EUROPEAN COMMISSION Brussels, 16.6.2021 SWD(2021) 146 final COMMISSION STAFF WORKING DOCUMENT Analysis of the recovery and resilience plan of Portugal Accompanying the document Proposal for a Council Implementing Decision on the approval of the assessment of the recovery and resilience plan for Portugal {COM(2021) 321 final}



Table of contents 1. Executive summary 2. Recovery and resilience challenges: scene-setter 2.1. Macroeconomic outlook and developments since the 2020 country report 2.2. Challenges related to sustainable growth, cohesion, resilience and policies for the next generation 2.3. Challenges related to the green and digital transition 3. Objectives, structure and governance of the plan 3.1. Overall strategy of the plan 3.2. Implementation aspects of the plan 4. Summary of the assessment of the plan 4.1. Comprehensive and adequately balanced response to the economic and social situation 4.2. Link with Country Specific Recommendations and the European Semester 4.3. Growth potential, job creation, economic, institutional and social resilience, European Pillar of Social Rights, mitigating the impact of the crisis, and social territorial cohesion and convergence 4.4. The principle of ‘do no significant harm’ 4.5. Green transition 4.6. Digital transition 4.7. Lasting impact of the plan 4.8. Milestones, targets, monitoring and implementation 4.9. Costing

4.10. Controls and audit 4.11. Coherence 5. Annex



1.Executive summary Following several years of above-average growth and an improving labour market, the COVID-19 pandemic hit Portugal’s economy hard. It took a toll on all aspects of social and business activity, especially on the country’s large hospitality sector. Real GDP, which was growing faster than EU average before the crisis, fell by 7.6% in 2020. After a resurgence of infections brought new lockdown restrictions early in 2021, real GDP is set to recover from the second quarter onwards. Substantial government support has shielded the labour market throughout the crisis, limiting the increase in the unemployment rate, which nevertheless went up 0.4 percentage points year on year to 6.9% in 2020. Youth employment, in particular, remains an issue, with more than a fifth of people aged 15-24 unemployed in 2020 and, overall, there is a risk of increasing job destruction. The fiscal policy response to the COVID-19 pandemic provided significant stabilisation to the economy but resulted in a worsened budgetary outlook. The general government debt-to-GDP ratio, which had been on a steady downward path since its 2016 peak of 131.5%, spiked to an all-time high of 133.6% in 2020. Portugal has requested EUR 13 907 294 284 in non-repayable support and EUR 2 699 000 000 of loans under the Recovery and Resilience Facility. Portugal’s long-term challenges relate mainly to social and educational needs, institutional resilience, including the efficiency of the justice system, and the need to boost the productive potential of the economy by investing in skills, research and development, as well as by improving the business environment and enhancing framework conditions for the sustainability of public finances. Its recovery and resilience plan should make a significant contribution to boosting the country’s economic rebound and contribute to a green, digital, inclusive and resilient future. Structured around the three elements of resilience, green and digital transitions, the plan is designed to give a focused response to Portugal’s key structural challenges, in line with the Draft Council Recommendation on economic policy in the euro area and a significant subset of the recent country-specific recommendations addressed to Portugal by the Council. The plan pursues the general objective of the Facility to promote the Union’s economic, social and territorial cohesion and is balanced in its response to the six policy pillars referred to in Article 3 of the Regulation. About three quarters of the 20 components in the Portuguese plan are directly related to the green transition and roughly half directly address the digital transition (pillars 1 and 2). The remaining four policy pillars are appropriately addressed through measures to: (i) strengthen the capacity, resilience and sustainability of the National Health Service; (ii) provide social housing and affordable housing; (iii) offer integrated social services, especially in deprived metropolitan areas; (iv) strengthen education and vocational education and training systems; (v) ensure the digitalisation of primary and secondary education; (vi) implement measures to incentivise innovation and support entrepreneurship; (vii) implement measures to digitalise public services, make public administration more efficient and improve the quality and sustainability of public finances; and, (viii) implement measures to improve the business environment, including the modernisation of administrative and tax courts and the streamlining of legal procedures. The plan is expected to contribute to addressing a significant subset of the recent country-specific recommendations addressed to Portugal by the Council. The plan promotes investment for the climate and green transition. Improving the quality of public finances and the financial sustainability of state-owned enterprises is central to the plan because it is a necessary condition to strengthen Portugal’s economic resilience. The plan is ambitious in strengthening the resilience of the health system and improving access to quality health care and long-term care. The plan aims to improve the population’s overall level of skills including digital skills and reinforces the link between regional and sectoral skills needs and vocational education and the training offer. The plan provides a significant response to improve the effectiveness and adequacy of social protection. The plan introduces relevant measures to reduce labour market segmentation, support quality employment and the preservation of jobs. The plan significantly aims to support the use of digital technologies and promote digital skills for various population groups such as students, teachers, the workforce, businesses and civil servants. The plan introduces significant measures to promote access to finance, in particular for SMEs, and promote private and public investment for the country’s economic recovery. The plan introduces significant reforms and investments to promote investment in research and innovation and make these more efficient and effective. The plan is ambitious in tackling the challenges of the business environment and improving the efficiency of the justice system. The measures in the plan contribute to the green transition, the enhancement of biodiversity and the protection of the environment. They can support Portugal’s decarbonisation and energy objectives as set out in the National Energy and Climate Plan 2030 (NECP 2030) and in its Roadmap for Carbon Neutrality 2050 (RNC 2050), and are thus a step towards achieving carbon neutrality by 2050. The green transition is presented as an opportunity to leverage the Portuguese economy towards sustainability, by promoting technological advancement, job creation and preservation of natural resources. This entails measures to decarbonise industry, reduce energy dependency, promote sustainable mobility and increase energy efficiency of buildings, deploy new technologies for renewable hydrogen and other renewable energy sources, and spending on research and innovation. Together, the measures supporting climate change objectives account for 37.9% of the Portuguese plan’s total allocation. All measures in the Portuguese plan pass the ex-ante assessment of the ‘do no significant harm’ principle. For those measures in the water management component (Component 9), which are sensitive from a climate adaptation and environmental point of view, Portugal ensures that no significant harm to the environment shall be done by implementing any result and condition from the Environmental Impact Assessments (EIA) relevant for these measures. In terms of the digital transition, key measures address the digitalisation of businesses and education, including the purchase of digital equipment and professional training. They also include decisive upgrades to the information systems for public financial management and for the provision of health care services, as well as the modernisation of the public administration to improve accessibility and simplify public interactions with businesses and citizens. The measures under the field of digital transformation could lead to a significant reduction of the complexity in processes and procedures, which could make the public administration as a whole more efficient in the long term. The measures with a digital impact account for 22.1% of the Portuguese plan’s total allocation. Once fully implemented, Portugal’s plan can be expected to prompt structural changes with a lasting impact to the administration, the institutions and several policies of the country. The most relevant measures in this respect relate to creating a more business-friendly environment, notably through changes in the justice system. They also comprise the establishment and capital reinforcement of the National Promotional Bank, Banco Português de Fomento to facilitate access to finance as well as improve financing conditions for viable companies, and to address the structural problem of undercapitalisation of Portuguese firms. Further structural improvements are expected to stem from measures to reduce the administrative burden on businesses, the elimination of barriers to investment linked to burdensome licensing requirements, and the lifting of restrictions on regulated professions. In addition, structural transformation related to the green and digital transitions are widespread throughout the plan. The plan’s approach to gender equality and, to a lesser extent, equal opportunities, can also make an impact by going beyond the response to the immediate consequences of the COVID-19 pandemic and addressing the structural factors leading to inequalities. Portugal has established a dedicated administrative structure ‘Estrutura de Missão Recuperar Portugal’ (‘task force’) with an adequate organisation and the responsibility to implement the plan as well as monitor and report on progress. The milestones and targets of the Portuguese plan constitute an appropriate system for monitoring the plan’s implementation. Portugal has provided individual cost estimates for all investments and reforms with associated costs included in the plan. The cost breakdown is generally detailed and well substantiated. Cost estimates, supporting documents and cost justifications show that most of the costs are reasonable, plausible, commensurate, and in line with the principle of cost-efficiency. However, some gaps remain which preclude the highest rating of this assessment criterion. The individual components do not, as a rule, provide clear information about additional and complementary investments from other EU funds, as the negotiation of the Partnership Agreement and the Programmes for the programming period 2021-2027 has not yet begun. However, this is compensated by strong governance and control systems, which provide assurance that the amount of the total cost is not covered by existing or planned Union financing. (1)

