 1, 2, 10
SDG 4, 8, 10
SDG 8, 9
(Continued on the next page)
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Table (continued)
2020 CSR 3
Some progress
Substantial progress
Some progress
Substantial progress
Some progress
Limited progress
Some progress
Some progress
Some progress
No longer relevant
No longer relevant
SDG 8, 9
SDG 8, 16
SDG 8, 9
SDG 7, 9, 13
SDG 11
SDG 9
SDG 8, 16
Implement the temporary measures aimed at securing access to
liquidity for firms, in particular small and medium-sized enterprises.
Front-load mature public investment projects and
promote private investment to foster the economic recovery.
Focus investment on the green and digital transition, in particular on
clean and efficient production and use of energy,
rail infrastructure
and innovation.
2020 CSR 4
Increase the efficiency of administrative and tax courts
2021 CSR 1
In 2022, use the Recovery and Resilience Facility to finance
additional investment in support of the recovery while pursuing a
prudent fiscal policy. Preserve nationally financed investment. Limit
the growth of nationally financed current expenditure.
When economic conditions allow, pursue a fiscal policy aimed at
achieving prudent medium-term fiscal positions and ensuring fiscal
sustainability in the medium term.
At the same time, enhance investment to boost growth potential.
Pay particular attention to the composition of public finances, both
on the revenue and expenditure sides of the budget, and to the
quality of budgetary measures, to ensure a sustainable and inclusive
recovery. Prioritise sustainable and growth-enhancing investment,
notably supporting the green and digital transition.
Give priority to fiscal-structural reforms that will help provide
financing for public policy priorities and contribute to the long-term
sustainability of public finances, including by strengthening the
coverage, adequacy, and sustainability of health and social
protection systems for all.
2022 CSR 1
In 2023, ensure prudent fiscal policy, in particular by limiting the
growth of nationally financed primary current expenditure below
medium-term potential output growth, taking into account continued
temporary and targeted support to households and firms most
vulnerable to energy price hikes and to people fleeing Ukraine.
Stand ready to adjust current spending to the evolving situation.
Expand public investment for the green and digital transitions, and
for energy security taking into account the REPowerEU initiative,
including by making use of the Recovery and Resilience Facility and
other Union funds.
For the period beyond 2023, pursue a fiscal policy aimed at
achieving prudent medium-term fiscal positions and ensuring
credible and gradual debt reduction and fiscal sustainability in the
medium term through gradual consolidation, investment and
reforms.
Improve the effectiveness of the tax and social protection systems,
in particular by simplifying both frameworks, strengthening the
efficiency of their respective administrations, and reducing the
associated administrative burden.
2022 CSR 2
Proceed with the implementation of its recovery and resilience plan,
in line with the milestones and targets included in the Council
Implementing Decision of 13 July 2021.
Swiftly finalise the negotiations with the Commission on the 2021-
2027 cohesion policy programming documents with a view to
starting their implementation.
2022 CSR 3
Enhance the conditions for a transition towards a circular economy,
in particular by increasing waste prevention, recycling and reuse to
divert waste away from landfills and incinerators.
SDG 8, 16
No longer relevant
SDG 8, 16
No longer relevant
SDG 8, 16
No longer relevant
SDG 8, 16
Limited progress
No longer relevant
SDG 8, 16
No longer relevant
SDG 8, 16
No longer relevant
SDG 8, 16
Limited progress
SDG 1, 2, 8, 10, 12,
16
RRP implementation is monitored through the
assessment of RRP payment requests and analysis of
the bi-annual reporting on the achievement of the
milestones and targets, to be reflected in the country
Progress on the cohesion policy programming
documents is monitored under the EU cohesion policy.
Limited progress
Limited progress
SDG 6, 12, 15
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Table (continued)
2022 CSR 4
Reduce overall reliance on fossil fuels,
including in the transport sector.