Balanced Response (2)

CSRs (3)

Growth, jobs… (4)

DNSH (5)

Green target (6)

Digital target (7)

Lasting impact (8)

M & T (9)

Costing (10)

Control Systems (11)

Coherence A A A A A A A A B A A 2.Recovery and resilience challenges: scene-setter 2.1.Macroeconomic outlook and developments since the 2020 country report

Portugal’s economic performance reversed abruptly in 2020, as the spread of the COVID-19 pandemic hit the country. Portugal’s GDP fell by 7.6% in 2020, mostly on the back of a significant contraction in the second quarter of the year. This was followed by a partial and short-lived recovery in the second half of 2020, as the resurgence of COVID-19 infections towards the end of the year brought a gradual increase in social distancing measures. In turn, further tightened restrictions as of mid-January 2021 weakened economic activity in the first quarter of the current year. According to the Commission 2021 spring forecast, the economy is now projected to resume its recovery in the second quarter of 2021 and to gain momentum this summer, when international travel is expected to rebound. In full-year terms, GDP is projected to grow by 3.9% in 2021 and 5.1% in 2022. A full return to pre-pandemic levels is expected by mid-2022. The country’s large hospitality industry, particularly activities related to foreign tourism, faced the largest volatility as the number of airport passengers fell by more than 90% in Q2‑2020 (y-o-y). Among the main economic sectors, only construction retained positive growth rates in 2020. On the demand side, export of services and investment in equipment recorded the largest drops, but private consumption also fell significantly amid a steep rise in savings. Consumer prices (HICP) dropped marginally by 0.1% in 2020, mainly due to constrained demand for energy and services. Prices are set to gradually increase in 2021 and 2022. Headline labour indicators remained quite resilient against the backdrop of the unfavourable economic environment, benefiting from substantial government support. Unemployment increased from an annual average of 6.5% in 2019 to 6.9% in 2020. The labour force and the number of employed persons decreased by 1.4% and 1.7%, respectively, in 2020. However, labour market utilisation fell at a much steeper pace, reflecting a drop of 23.6% y-o-y in hours worked during the strict lockdown in Q2-2020. Moreover, the number of registered unemployed increased significantly during the lockdown, implying certain statistical discrepancies due to the complexity of the situation, where many persons were forced into temporarily paid or unpaid leaves. The economic downturn in 2020 also weighed on Portugal’s social situation, although the welfare state and government measures played an important role in stabilising incomes. Prior to the crisis, the country’s poverty and inequality indicators were improving, though against the background of a weak social protection system and rising house prices. The proportion of people at risk of poverty and social exclusion stood at 21.6% in 2019, according to the latest available estimates. The steep contraction in the hospitality sector in 2020, where income levels are below the average, is expected to have had a negative impact on the country’s poverty and inequality indicators, despite the resilience of the labour market and social transfers from the government. The pre-existing tax-benefit system and government measures to address the exceptional socio-economic situation have cushioned part of the shock on households’ income, limiting the rise in income inequality and poverty risk. Monetary compensation schemes absorbed the largest share of the market income shock. Fiscal policy was used to sustain the economy during the COVID-19 crisis, which has put a strain on public finances. The general government balance was hit, turning from a small surplus of 0.1% of GDP in 2019 to a deficit of 5.7% of GDP in 2020. The package of crisis mitigation measures, with an estimated overall direct budgetary cost of about 3% of GDP, was the main driver of this deterioration. Spending increased across the board, with transfers and subsidies to firms and households – including through short-time work and furlough schemes – contributing the most. The decline in tax revenue by about 1¾% of GDP also pushed the deficit upwards, reflecting the operation of automatic stabilisers on the back of the sharp drop in output. Whilst Portugal’s public debt was on a declining path prior to the COVID-19 crisis, the debt-to-GDP ratio reached an all-time high in 2020, soaring by about 17 percentage points to 133.6%. With the expected economic rebound, the public debt-to-GDP ratio is set to resume a downward path already in 2021, but it will take years for it to reach its pre-pandemic level. Furthermore, the projected gradual decrease in the public debt-to-GDP ratio would crucially hinge on Portugal attaining structural primary surpluses and favourable nominal GDP growth-interest rate differentials over the medium term. In the short term, Portugal is projected to face high fiscal sustainability risks according to the S0 indicator. This reflects the abrupt and considerable deterioration of public finances in 2020, against the background of the COVID-19 outbreak and the direct budgetary cost of the crisis mitigation measures. At the same time, financial market data show historically low and stable spreads of credit defaults swaps and credit ratings. Moreover, historically low borrowing costs, supported by the Eurosystem’s interventions and EU initiatives, have contributed to mitigate short-term risks. In addition, Portugal’s treasury reported an accumulation of currency and deposits by 4.7% of GDP in 2020, while gross financing needs are projected to decline over the forecast horizon. In the medium term, Portugal is deemed to face high fiscal sustainability risks according to an overall conclusion based on the S1 indicator and the Commission’s debt sustainability analysis (DSA). While the S1 indicator indicates medium fiscal sustainability risks in the medium term, the Commission’s DSA for Portugal points to high sustainability risks based on its baseline scenario and plausible alternative scenarios, which project public debt-to-GDP ratios above 90% by 2031, and justify the overall conclusion of high fiscal sustainability risks in the medium term. According to the Commission’s baseline scenario based on the 2021 spring forecast, the public debt-to-GDP ratio is expected to steadily decline at a gradual pace of about 2.5 percentage points per year on average to a relatively high level of 105% by 2031. Only in 2027 would the public debt-to-GDP ratio reach its pre-crisis level at the end of 2019. In plausible scenario alternatives to the Commission’s baseline scenario – incorporating potential shortfalls in nominal GDP growth, interest rate hikes, or slower fiscal adjustment – the public debt-to-GDP ratio would still be forecast to remain on a downward path over the 10-year projection horizon, but the pace of debt reduction would be visibly impaired. The Commission’s DSA also indicates that there is a significant probability of the public debt ratio to be higher in 2025 than in 2020, according to a stochastic extension of the baseline projection. In the long term, Portugal is projected to face medium fiscal sustainability risks, according to an overall conclusion based on the S2 indicator and the Commission’s DSA. At the same time, there are mitigating factors for the risks associated with Portugal’s public debt position, notably linked to the public debt profile. The lengthening of debt maturities in recent years, relatively stable financing sources (with a diversified and large investors’ base), the gradual smoothening of the public debt redemption profile, the substantial cash buffer, and historically low borrowing costs supported by the Eurosystem’s interventions, jointly contribute to mitigate the medium- and long-term risks. In addition, the implementation of reforms and investments under Next Generation EU, notably the Recovery and Resilience Facility (RRF), is expected to have a substantial positive and long-lasting impact on GDP growth in the coming years, which should contribute to strengthening debt sustainability. However, some non-insignificant degree of uncertainty is related to the accumulation of public contingent liabilities – on top of non-negligible pre-pandemic levels – stemming from some state-owned enterprises and the private sector, including through the possible materialisation of state guarantees granted to firms during the COVID-19 crisis. As regards macroeconomic imbalances, the outbreak of the COVID-19 pandemic has put a significant upward pressure on Portugal’s indebtedness in 2020. The ratios of both public and private debt to GDP increased amid a further deterioration in the external position in the context of a relatively high share of non-performing loans. However, the projected economic recovery is set to move back these indicators on a favourable track, as specified in the Commission’s 2021 in-depth review for Portugal published on 2 June 2021. The macroeconomic scenario underpinning Portugal’s 2021 stability programme – which reflects the growth-enhancing impact of a successful implementation of the Portuguese plan – projects real GDP growth of 4% in 2021. Domestic demand is projected to be the main driver of the economic recovery, but external demand is also expected to contribute. Economic growth is projected to improve further to 4.9% in 2022, and to gradually ease afterwards to 2.2% in 2025, with the RRF impact on growth estimated at an annual average of about 0.7 percentage points over the program’s five-year horizon. Portugal’s 2021 stability program, including the impact of the recovery and resilience plan, projects the unemployment rate at 7.3% in 2021 and 6.7% in 2022, with a further improvement to 5.8% in 2025. Inflation is expected to pick up only moderately to 1.5% in 2025. The Commission forecasts a similar macroeconomic scenario for 2021 and 2022 as that of the 2021 stability program. As regards domestic demand, and according to its 2021 spring forecast, the Commission projects stronger growth in both private consumption and investment in 2021, compared with the 2021 stability program. The Commission projects private consumption in 2022 to grow at a similar rate as in the program’s scenario, while the growth in investment is expected to be slightly lower. As regards the external environment, the Commission forecasts a significantly lower contribution to growth from net exports in 2021, while its projections are in line with the programme’s scenario in 2022. As regards the labour market, the Commission projections envisage more favourable developments, particularly in 2021. Inflation projections are slightly higher in the Commission forecast in both years. The 2021 stability programme foresees the improvement of Portugal’s fiscal position in the period 2021-2025. For 2021, the government plans an improvement of the general government deficit to 4.5% of GDP from 5.7% of GDP in 2020, while the debt ratio is planned to decrease to 128% of GDP. According to the program, the deterioration of the primary budget balance in 2021 compared with the pre-crisis level (2019) is set to amount to 5% of GDP, reflecting discretionary budgetary measures of about 3% of GDP in support of the economy and the operation of automatic stabilisers. For 2022, the government plans a further decline of the general government deficit to 3.2% of GDP – mainly due to the phasing-out of fiscal support and the expected economic rebound –, while the general government debt ratio is planned to decrease to 123% of GDP. These program’s budgetary plans for 2021 and 2022 are in line with the Commission 2021 spring forecast. According to the program’s medium-term budgetary plans, the general government deficit is planned to decrease from 2.2% of GDP in 2023, to 1.1% of GDP in 2025. The general government deficit is thus planned to no longer exceed 3% of GDP in 2023. The general government debt ratio is planned to decrease from 120.7% of GDP in 2023 to 114.3% of GDP in 2025. Table 1: Comparison of macroeconomic and budgetary developments and forecasts The macroeconomic and fiscal outlook continue to be affected by high uncertainty related to the COVID-19 pandemic and its economic consequences. Overall, the macroeconomic scenario presented in the Portuguese plan and underpinning the budgetary projections for 2021 and 2022 in the 2021 stability programme is realistic, based on plausible macroeconomic assumptions compared to the Commission 2021 spring forecast. 2.2.Challenges related to sustainable growth, cohesion, resilience and policies for the next generation Smart, sustainable and inclusive growth The COVID-19 pandemic heavily affected the Portuguese economy and aggravated its pre-existing challenges and vulnerabilities, reversing relevant parts of the positive socio-economic trends observed over recent years. Before the COVID-19 outbreak, the economy was growing at a higher rate than the EU average, catching up from the lows reached at the beginning of the past decade. Since the COVID-19 outbreak, however, unemployment has risen, particularly affecting the youth, reversing the favourable developments of the pre-pandemic period. Productivity has also been impacted, as has the level of investment, which in the pre-pandemic period was already relatively low in Portugal, compared with the EU average. The COVID-19 pandemic strongly affected the Portuguese labour market, with young people bearing the brunt of job destruction, but swift government support prevented a more severe disruption. The employment rate decreased from 76.1% in 2019 to 74.7% in 2020. The authorities swiftly implemented short-time work schemes and ancillary measures, the most important of which was a tailor-made scheme allowing for the temporary interruption of work or reduction of normal working time, in combination with an exemption from employers’ social security contributions, commonly designated as ‘simplified lay-off’ in Portugal. This prevented the unemployment rate from rising more sharply (6.5% at the end of 2019 compared to 6.9% at the end of 2020). Youth employment (15-24 years) experienced the most noticeable fall, dropping from 28% in 2019 to 23.4% in 2020, while the youth unemployment rate rose significantly from 18.3% in 2019 to 22.6% in 2020. The share of temporary contracts dropped to 17.4% in 2020 (from 20.3% in 2019), representing a reduction of about 126 000 jobs (mostly related to the tourism sector and affecting mostly youth), which was not compensated by the creation of permanent jobs. Productivity growth, which mildly recovered in 2019, significantly deteriorated in 2020. Starting from a traditionally low base, productivity growth in 2020 returned from its feebly positive trend to a significantly negative one on the back of the COVID-19 pandemic (labour productivity per person contracted by 13.2% y‑o‑y in Q2‑2020, 3% y‑o‑y in Q3‑2020, and 5.7% y‑o‑y in Q4‑2020). Productivity growth in Portugal has remained sluggish, held back, among other factors, by the low levels of capital per worker, relatively low levels of investment (particularly in intangibles), moderate innovation capacity, and the overall low skills level of the population. Other factors related to the business environment may have also hampered productivity growth, such as the large share of micro and under-capitalised firms, an underdeveloped capital market, inefficiencies in the justice system, and regulatory restrictions weighing on competition (notably in professional business services). In 2020, the number of new firms registrations fell by 11% compared to 2019, and new business registrations remained subdued in Q1‑2021, with possible further unfavourable effects on investment and productivity. Transportation bottlenecks, mainly on ports and railways – where interoperability with Spain remains limited – also act as significant deterrents to productivity growth in Portugal.