Accelerate the deployment of renewables by upgrading electricity
transmission and distribution grids, enabling investments in
electricity storage
and streamlining permitting procedures to allow for further
development of wind, particularly offshore, and solar electricity
production, as well as renewable hydrogen production.
Strengthen the incentives framework for energy efficiency
investments in buildings.
Increase energy interconnections.
2023 CSR 1
Wind down the emergency energy support measures in force, using
the related savings to reduce the government deficit, as soon as
possible in 2023 and 2024. Should renewed energy price increases
necessitate new or continued support measures, ensure that these
are targeted at protecting vulnerable households and firms, fiscally
affordable, and preserve incentives for energy savings.
Ensure prudent fiscal policy, in particular by limiting the nominal
increase in nationally financed net primary expenditure in 2024 to
not more than 1.8%1, unless a higher reference rate in net nationally
financed primary expenditure growth is estimated to be compatible
with Portugal reaching its MTO of -0.5% of GDP, inter alia if interest
expenditure is lower than currently projected by the Commission.
Preserve nationally financed public investment and ensure the
effective absorption of RRF grants and other EU funds, in particular
to foster the green and digital transitions.
For the period beyond 2024, continue to pursue a medium-term
fiscal strategy of gradual and sustainable consolidation, combined
with investments and reforms conducive to higher sustainable
growth, to achieve a prudent medium-term fiscal position.
Improve the effectiveness of the tax and social protection systems,
in particular by prioritising the simplification of both frameworks,
strengthening the efficiency of their respective administrations, and
reducing the associated administrative burden.
2023 CSR 2
Accelerate the implementation of its recovery and resilience plan,
also by ensuring an adequate administrative capacity and, following
the recent submission of the addendum, including the REPowerEU
chapter and the additional loan request, rapidly start the
implementation of the related measures. Proceed with the speedy
implementation of cohesion policy programmes, in close
complementarity and synergy with the recovery and resilience plan.
2023 CSR 3
Improve the conditions for the transition towards a circular economy,
in particular by increasing waste prevention, recycling and reuse, to
divert waste away from landfills and incinerators.
2023 CSR 4
Reduce overall reliance on fossil fuels.
Further accelerate the deployment of renewables by further
simplifying and digitalising permitting to allow for additional wind
particularly offshore and solar electricity production, as well as
promoting self-consumption and renewable energy communities.
Increase electricity interconnection capacity
and upgrade the electricity transmission and distribution grids,
enabling investment in electricity storage
and digitalisation of the grid, including the faster roll-out of smart
meters.
Accelerate investment in energy efficiency by promoting financial
schemes to attract private investment and supporting households in
need.
Step up policy efforts aimed at the provision and acquisition of skills
and competences needed for the green transition.
Some progress
Some progress
Some progress
Limited progress
SDG 7, 9, 13
SDG 11
SDG 7, 9, 13
Some progress
Some progress
Some progress
Substantial progress
SDG 7, 8, 9, 13
SDG 7
SDG 7, 9, 13
Some progress
SDG 8, 16
Full implementation
SDG 8, 16
Full implementation
SDG 8, 16
Full implementation
SDG 8, 16
Limited progress
SDG 1, 2, 8, 10, 12,
16
RRP implementation is monitored through the
assessment of RRP payment requests and analysis of
the bi-annual reporting on the achievement of the
milestones and targets, to be reflected in the country
reports.
Progress with the cohesion policy is monitored
in the context of the Cohesion Policy of the European
Union
Limited progress
Limited progress
Some progress
Some progress
SDG 6, 12, 15
SDG 7, 9, 13
Some progress
SDG 7, 9, 13
Some progress
Limited progress
Some progress
Some progress
Some progress
SDG 7, 9, 13
SDG 7, 9, 13
SDG 7, 9, 13
SDG 1, 2, 7, 10
SDG 4
(Continued on the next page)
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Table (continued)
2024 CSR 1
Submit the medium-term fiscal-structural plan in a timely manner.