Although net total investment turned positive in 2019 for the first time since 2011, a sizeable investment gap has built up over the pre-pandemic period. After sustaining investment levels that were above the EU average over the decade 2001‑2010, the subsequent decade 2011‑2020 was marked by structurally low investment in Portugal (at an average of 16.7% of GDP, compared with the EU average of 20.7% of GDP over the period 2011‑2020). Against that background, the total investment observed in Portugal was lower than the consumption of fixed capital over the period 2012‑2018, with net total investment becoming mildly positive only in 2019. In detail, the private investment-to-GDP ratio was on an increasing path since its trough in 2013, and net private investment became positive as of 2017. However, the public investment-to-GDP ratio was visibly reduced during the economic and financial crisis, and it remained particularly subdued throughout the post-programme period (at an average of 1.9% of GDP over 2015‑2020, compared with the EU average of 3% of GDP). While this correction of public investment from the high earlier levels may have reflected a stronger focus on high-quality projects, such a protracted period of continuously subdued public investment opened a sizeable investment gap vis-à-vis the EU benchmark. Importantly, decade-long negative net public investment may have contributed to the gradual erosion of the public capital stock. In 2020, private investment growth was halted by the COVID-19 crisis and, in spite of public investment growth accelerating to a double-digit rate, it was not sufficient to fully offset the former’s fall. Therefore, there is scope for targeted public investment that would fuel productivity growth through improved human capital and technological innovation, and generate a crowding-in effect by providing relevant infrastructure for additional private investment. Notwithstanding a slight increase in Portugal’s R&D intensity in recent years, R&D levels have remained low. R&D intensity – that is, expenditure on research and development – has been traditionally low in Portugal. The convergence process towards the EU average during the period 2003‑2009 came to a halt during the financial crisis, after which R&D intensity bottomed at 1.24% of GDP in 2015. Since then, R&D intensity recovered only moderately to 1.4% of GDP in 2019 (0.74% of GDP in the business enterprise sector, 0.57% of GDP in the higher education sector and 0.07% of GDP in the government sector). The relatively low levels of R&D intensity, in combination with the modest cooperation between academia and businesses (Portugal ranked 25th in the EU in terms of ‘public-private scientific co-publications’ in 2019 and 20th in terms of ‘public expenditure on R&D financed by business enterprise (national) as a percentage of GDP’ in 2018) and the limited monitoring and coordination of the smart specialisation agenda, jointly hamper the potential upgrade of the Portuguese R&I system. Social and territorial cohesion The socio-economic consequences of the pandemic are unevenly distributed across Portuguese regions, and their different economic specialisations. Regions where economic activity is oriented towards the commercial and hospitality sectors are more affected, largely due to the immense shock in the latter sector, which in 2019 accounted for 8.7% of GDP. Regions most affected include the Algarve, the major urban centres, and the outermost regions of Madeira and the Azores. Regions with a higher concentration of industrial activity, such as Portugal’s northern region, have suffered the consequences of restrictions in the exporting sectors, but showed more resilience in economic activity with the reopening of the sector during Q3‑2020. The distribution of opportunities is concentrated within urban and coastal regions, which are wealthier than their rural and interior counterparts. Another challenge lies in the depopulation of rural areas, some of which are projected to lose population at a rate above 1% a year between 2015 and 2025. Specific challenges concern the outermost regions of Madeira and the Azores, such as high transport and communication costs, as well as their dependence on few economic activities. The effects of the COVID-19 crisis and the pre-pandemic trend of rising house prices, combined with the low supply of affordable and social housing, could revert recent positive developments in the reduction of poverty and social exclusion. The ability of social transfers to reduce poverty remained limited over the past ten years and in 2019 stood at 24.2%, compared with the EU average of 32.4%. Monetary poverty – that is, people at risk of poverty after social transfers – was also slightly above the EU average in 2019 (at 17.2%, compared with the EU average of 16.5%), while in-work poverty increased from 9.7% in 2018 to 10.8% in 2019 (compared with the EU average of 9% in the latter year), as did the share of people living in households with poor housing conditions. The risk of poverty is highest in the Autonomous Regions, with 36.7% at risk of poverty in the Azores and 32.2% in Madeira, compared with 17.8% in the Lisbon region in 2019. While the burden of housing costs in general fell between 2013 and 2019, it increased for poor households. Over the same period, the severe housing deprivation rate remained above the EU average (affecting about 26 000 families, mostly in metropolitan areas and the outermost regions). The share of poor households overburdened by housing costs increased to 22.8% in 2019, about ten times the corresponding share for other households (2.2%). The situation is likely to worsen with the increase of the house price index in 2020, which in Portugal (at 153.4) was well above the EU average (at 126.7). Portugal is characterised by relatively weak public investment in social and affordable housing, with the public housing supply accounting for only around 2% of the total (below the 5% EU average). Health, and economic, social and institutional resilience At the outset of the COVID-19 pandemic, the National Health Service had already been facing a challenging situation for years. In 2018, the number of hospital beds in Portugal (3.4 per 1 000 inhabitants) was low compared with the EU average (5 per 1 000 inhabitants). The distribution of health resources (facilities and health professionals) was unequal and sub-optimal, and there were shortages in specific areas (of nurses in general and of specialists in rural areas). Pre-pandemic challenges existed in access to health care and, in 2018, out-of-pocket payments for health care as a share of total health expenditure in Portugal (29.5%) were amongst the highest in the EU (with an average of 21.7%). At the same time, expenditure in the National Health Service had been accelerating since 2015 (driven by costs of wages, medicines and medical devices), which was exerting pressure on hospitals’ initial budgets. The latter proved systematically to be insufficient, also partly owing to weaknesses in planning, costing and management control As a result, public hospitals had accumulated a sizeable stock of arrears that reached a peak of 0.5% of GDP in November 2017, before starting to moderate on the back of ‘ad-hoc’ clearance measures by the government. The emerging track record of recurrent bailouts by the government – which had nevertheless not fully succeeded in avoiding a systematic vicious cycle of hospitals’ indebtedness – also triggered knock-on effects on supply-chain relationships. The planned reforms to strengthen the efficiency and sustainability of the National Health Service came to a temporary halt in view of the COVID-19 pandemic. The design of a comprehensive plan to improve the sustainability of the National Health Service and tackle the root-causes of arrears in public hospitals got under way in 2019, following up on the recommendations of a temporary task force. However, the COVID-19 crisis interrupted its implementation. The plan was expected to introduce an enhanced governance model for public hospitals, with a view to granting them greater autonomy in terms of investment and hiring decisions, in combination with enhanced monitoring and stronger accountability. This strategy crucially hinged upon making best use of the planning and management tools foreseen in the current legal framework. This includes revamping management contracts to strengthen performance-based practices, and ensuring the wide-spread approval of hospitals’ budget and activity plans based on compliance with quantitative and qualitative targets that would foster sustainability. The COVID-19 outbreak coincided with a decrease in hospital procedures and added to pre-pandemic challenges. In 2020, there was a sharp reduction in hospital procedures, which reflected the need to channel resources to fight the COVID-19 pandemic and patients’ fear of contracting the virus while at the hospital. As many hospital procedures unrelated to the pandemic were postponed, further pressure has accumulated on the already existing backlogs and waiting lists. In particular, in view of the considerable reduction in consultations and diagnosis testing in public hospitals during the confinement periods, there is a risk of an increased number of undetected serious medical conditions, with possible long-term implications. Furthermore, Portugal’s adverse demographic trends – namely, accelerated population ageing and related increasing demand for health care – coincide with changing disease patterns, an increasing burden of chronic and degenerative diseases as well as multi-morbidity gradually becoming more prominent. The current and evolving health care needs and associated increasing costs pose challenges to the responsiveness, sustainability and resilience of the National Health Service. The COVID-19 crisis has exposed the fragility of the long-term care system in Portugal. Despite improvements in institutional long-term care in the last decade, access rates are low in all regions of the country. The long-term care system in Portugal is expected to face increasing pressure in the coming years, especially due to demographic ageing, which will likely translate into higher demand for long-term care services. The share of potentially dependent persons in the total population is deemed to increase from 8.3% in 2016 to 9.7% in 2030, and to 11.3% in 2050. Portugal has been identified as one of the EU Member States with the highest share of out-of-pocket funding for long-term care. Portugal has a high deficit of long-term care workers, with only 0.8 workers per 100 people aged 65+, compared with 3.8 on average across 25 Member States. In 2016, 95.8% of formal long-term care workers in Portugal were women, compared with 90.8% in the EU-27. According to OECD data, nearly two out of three (64%) long-term care workers in Portugal are low-educated, which compares with an average of 15% in 20 other OECD countries. A recent reform approving the status of care workers in Portugal is helping to reduce the very high rate of informal caregivers, and to formalise employment and skills levels. Social services should also be reinforced further through the recently approved National Disability Strategy to accompany the transition towards a model of independent living and deinstitutionalisation. A stronger budgetary framework would improve conditions for the economic recovery. In particular, efficiency-oriented spending reviews and the effective implementation of the 2015 Budgetary Framework Law remain of central importance to improve the quality of public finances and make them more growth-friendly. First, this would help to strengthen the medium-term focus of budgetary planning, increasing efficiency when allocating resources to new policy priorities, and placing a greater focus on growth-friendly spending that would support the economic recovery. Second, the 2015 Budgetary Framework Law would introduce the principle of ‘programme budgeting’, making budget units more accountable and the overall budgetary planning and monitoring more performance-oriented. Third, its multiannual focus would enhance overall transparency and accuracy, making budgetary planning more stable and predictable, thereby supporting confidence levels among economic agents. However, the effective implementation of the 2015 Budgetary Framework Law has been subject to systematic delays. Its implementation should come hand in hand with a significant upgrade of the information systems for public financial management, as well as full adherence to the new accrual-based accounting system (that is, the ‘Sistema de Normalização Contabilística para as Administrações Públicas’, SNC-AP). These are expected to take effect gradually across government sectors and bodies. Furthermore, pre-pandemic vulnerabilities related to the financial sustainability of state-owned enterprises constitute a downside risk for Portugal’s budgetary outlook, further constraining the available room of manoeuvre for fiscal policy in view of the country’s high public debt-to-GDP ratio. These vulnerabilities were heightened on the back of the COVID-19 crisis, notably for the state-owned enterprises that were more vulnerable to the direct consequences of the containment measures, such as those operating in the transport sector. The efficiency of the justice system remains a major challenge for the Portuguese economy. Despite some improvements, Portugal rates among the Members States with the lengthiest judicial proceedings (notably for administrative and tax justice, with disposition times above 800 days in the first instance), and with one of the highest backlogs of pending cases. Reforms to the legal and institutional framework for insolvency and debt enforcement, as well as the stabilisation in the number of incoming cases, brought some improvements regarding the efficiency of insolvency and civil enforcement proceedings. However, a potential increase in bankruptcies resulting from the COVID-19 pandemic may lead to a surge in litigation cases that could exacerbate the existing bottlenecks, namely the high backlog of older cases. While Portugal adopted measures to ensure the functioning of the justice system remotely, the suspension of deadlines in non-urgent cases and the adjournment of non-urgent acts may further affect the future efficiency of the system. Policies for the next generation, children and youth, including education and skills. The COVID-19 crisis exposed further the need to invest in education and training systems and policies to upskill a population with low levels of educational attainment. Despite some improvement over the past years, the share of individuals with low educational attainment (44.5% in 2020) and a population lacking basic digital skills (48% in 2019) remain above the EU average (25% and 44%, respectively). Investments in skills, based on a strong skill needs analysis, carried out with relevant stakeholders (social partners, higher education and training institutions), would help improve the qualification levels of the active population and reduce socio-economic inequalities. The gender gap in science, technology, engineering and mathematics (STEM) remains relevant, and despite higher enrolment in information and communications technology (ICT) and STEM, graduate numbers remain low. In terms of infrastructure, there is a persistent lack of available places in public pre-primary schools, particularly in large metropolitan areas and a shortage of affordable university student accommodations. A National Plan for Accommodation in Higher Education, launched in 2019, aims to double the current offer in the coming years. Remote schooling during the COVID-19 pandemic posed significant challenges for disadvantaged students and prompted Portugal to invest significantly in a national digitalisation programme to acquire digital equipment for all primary and secondary students, and provide digital training for teachers. National as well as European structural and investment funds were mobilised to this end too, including the Coronavirus Response Investment Initiative Plus (CRII+). 2.3.Challenges related to the green and digital transition Green dimension The recovery and resilience plan should contribute to the green transition and at least 37% of the financial allocation needs to contribute to climate objectives. The measures in the plan are expected to contribute to achieving the 2050 climate neutrality objective, and the 2030 energy and climate targets, taking into account Member States’ national energy and climate plans. They should also contribute to meeting environmental targets for waste, water, pollution control, sustainable mobility, biodiversity protection and restoration, marine and water resources, and support the transition to sustainable food systems as well as to a circular economy as appropriate, while ensuring that nobody is left behind. Despite the progress Portugal made in recent years, challenges remain in water management. This applies principally to water governance and water body rehabilitation. Further infrastructure investments are needed to improve water management, such as wastewater collection and treatment, reduction of leaks in the networks and general water supply, as well as nature based solutions and river restoration. Moreover, Portugal should take advantage of the potential of water reuse. Alongside water management, forest fire prevention is the second critical aspect in a context of increased risk of desertification and climate change vulnerability. Forests cover more than half of the Portuguese territory, of which 92% are privately owned, 6% by local authorities and only 2% by the State. Desertification, depopulation of rural areas as well as fragmentation of land ownership, obstruct sustainable land management, with an impact on biodiversity preservation and on the prevention of forest fires. Portugal is far below the EU average on circular economy and waste management indicators. With a rate of 29% in 2019, Portugal is missing the EU target of recycling half of municipal waste by 2020. The EU has set even more ambitious targets for the next decade. There are also big differences across regions. Therefore, further efforts are needed in this area.