In line with the requirements of the reformed Stability and Growth
Pact, limit the growth in net expenditure in 2025 to a rate consistent
with, inter alia, putting the general government debt on a plausibly
downward trajectory over the medium term and respecting the 3% of
GDP deficit Treaty reference value.
Wind down the emergency energy support measures before
2024/2025 heating season.
Improve the effectiveness of the tax system, in particular
strengthening the efficiency of its administration and reducing
associated administrative burden.
Take action to ensure the medium-term fiscal sustainability of
pension system
2024 CSR 2
the
by
the
the
Limited progress
Full implementation
SDG 8, 16
Limited progress
SDG 8, 16
Some progress
Limited progress
No progress
SDG 8, 16
SDG 8, 16
SDG 8
Strengthen administrative capacity to manage EU funds, accelerate
investments and maintain momentum in the implementation of
reforms. Address relevant challenges to allow for continued, swift
and effective implementation of the recovery and resilience plan,
including the REPowerEU chapter, ensuring completion of reforms
and investments by August 2026. Accelerate the implementation of
cohesion policy programmes. In the context of their mid-term review,
continue focusing on the agreed priorities, taking action to better
address the needs in the area of prevention of and preparedness for
climate change-related risks, while considering the opportunities
provided by the Strategic Technologies for Europe Platform initiative
to improve competitiveness.
2024 CSR 3
Improve water management to strengthen adaptation to the effects
of climate change and ensure long-term economic and
environmental resilience, by putting in place a strategy for integrated
and sustainable water management, developing its governance
structure,
promoting investments in wastewater collection and treatment, leaks
reduction and water monitoring,
while developing nature-based solutions and water body
rehabilitation, and improving water efficiency and water reuse.
2024 CSR 4
Strengthen the capacity of the electricity transmission and
distribution grid, in particular by improving connection procedures
and increasing their transparency to incentivise investments in the
national network and increase energy storage capacities.
RRP implementation is monitored through the
assessment of RRP payment requests and analysis of
the bi-annual reporting on the achievement of the
milestones and targets. Progress with the cohesion
policy programming is monitored in the context of the
Cohesion Policy of the European Union.
Limited progress
SDG 1, 6, 7, 8, 11, 12,
13, 15
SDG 1, 6, 7, 8, 11, 12,
13, 15
SDG 1, 6, 7, 8, 11, 12,
13, 15
Limited progress
Limited progress
Limited progress
Limited progress
Limited progress
SDG 7, 9, 13
Source:
European Commission
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ANNEX 17: COMPETITIVE REGIONS
Portuguese regions have recovered quickly
since 2020, but disparities continue to be
pronounced, with uneven development.
Supporting business growth is important to
improve regional competitiveness, alongside better
policy and administrative coordination and
improvements in the local business environment.
Demographic challenges persist, and achieving a
carbon-neutral economy requires transformation
across all economic sectors, with some regions
facing water management challenges.
Portugal continues to catch up with the rest
of the EU in terms of GDP per capita, but
regional disparities remain significant.
In
2023, the capital region was the only region in
Portugal with a GDP per capita above the EU
average, while - apart from Algarve, Madeira and
Alentejo
–
it was below 75% in all other regions. In
2014-2023, Madeira, Algarve, Norte, Azores
experienced the strongest average annual GDP per
head growth (all above 2.2% compared to the EU
average of 1.6%).
enterprises. Unleashing the potential of companies
to scale up would help to stimulate innovation and
improve
regional
competitiveness.
The
entrepreneurial activity that is vital to generate
positive economic outcomes has improved over
the same period, but significant disparities persist
between and within regions (
193
).
Demographic trends, skills mismatches and
researchers' limited transition industry,
particularly in regions with a strong
industrial and business R&D base, are
undermining competitiveness.
According to the
2023 ageing index (
194
), Centro and Alentejo have
the highest rate of older people for every 100
young people. While in 2014-2023, the population
aged 20-64 in Portugal as a whole decreased
similarly to EU average, the working age
population has diminished at a higher rate in
Centro, Alentejo, Norte and Madeira (Table A17.1),
leading to a shrinking workforce.