The emission of several air pollutants has decreased in recent decades in Portugal. However, air quality remains a concern, mainly related to nitrogen dioxide (NO2). In particular, personal transport exacerbates problems with air quality and traffic congestion in the major metropolitan areas of Lisbon, Porto and Braga, leading to health and economic costs. Portugal boasts a rich biodiversity. Around 20% of the Portuguese territory belongs to the EU Natura 2000 network (EU average is 18%). However, a scientific assessment of Natura 2000 in Portugal concluded that some species and habitats, particularly in the marine environment, are not sufficiently protected. Therefore, Portugal should extend its Natura 2000 network with additional designations, and provide for the necessary management measures and resources in the sites already designated. Anticipating the adverse effects of climate change, such as floods, coastal erosion, droughts, heat waves and forest fires, remains a core challenge in Portugal. These natural hazards are expected to become more frequent and extreme due to climate change and decreased ecological resilience caused by the loss of biodiversity, exploitation of natural resources, or pollution. Therefore, measures and investments in risk prevention and preparedness, climate change adaptation and nature-based solutions are necessary to achieve sustainable growth. Access to innovation, including technological solutions, are key for a positive transition towards the optimal environmental performance of businesses in rural areas, which accounted for 79% of land in Portugal in 2016, compared to 45% for the EU-27. Portugal is not making use of green budgeting practices, which could help deliver on national and international commitments for climate change and environmental protection. Evaluating the environmental impact of fiscal policies and assessing their coherence with central objectives could help make government more accountable, and hence improve compliance with environmental and climate goals. Revamping the spending review process would offer an opportunity for Portugal to scrutinise spending allocations with respect to these priorities, in order to generate further efficiency gains that could be channelled towards them. Greenhouse Gas (GHG) Emissions Portugal’s targets under the Effort Sharing Regulation (ESR) are 17% emissions reduction by 2030 compared to 2005. In addition, Portugal targets reductions of 85-90% by 2050 compared to 2005, according to its 2050 roadmap for carbon neutrality. By continuing current policies, Portugal is expected to meet its ESR 2030 target with a large margin of 23%. As part of its carbon neutrality objective by 2050, Portugal plans a total GHG emission reduction compared to 2005 of 45% to 55% by 2030 and 65% to 75% by 2040. However, these national targets exclude the land use, land-use change and forestry (LULUCF) sector. The National Energy and Climate Plan (NECP) provides a broad overview of measures. However, these are not always well defined and there is potential to reinforce policies and measures addressing emissions reductions in the building sector and in the transport sector to achieve significant GHG emission reductions. The NECP describes the national adaptation strategy adopted in 2019 for the period 2020-2030. It includes objectives towards climate change adaptation, the current policy framework and an action programme. Among the objectives, there are improved water management, risk prevention and preparedness to anticipate the adverse effects of climate change. The regional dimension of risk assessment and governance could be strengthened. Renewable share Portugal has the 7th highest share of renewables in energy consumption in the EU. The share of renewable resources in final energy consumption increased from 19.5% in 2005 to 30.6% in 2019. Portugal aims to contribute to the EU’s 2030 target for renewable energy by reaching 47% of renewable energy. This contribution is above the 42% share calculated using the formula in Annex II to Regulation (EU) 2018/1999 on the Governance of the Energy Union and Climate Action (the ‘Governance Regulation’), setting out the national contributions for the share of energy from renewable sources. However, to achieve this contribution, Portugal will need to add additional policies and measures, in particular to also respond to the high ambition for deployment of renewable hydrogen. While increasing the share of renewable energy sources. Portugal needs to fully take into account the impacts from combustible renewable fuels on air quality. Energy supply needs to be diversified and transmission and distribution grids should be reinforced. For instance, the full potential of offshore wind and ocean energy needs to be exploited, as well as of decentralised solar photo-voltaic (PV) in cities. The repowering of existing wind parks should also be on the agenda. Similarly, the sustainable use of forestry biomass could contribute towards creating more value in the forestry sector. The integration of renewable energy generation requires the expansion, reinforcement and digitalisation of transmission and distribution grids in the national territory, with Spain and (onwards) France. Adequate interconnections are essential for the security of supply, upholding demand for renewable domestic production during supply surpluses periods, and creating conditions for competitive and stable electricity prices. Portugal presents unique conditions to develop a renewable hydrogen economy. Favourable conditions include the existence of a modern natural gas infrastructure, very competitive renewable electricity production prices and a strategic geographical location that facilitates exports, notably the deep sea water port of Sines. Investment needs in hydrogen-related projects are estimated at up to EUR 7 billion and could trigger a reduction of natural gas imports by 2030. Energy efficiency Portugal’s energy efficiency contribution to the EU target is to be 35% more efficient by 2030 in terms of primary energy intensity compared to 2005. This translates into a contribution of 25.5 million tonnes of oil equivalent (Mtoe) for primary energy consumption and 14.9 Mtoe for final energy consumption. The subsequent energy efficiency contributions are considered to be modestly ambitious, both in terms of primary and final energy consumption. The renovation of buildings is not picking up in Portugal. For public buildings, it remains hampered by tight public procurement rules. For private buildings, there is little demand for renovation. More pro-active and well-designed building renovation programmes are needed to promote energy efficiency renovations, reduce energy poverty, and improve indoor thermal comfort, as well as quality and affordability of housing. Specifically in the residential sector of Portugal, it is estimated that for an annual average renovation rate of 2.6% over the period 2021-2050, the primary energy saving potential is 17.5 TWh, by 2050. The employment impact associated to this renovation scenario indicates the generation of more than 2.5 million full time equivalent jobs over the considered period. The national Long-term Renovation Strategy quantifies that the investment needed for the full transformation of the Portuguese building stock is EUR 143 billion until 2050 (EUR 4.95 billion per year). To achieve the energy efficiency and renewable objectives, it is also important for Portugal to promote other energy investments and reforms. This includes the reinforcement of energy cross-border interconnections, improving the coverage of the transmission grid, smarting/modernisation of electricity distribution grids, electrification of transport, and regulatory reforms for the complete integration in the internal energy market. The table below gives an overview of Portugal’s objectives, targets and contributions under Regulation (EU) 2018/1999 of the European Parliament and of the Council of 11 December 2018 on the Governance of the Energy Union and Climate Action. Table 2: Overview of Portugal's energy and climate objectives, targets and contributions National targets and contributions Latest available data 2020 2030 Assessment of 2030 ambition level Binding target for greenhouse gas emissions compared to 2005 under the Effort Sharing Regulation (%) -16% 1% -17% As in ESR, total GHG target implies higher reductions National target/contribution for renewable energy: Share of energy from renewable sources in gross final consumption of energy (%) 30.3% 31% 47% Sufficiently Ambitious (42% is the result of RES formula) National contribution for energy efficiency: Primary energy consumption (Mtoe) 22.6 (2018) 22.5 21.5 Modest Final energy consumption (Mtoe) 16.9 (2018) 17.4 14.9 Modest Level of electricity interconnectivity (%) 8% 10% 15% N/A Source: Assessment of the final national energy and climate plan of Portugal, SWD (2020) 921 final. Digital dimension