There are also skills mismatches, indicating
that qualified workers are not optimally
engaged in the labour market.
On the other
hand, highly qualified individuals with strong R&D
skills often find opportunities in their home
country less attractive. As a result, many opt to
work abroad or explore alternative career paths
(see Annex 3). The low employment of researchers
(full-time equivalent) in enterprises is evident,
even in the capital region and Norte, which have
the highest employment of researchers in
enterprises (6.2 per 1 000 active population) (
195
).
This persists despite an increase in the overall
number of researchers since 2014.
Innovation investments continue to be
concentrated in a few regions, with modest
improvements in high-technology exports.
In
2022, total expenditure on innovation activities
reached EUR 3.4 billion, an increase of 30%
compared to 2018, indicating a promising path.
However, innovation expenditure is highly
concentrated in enterprises in Greater Lisbon and
(
193
) GEP - Gabinete de Estratégia e Planeamento / MTSSS -
Ministério do Trabalho, Solidariedade e Segurança Social
(2024) Quadros de Pessoal 2012
–
2022.
(
194
) Statistics Portugal
–
2024.
(
195
) DGEEC - Direção-Geral de Estatísticas da Educação e Ciência
(2024) Inquérito ao Potencial Científico e Tecnológico
Nacional. Investigação e Desenvolvimento (I&D): Principais
Indicadores por Região 2022.
Competitiveness
Despite the increase in the GDP per capita,
increasing productivity remains a challenge
for Portuguese regions.
Considering labour
productivity by industry (GDP per hour worked), the
‘Manufacturing’
and
‘Industry’ sectors registered
annual growth below the EU average in 2013-
2023 (+1.1% and +0.7% respectively) (
192
). Despite
increases in labour productivity in all Portuguese
regions between 2013 and 2022, it stood at 68%
of the EU average in 2022. The capital region had
the highest productivity, while Norte had the
lowest levels of productivity in Portugal (Table
A17.1).
The business structure remains largely
unchanged, with medium-sized and large
enterprises concentrated in a few regions
and notable differences in entrepreneurial
activity.
In 2022, micro and small enterprises
represented approximately 97% of business
entities, without significant changes over the past
decade. Norte and the capital region account for
the highest number of medium-sized and large
(
192
) Eurostat (nama_10_lp_a21).
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Table A17.1:Selection
of indicators at regional level (NUTS 2024) in Portugal
Productivity -
GDP per hour
worked (PPS)
Real
productivity
growth
(per hour
worked)
Working age
population (20-
64) growth
Employment
rate
20-64
At-risk-of-
poverty or
social exclusion
GDP per head
(PPS)
Real GDP per
head growth
Population
growth
Index
EU-27 = 100
Average annual
% change
Index
EU-27 = 100
Average annual
% change
Average annual
change
per 1000
residents
2014-2023
1,7
1,9
0,9
7,3
-0,7
5,2
4,6
-4,5
3,2
-1,8
-2,0
Annual %
change
% of
population
aged 20-64
% of total
population
NUTS2024
European Union (27 MS)
Portugal
Norte
Algarve
Centro (PT)
Grande Lisboa
Península de Setúbal
Alentejo
Oeste e Vale do Tejo
Região Autónoma dos Açores
Região Autónoma da Madeira
2023
100
81
69
87
69
126
54
76
62
71
87
2014-2023
1,6
1,8
2,3
2,4
1,7
1,5
1,6
2,1
1,2
2,2
2,8
2022
100
68
60
72
63
77
66
64
58
63
71
2013-2022
0,9
0,9
1,4
0,9
1,0
-0,8
0,4
-0,2
1,1
0,8
1,8
2014-2023
-0,3
-0,3
-0,4
0,2
-0,4
0,3
0,2
-0,7
-0,3
-0,3
-0,6
2024
75,8
78,5
77,4
79,8
78,5
81,1
78,8
79,7
76,7
74,8
76,3
2024
21,0
19,7
21,0
18,7
18,9
16,5
21,8
18,7
19,1
28,4
22,9
Source:
Eurostat and ARDECO (JRC)
Norte, which accounted respectively for EUR 1.4
billion and EUR 1.2 billion, or 41% and 34% of
total innovation expenditure (
196
). While export
activities increased from EUR 42.8 billion to
EUR 79.3 billion between 2011 and 2024, the
relative performance of high-technology exports in
Portugal increased only from 3% to 5% in the
same period. Norte is still the main exporting
region, and its export activities grew by EUR 10.7
billion, the highest absolute value among the
Portuguese regions. The other two regions which
recorded the highest increases in exports were the
capital region and Centro. This trend was observed
in high-technology exports, which reached5.6% of
total exports in Norte, 4.8% in the capital region,
and 3.9% in Centro (
197
).
Fostering science-industry and business-to-
business cooperation would help to boost
innovation and the creation of marketable
products.
This is particularly relevant in Norte,
which has a substantial concentration of industry
and enterprises but below average levels of
cooperation. So far there has been a small
increase in new-to-market innovation sales. In
2022, Greater Lisbon accounted for the highest
proportion of new-to-market innovation sales
(5.6%), while the figures were much lower in most
other regions. The proportion of enterprises
(
196
) Community Innovation Survey - 2022.
(
197
) Statistics Portugal
–
2025.
cooperating with other enterprises or organisations
in R&D activities was highest in Centro (8%), while
Greater Lisbon had the highest percentage (6.2%)
of cooperation in other innovation activities. In
Norte, which has the highest concentration of
enterprises in Portugal, cooperation accounted for
4.9% and 4%, respectively, falling behind the
national average (
198
).
Portugal has a diversified economic structure
(
199
), with different regional specialisation
patterns, pointing towards comparative
advantages and emerging opportunities to
generate new sources of growth and
employment.
Norte is the most industrialised
region of Portugal, with a strong presence of the
textile sector and manufacturing of components
and parts for the automotive sector. In the
pharmaceutical and biotechnology sector, activities
are driven by BIAL (
200
). The future Innovation Hub
which is being developed in the Metropolitan Area
(
198
) Community Innovation Survey - 2022.
(
199
) The Portuguese economy is based on traditional industries,
with agri-food, textiles, footwear and the tourism sector
playing an important role. The key manufacturing industries
include the automotive sector, aeronautics, automation,
pharmaceuticals and renewable energies. For detailed
regional
industrial
economic
indicators
see:
https://web.jrc.ec.europa.eu/dashboard/TEDV/index.html.
(
200
) BIAL is ranked 53rd in the EU pharma and biotech companies
with the highest R&D investments. EU Industrial R&D
Investment Scoreboard
–
2024.
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of Porto is an opportunity to diversify economic
activities in new areas (
201
). The aeronautics
industry - not yet as developed as the automotive
sector - has a growing cluster of companies.
Centro is specialised in manufacturing of ceramics
and glass, and moulding, with activities linked to
the pharmaceutical and biotechnology sectors. The
capital region has the greatest concentration of
services, with a strong presence of manufacturing
industries, such as the pharmaceutical sector, and
in Península de Setúbal, the automotive industry.
In Alentejo, in addition to traditional sectors,
aeronautics is a more recently developed sector in
the region, with the renewable energy cluster
providing
an
opportunity
for
economic
diversification. Considering geographic location
and natural resources, there is high but still
untapped potential to develop the blue economy in
coastal areas of mainland Portugal, as well as in
the outermost regions of Azores and Madeira, for
instance on renewable energy production.
Economic diversification is key to building more
resilient regional economies in Azores and Madeira
which rely heavily on tourism.
Improving the quality of governance would
be beneficial for improving the Portuguese
economy's competitiveness both at national
and regional level.