The recovery and resilience plan should contribute to the digital transformation with at least 20% of the financial allocation dedicated to the digital objective. The measures in the plan should, among other objectives, support the digital transformation of the economic and social sectors (including public administration, public services, and the justice and health systems). The objective of the plan’s measures should be to improve above all the resilience, agility and security of companies and public sector actors, alongside competitiveness and inclusiveness. Portugal ranks 19th amongst EU countries in the Commission’s 2020 Digital Economy and Society Index (DESI). In March 2020, Portugal approved the action plan ‘Portugal Digital’ to accelerate its digital transformation around three pillars: (i) training and digital inclusion; (ii) digital transformation of businesses; and, (iii) digitalisation of public administration. Portugal faces various challenges in the digital area: investing in the digital transition, particularly in the development of digital skills, both basic and advanced, in the use of digital technologies to ensure equal access to quality education and training, and to boost firms’ competitiveness. This is especially relevant in Portugal, where the economy is characterised by micro-enterprises concentrated in traditional sectors. Other challenges in the field of connectivity concern reducing the connectivity disparities between urban and rural areas, allocating 5G spectrum, replacing the submarine cables to outermost regions, and the digitalisation of firms’ licensing process. Portugal’s priority is to replace the Atlantic submarine cable ring linking the mainland with Madeira and the Azores (CAM submarine cables), which is reaching the end of its life-cycle. Portugal is also interested in linking Lisbon to Marseille through a new submarine cable. New submarine cables connecting Portugal with other Member States would boost the resilience of the EU’s connectivity grid, together with submarine cables to other continents (e.g. South America and Africa), taking advantage of Portugal’s geographical location in Europe. The recently inaugurated transatlantic cable, supported by the EU through the BELLA programme, linking Sines in Portugal to Fortaleza in Brazil, will enable the first direct, high-capacity data connection between the two continents to support research and education data exchange and represents a significant step in achieving this objective. A challenge to network deployment in Portugal is the fragmentation of the authorisation rules, necessary to access the infrastructure at municipal level, and the lack of coordination between them. Regarding European projects of common interest that complement and connect Member States’ infrastructures, Portugal proposes two projects that are important to both Portugal and the EU: Lisbon-Madeira-Azores-Lisbon and Lisbon-Barcelona-Marseille. In connectivity, Portugal’s results are above average in the deployment of very-high capacity networks and the take-up of broadband connections of at least 100 Mbps. Additional effort is still needed to ensure very high-capacity network coverage and that mobile broadband take-up reaches all households, including those in rural areas. Prices in Portugal are higher than the EU average. The successful rollout of 5G will depend on the implementation of the 5G strategy and on the prompt completion of the 700 MHz award procedures under conditions conducive to investment. To face the challenges posed by the COVID-19 crisis, digital service infrastructures were reinforced to deal with higher demand. However, the spectrum auctions of the 700 MHz and 3.6 GHz pioneer bands planned for Q2‑2020 were postponed to start in January 2021 (with a multiple-round auction). The investment needs for Portugal to reach the 2020 and 2025 EU connectivity targets are estimated at EUR 2.8 billion. Portugal’s digital-related public investment in R&D is below the EU average with modest levels of R&D expenditures in the business sector. Progress has been limited on upgrading the country’s economic structure towards a higher share of value added in high-tech manufacturing and services. On the other hand, Portugal has joined the group of Strong Innovators (European Innovation Scoreboard 2020) and scores particularly well on small- and medium-sized enterprises (SMEs) innovating in-house and SMEs with product or process innovation. Yet, weak science-business links are holding back the advancement of the research and innovation system. Increased knowledge flows between academia and the private sector, such as joint programmes to support upskilling of workers could accelerate the twin transition. Portugal could boost the R&I public-private cooperation in key sectors for the twin transition, as it is a major bottleneck of the Portuguese innovative ecosystem. This includes developing absorptive capacities, accelerating the technology transfer and innovation diffusion. In this area, Portugal has recently adopted the Portugal 2030 Strategy that, among its objectives, aims to increase total expenditure on R&D to 3% of GDP in 2030, with 1.25% public and 1.75% private, also to align with the objective set in the Commission’s Communication ‘A new ERA for Research and Innovation’ (COM 2020/628). Portugal performs weakly on digital skills and the use of internet services. In 2019, 48% of the population lacked basic digital skills, and about 26% had no digital skills. These skills gaps hinders the development of a digital economy and society. The country has made significant efforts, but the approach needs to be both comprehensive an ambitious. Another factor is the low share of ICT graduates (2.2% in 2018), which is below the EU average (3.8%). Raising the share of graduates in science and digital technologies, and providing upskilling and reskilling opportunities could help meet the growing demand for the skills that the twin transition needs. Improved access to digital skills, together with better connectivity, could also contribute to the general development of rural and low density areas. Portugal is a leader in digital public services. It is among the 14 EU countries with two national electronic identity schemes recognised by the other Member States. Portugal continues to invest in the digitalisation of the public sector in order to reduce the administrative burden for businesses. It can affirm its leading position in the field by greater involvement in European cross-border initiatives for digital public services. Portugal could bring about a qualitative shift by investing in public sector use of novel technologies like Cloud computing, predictive analytics, and other uses of Artificial Intelligence, augmented and virtual reality, as well as block-chain. The European Digital Innovation Hubs can help build innovative ecosystems that support the digitalisation of the public sector. During the COVID-19 crisis, the digitalisation of the public administration was accelerated mainly through the ePortugal portal. Cybersecurity is the biggest risk resulting from digital transformation initiatives. An adequate level of security is imperative in order to manage and reduce financial, operational, reputational and legal risks. Portugal’s national strategy for Cyberspace Security 2019-2023 aims to maximise resilience, promote innovation, generate and guarantee resources based on six actions: (i) cyberspace security structure; (ii) prevention, education and awareness; (iii) cyberspace and infrastructures protection; (iv) response to threats and combating cybercrime; (v) R&D and innovation; and, (vi) national and international cooperation. Portugal ranks below the EU average on digitalisation of businesses and on integration of digital technology in businesses. Portugal continues implementing the national strategy for the digitalisation of the economy, committed to the development and deployment of advanced technologies. However, greater efforts targeting key strategic technologies are needed to boost growth and jobs. Figure 1: Digital Economy and Society Index 2020 – relative performance by dimension One of the main factors hindering the digitalisation of SMEs is the digital knowledge gap. Portugal ranks 21st in the DESI (2020) for human capital. Adopting digital technologies and improving skills levels would increase productivity and help the country’s numerous micro-enterprises to grow. At the same time, Portugal could invest more in promoting entrepreneurship and business scale-up with a view to change the specialisation profile of the productive fabric. Note: The EU aggregate corresponds to the EU-28, based on the 2020 DESI report. Supporting the digitalisation of the Portuguese SMEs is an essential element of this effort. Promoting and, where appropriate, co-financing the European Digital Innovation Hubs would benefit the digitalisation of the Portuguese companies. Another important facet is ensuring that businesses own and control the data they generate, participating in the value created with ‘their’ data. This requires new ways of data governance. Portugal could support the creation of common European data spaces in crucial economic sectors and domains (e.g. in health, manufacturing, and climate). Box 1: Progress towards the Sustainable Development Goals Sustainable Development Goals and the four dimensions underpinning the Annual Sustainable Growth Strategy The objectives of the Sustainable Development Goals (SDGs) are integrated in the European Semester since the 2020 cycle. This provides a strong commitment towards sustainability in the coordination of economic and employment policies in the EU. In that respect, this section outlines Portugal's performance with respect to SDGs, with particular relevance for the four dimensions underpinning the 2021 Annual Sustainable Growth Strategy and of relevance to the recovery and resilience plans (green transition, fairness, digital transformation and productivity, and macroeconomic stability), indicating possible areas where investments and reforms are in line with the objectives of the Facility and could further accelerate progress on the SDGs. Green Transition An area where Portugal performs significantly better than the EU average is ‘on average CO2 emissions from new passenger cars’ under SDG 9 (industry, innovation and infrastructure). However, emissions have slightly increased in recent years. Significant progress has also been made in the ‘share of renewable energy in gross final energy consumption’ under SDG 7 (affordable and clean energy), which increased from 24.1% in 2010 to 30.6% in 2019, and stands now well above the EU average. Yet, the country relies heavily on imports from other countries to meet its energy needs: energy imports represented 73.8% of total gross available energy in 2019. Portugal has also made some progress towards the targets under SDG 2 (zero hunger) that are related to supporting sustainable agriculture and reducing the adverse impacts of agricultural production. In 2019, the share of organic farming in total agricultural area increased significantly and stands now close to the EU average. Still, funding and government support to agricultural R&D remains significantly below the EU average. Finally, despite some marginal improvement, current levels for some indicators related to the green transition remain significantly lower than the EU average, particularly for the recycling rate of municipal waste and the share of buses and trains in total passenger transport under SDG 11 (sustainable cities and communities) and the circular material use rate under SDG 12 (responsible consumption and production), which is more than five times lower than the EU average (2.2% in Portugal, compared to the EU average of 11.9%, in 2019). Fairness Portugal has made progress towards SDG 1 (no poverty) in 2019, bringing the rate of ‘people at risk of poverty or social exclusion’, in ‘severe material deprivation’ and living in households with very low work intensity to around or below the EU averages. However, the monetary poverty (‘people at risk of poverty after social transfers’) was still above the EU average in 2019 (17.2%, while 16.5% in the EU), as were in-work-poverty, which increased to 10.8% in 2019 (9% in the EU in 2019), and the share of people living in households with poor housing conditions. Regarding SDG 4 (quality education), Portugal has made significant progress in most associated dimensions of this goal, most notably in the percentage of early leavers from education and training, which dropped from around 39% in 2004 to 8.9% in 2020. This share is now below the EU average (10.1%). Portugal performs relatively well in SDG 5 (gender equality) dimensions and most notably in the gender pay gap rate (10.6% in 2019) and ‘gender employment gap’ (5.9 percentage points in 2020), both below the EU average (14.1% and 11.3 percentage points respectively). Concerning SDG 8 (decent work and economic growth) and the targets related to the dimension of fairness, Portugal performs rather well, with the share of young people that are not in education or training ‘young NEETs’ (Not in Education, Employment or Training) at 11%, well below the EU average of 13.7% in 2020. Furthermore, the long-term unemployment rate has been on a downward path since 2013 and the employment rate surpassed the EU average. Despite steady improvements, income inequality (SDG 10) was still above the EU average in 2019, with households in the top 20% of the income distribution having incomes 5.2 times those of households in the bottom 20% (5 in EU). Similarly, the lowest 40% of the income distribution earned 20.7% of the total incomes, slightly below the EU average of 21.4%. Digital transition and productivity Portugal is underperforming in all targets related to the digital transition and productivity dimension that fall under SDG 8 (decent work and economic growth) and SDG 9 (industry, innovation and infrastructure). Despite some improvements observed in recent years, the investment share of GDP, as well as the gross domestic expenditure in R&D, remain well below the EU averages. Macroeconomic stability Portugal’s performance under SDG 8 (decent work and economic growth) remains moderate. Before the pandemic, the unemployment rate had been on a downward path since 2013. However, the real GDP per capita and the investment share of GDP are still far below the EU average, although some improvements have been observed in recent years. With regards to SDG 16 (peace, justice and strong institutions), Portugal made significant progress towards ensuring peace and personal security. Furthermore, the percentage of the population with confidence in the European Institutions and, therefore, trust in European policies, is constantly increasing since 2013 and exceeds the European average. 3.Objectives, structure and governance of the plan 3.1.Overall strategy of the plan The Portuguese recovery and resilience plan aims to address the challenges identified in the context of the European Semester. The measures included in the plan focus on addressing these challenges by boosting the competitiveness of the Portuguese economy, on improving skills and qualifications, on increasing territorial and social cohesion, and on boosting public and private investment firmly in line with the twin digital and climate transitions. The plan’s strategy is structured around the three pillars of resilience, climate and digital transition, and the goals mentioned above are reflected throughout its 20 components. The 20 components that make up the Portuguese recovery and resilience plan are the following: COMPONENT 1 – National Health Service