According to the 2024
European Quality of Government Index (
202
), the
regions with below scores below EU average are
Algarve, Norte and Alentejo. It is important to
continue strengthening the capacity of the
Commissions for Coordination and Regional
Development (CCDRs), considering the new powers
granted to them during the reform which entered
into force in January 2024. In addition, closer
cooperation between the CCDRs and the
Portuguese Trade and Investment Agency would
be beneficial for attracting new investors.
Streamlining internal processes remains important
to further improve collaboration with other
national agencies, for instance, Portugal’s Agency
for Competitiveness and Innovation (
203
).
There is also scope to improve the business
environment by streamlining processes at
(
201
) Sustainable mobility, clean energy, advanced manufacturing
and marine economy.
(
202
)
European Quality of Government Index 2024 | University of
Gothenburg
(
203
) OECD (2024) Rethinking Regional Attractiveness in the Alentejo
Region of Portugal.
local level.
Variations across Portuguese cities in
the speed at which building and environmental
permits can be obtained and property is
transferred suggest there is scope for
improvement (
204
). For instance, in Funchal it takes
about nine months to obtain a building permit,
while in Coimbra and Lisbon it can take up to a
year and a half. Obtaining environmental permits
in mainland Portugal is supported by a platform
(
205
) which enables comprehensive online services,
including submissions, payments and notifications.
In turn, the outermost regions of Azores and
Madeira do not have similar electronic platforms,
relying instead on in-person or email submissions.
Property transfer can take 44 days in Lisbon, but
83 days in Ponta Delgada.
Social fairness
Portuguese regions are affected by
demographic changes.
The four regions where
the population grew in 2014-2023 were the
capital region, Península de Setúbal, Oeste e Vale
do Tejo and Algarve, mainly due to strong net in-
migration 2022 - 2023. Alentejo had the largest
decline in population, with the Azores and Madeira
showing also significant decreases (Table A17.1).
Most of the decline in the Azores is related to net
outmigration in between 2013 and 2019. Other
regions show positive net in-migration in this
period, which is not sufficient to compensate for
the negative natural population change. It is a
challenge to ensure access to essential services,
particularly in areas facing depopulation.
Helping young people find jobs is necessary
to sustain the working age population and
economic growth in many Portuguese
regions.
Between 2013 and 2022, 845 000
people emigrated from Portugal (
206
). Over the
past decade, thousands of young and educated
Portuguese people left the country in search of
better opportunities. In 2024, youth unemployment
was still above the EU average of 15% in all
(
204
) The World Bank (2024) Subnational Business Ready in the
European Union 2024: Portugal.
(
205
) Integrated Environmental Permitting System (SILiAmb),
managed by the Portuguese Environment Agency (APA).
(
206
) Observatório da Emigração (2024) Emigração Portuguesa
2023: Relatório Estatístico.
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regions and 41.9% of those aged 30-34 held
tertiary degree, with only the capital region
exceeding the EU average (44.8%). Situation of the
youth is challenging in the Azores, where the rate
of early leaving from education and training stood
at 19.8%, which is three times higher than
Portugal’s average of 6.6%,
while only 22.7% of
those aged 30-34 held tertiary degree.
The outermost regions of Azores and Madeira
continue to face major challenges.
In 2024,
the Azores and Madeira recorded the lowest
employment rates (for 20- to 64-year-olds) and
the highest percentage of population at risk of
poverty and social exclusion (AROPE rate) (Table
A17.1). These disparities appear to be linked to the
high rate of early school leaving and below
average educational attainment. The percentage
of population with a tertiary education degree was
significantly lower in the Azores (17.6%) and
Madeira (22.4%) than
Portugal’s average
(31.4%)
in 2024. Digitalisation also remains a challenge,
with internet usage for interactions with public
authorities at 39% in Azores and 44% in Madeira,
well below the national average of 49% in 2021.
Portugal performs relatively well in terms of
access to essential services, but regional
disparities
persist,
with
significant
difficulties in housing.