This component of the Portuguese recovery and resilience plan addresses several challenges for the Portuguese health system with respect to current and evolving health care needs and associated costs. First, Portugal’s adverse demographic trends – characterised by accelerated ageing and subsequent long-term care needs – coincide with changing disease patterns, an increasing burden of chronic and degenerative diseases, as well as multi-morbidity gradually becoming more prominent. Second, there is still considerable avoidable mortality in Portugal and a relatively low number of healthy life years at age 65. Third, there is available scope to place a greater focus on health promotion and disease prevention, in combination with addressing the fragmentation of health services and the gaps in access to health care. Fourth, out-of-pocket payments for health care are amongst the highest in the EU and the reported financial burden of medical care is relatively high. Finally, Portugal’s National Health Service has been facing a challenging financial situation for a number of years. In particular, Portugal has a track record of recurrent bailouts of public hospitals by the government, which did not succeed in avoiding a systematic cycle of hospitals’ indebtedness, with knock-on effects on supply-chain relationships. The main objective of the component is to strengthen the response capacity of Portugal’s National Health Service, with a view to responding to the demographic and epidemiological changes in the country, to therapeutic and technological innovation, and to the trend of increasing demand for health care and associated costs. To this end, the component aims to strengthen the core role of primary health services within the overall architecture of the National Health Service, upscale long-term and mental health services, and increase efficiency by completing the reform of the governance model of public hospitals and bringing forward the digitalisation of health services. The component includes 3 reforms and 9 investments, with total estimated costs of EUR 1 383 million. The component has an overall climate contribution of 22.8%, and a digital contribution of 25.4%. COMPONENT 2 – Housing This component of the Portuguese recovery and resilience plan addresses the challenges related to the structural shortage of permanent and temporary housing solutions for the more vulnerable groups and contributes indirectly to reinforcing the social protection system. Public housing only accounts for 2% of the total stock in Portugal and is deemed to be insufficient in addressing the needs of the most deprived and at risk of social exclusion. The main objectives of the component are: i) to increase the social and affordable housing supply (including addressing other related needs, such as the lack of basic infrastructure and equipment, unhealthy and insecure places of residence, precariousness or lack of contractual ties, overcrowding or inadequacy of housing for the special needs of residents with disabilities or reduced mobility); ii.) to create a national public response to urgent and temporary accommodation needs arising from unexpected or unforeseeable events such as natural disasters, fires, pandemics, migration movements, asylum applications, or situations of imminent risk such as domestic violence, trafficking in human beings, risk of evictions and others; and iii) to increase the supply of student accommodation at affordable prices. The investments in the component entail construction of new dwellings and rehabilitation of existing ones. The component includes 1 reform and 6 investments for a total estimated cost of EUR 2 732 million, out of which EUR 1 583 million for non-repayable support and EUR 1 149 million for loans. The component has an overall climate contribution of 45%, and a digital contribution of 0.1%. COMPONENT 3 – Social Responses Portugal has been facing important demographic and socio-economic challenges for many years which have been amplified by the COVID-19 pandemic. This component of the Portuguese recovery and resilience plan addresses the following challenges: demographic ageing, rights of persons with disabilities and other persons with dependency and situations of poverty and social exclusion among disadvantaged communities and groups. In this context, this component addresses structural social policy related challenges and shortages in social service coverage for populations/regions in need, both in mainland Portugal and in the Autonomous Regions of Azores and Madeira. The main objectives of the component are: i) improving the social care facilities and ensuring better territorial coverage; ii) strengthening and expanding the network of social responses with innovative solutions and pilot projects and interventions; iii) developing novel community-based support responses, contributing to the promotion of independent living, prevention of dependency and the development of responses for non-institutionalisation in line with the UN Convention on the Rights of Persons with Disabilities; iv) ensuring accessibility to inclusive living and participation in society and the economy for persons with disabilities; and v) promoting the eradication of poverty by developing an all-encompassing national strategy focusing on the most vulnerable and disadvantaged communities. The component includes 4 reforms and 6 investments, for a total estimated cost of EUR 833 million. The component has an overall climate contribution of 25.3%, and a digital contribution of 1.4%. COMPONENT 4 – Culture This component of the Portuguese recovery and resilience plan addresses both the challenges relating to the effects of the COVID-19 pandemic and legacy problems, resulting from a situation of chronic lack of resources for the up-keep, renovation and modernisation of cultural installations and equipment. The main objectives of the culture component are: i) the renovation of buildings and national monuments; ii) the protection of artisan techniques and professions; iii) the modernisation of the technological infrastructure and cultural installations; iv) the digitalisation of works of art and the cultural heritage; and v) the internationalisation, modernisation and digital transition of bookshops and book publishing. The component includes 2 investments, for a total estimated cost of EUR 243 million. The component has an overall climate contribution of 24.8%, and a digital contribution of 38.1%. COMPONENT 5 – Investment and Innovation This component of the Portuguese recovery and resilience plan addresses challenges related to the relatively modest level of research and innovation, notably through fostering the links between business and science and with a particular focus on innovation on the green transition, and challenges related to the chronic under-capitalisation of the Portuguese business sector that has further deteriorated as a consequence of the COVID-19 pandemic. The objective of the component is to increase the competitiveness and resilience of the Portuguese economy through measures designed to strengthen research, by fostering the transfer of its results to the business sector, thus promoting innovation and investment. The research and innovation part of the component aims to improve academia-business cooperation, strengthen Portugal’s scientific and technological potential and support the implementation of ambitious and comprehensive research and innovation agendas addressing major socio-economic and environmental challenges. This is expected to be achieved through increased and more effective R&D and innovation investments, targeted support to better translate research results into investment, diversification and specialisation of the productive structure, exploiting the actual potential for competitive affirmation of established industrial sectors and emerging areas and contributing to the twin transition. In particular, this component aims at increasing exports of high value added goods and services, increasing R&D investment (both through new high skilled jobs and by increasing the R&D expenditure by firms), and contributing to reduce CO2 emissions. In line with the need to support the solvency of the productive system and to address market failures in access to finance, this component includes a reform and investments that contribute to the improvement of the Portuguese corporate financing market, through the creation and capital reinforcement of the National Promotional Bank, Banco Português de Fomento and the development of new financial instruments. The component also introduces capital market reforms to strengthen the capital markets in Portugal in the long term through the revision of the existing legal framework and the adoption of new laws, with particular emphasis being placed on securities investment companies for development of economy (SIMFEs), collective investment undertakings and the revision of the securities code. The component includes 5 reforms and 7 investments, for a total estimated cost of EUR 2 914 million, out of which 1,364 in non-repayable support and 1,550 in loans. The component has an overall climate contribution of 18% and a digital contribution of 1.8%.