In 2018, the percentage
of the population with a primary school within 15
minutes' walk was comparable to the EU average
in most regions, with the highest proportion in the
capital region and the lowest in Centro (Graph
A17.1). This is a common problem for
municipalities in low density areas, which are
incurring considerable costs to ensure transport
for pupils. The travel time to the nearest
healthcare centre exceeds the EU average in all
regions except the capital region, and is
particularly long in Alentejo, Centro, Azores and
Madeira, where double insularity (
207
) translates
into challenging access to services in the smallest
islands. Moreover, Portugal continues to experience
significant difficulties in housing (see Annex 11).
Graph A17.1:
Access to healthcare and primary
education in rural areas
EU27
Portugal
Azores
Alentejo
Centro
Madeira
Norte
Algarve
Lisboa
0
20
40
60
80
100
Access to healthcare (% of population)
Access to primary school (% of children under 15 years old)
Units: Percentage of population that can reach nearest
hospital within 10 minutes by car (EU-27) (2020-2021);
Percentage of children under 15 years old who can reach
primary school within 15-minute walk (EU-24) (2018).
Source:
Eurostat
Sustainability
Greenhouse gas emissions per capita are
below the EU average in Portugal and
continue to decrease, but there are some
specific territorial challenges in the
transition to climate neutrality.
Despite having
decreased emissions by 13.8 tonnes per capita
between 2018 and 2023, Alentejo is the only
Portuguese region with a level of emissions above
the EU average. Centro is the Portuguese region
with the second-highest emissions per capita, with
a decrease estimated at 1.1 tonnes per capita in
the same period (Graph A17.2). Emissions in those
two regions decreased following the closure of
coal-fired power plants in Sines (Alentejo Litoral)
and Pego (Médio Tejo) in 2021 (
208
).
(
207
)
Double insularity refers to geographical remoteness from 1) the
continental part of the Member State and from 2) the European
Union (EP report ‘Islands of the European Union: State of play and
future challenges, March 2021,
Research for REGI Committee -
ISLANDS OF THE EUROPEAN UNION: State of play and future
challenges | Think Tank | European Parliament)
(
208
) Alentejo Litoral and Médio Tejo, and Matosinhos in the
Metropolitan Area of Porto, are currently implementing the
Territorial Just Transitional Plans, aimed at boosting
economic diversification and ensuring that the transition
towards a climate-neutral economy leaves no one behind.
111
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3035405_0113.png
Graph A17.2:
Greenhouse gas emissions per capita
35
30
25
20
2018
2023
15
10
5
0
EU27
Centro (PT)
Algarve
Azores
Lisboa
Norte
Unit:
Tonnes per capita per year
Source:
REGIO elaboration based in Eurostat
Achieving a carbon-neutral economy requires
transformation of every economic sector.
Portuguese regions lag far behind the EU average
in resource productivity and the use of
environment-related technologies, but also in
terms of green employment. In 2020, the
proportion of employment in sustainable but
competitive sectors ranked below the EU average
in all regions (12% in the capital region), and much
lower in all others (
209
). Improving rail
infrastructure, decarbonising transport and
personal mobility play a key role, particularly in
Portugal’s metropolitan areas, which face
significant challenges in air quality and traffic
congestion (see Annex 7).
Algarve, Alentejo and Madeira are facing
water scarcity.
Water stress has been
aggravated by prolonged droughts and climate
change, and growth forecasts anticipate that the
situation will deteriorate further (see also
Annex 9). The Algarve and Alentejo already are
affected by severe and extreme water scarcity,
with expected further increase in water demand
leading to decreases in water availability,
estimated at between -1% and -13% within the
next decade (
210
). This suggests the need to
strengthen water management policy in vulnerable
territories.
(
209
) Regional Competitive Environmental Sustainability indicator;
https://publications.jrc.ec.europa.eu/repository/handle/JRC136
629.
(
210
) DG REGIO / Guido Schmidt (AMI list expert), Supporting the
management of water scarcity in Portugal.
Alentejo
Madeira
112