COMPONENT 6 – Qualifications and Skills In Portugal, 44.5% of the population aged 25-64 had low education attainment levels in 2020, well above the EU average of 25.0%. In addition, the fraction of the population with basic digital skills or having never used the internet is very high. Equally, labour market segmentation and gender imbalances in pay and career opportunities remain high by EU standards. This component addresses multiple challenges related with the relatively low education and qualification attainment levels, lifelong learning participation, labour market segmentation, removing administrative barriers in the area of highly regulated professions, preparing for the challenges linked to the future of work, and gender equality and equal opportunities. The objectives of the component are broad, encompassing skilling and upskilling, some bottlenecks in the business environment, labour market segmentation, gender balance and equal opportunities. As regards production potential, this component focuses on measures to raise the low qualification levels and improve lifelong learning participation through the reform of education and Vocational Education and Training VET systems, foster knowledge transfer between universities/public research organisations and firms, and reduce restrictions in highly regulated professions, while enhancing competitiveness in the provision of business services. The component also presents measures to address various principles of the European Pillar of Social Rights (EPSR), such as labour relations and access to rights protection of workers with atypical labour contracts, financial support to promote the inclusion of unemployed people with permanent quality jobs, and the development of the Portuguese norm for a management system of equal pay. The component includes 5 reforms and 5 investments, with a total estimated cost of EUR 1 324 million. The component has an overall climate contribution of 13.7%, and a digital contribution of 50.3%. COMPONENT 7 – Infrastructure This component of the Portuguese recovery and resilience plan addresses the challenge of low territorial cohesion and the low competitiveness of firms in the inland regions caused by inadequate links to the road network. This leads to context costs for firms, such as transport costs through low road connectivity or the difficulty to attract skilled staff. Another challenge is the need to reduce emissions in the transport sector and in business parks. The objectives of the component are to increase territorial cohesion and improve competitiveness in order to promote the economic development of the inland regions. Through the deployment of charging stations, it aims to promote the decarbonisation of road transport. To this end, the component aims to make business parks more sustainable and more digital and provide them with better access to the road network. It also seeks to improve road transport connectivity by expanding the road network, e.g. by addressing missing links, including on the Azores, and providing four cross-border connections. The acceleration of the expansion of the network of publicly accessible electric vehicle charging stations is expected to help reduce the carbon footprint of the road transport sector in Portugal and make it more sustainable. This investment is a flanking measure for the expansion of the road infrastructure, in line with the Commission’s DNSH Guidance (2021/C58/01). The component includes 6 investments, with a total estimated cost of EUR 690 million. The component has an overall climate contribution of 13%, and a digital contribution of 3.7%. COMPONENT 8 – Forests This component of the Portuguese recovery and resilience plan addresses the following challenges: the socio-economic and demographic decline in rural areas, the existence of extensive areas without active management to prevent fires or to protect biodiversity and the highly fragmented private ownership of the land. The exodus of the population towards the major urban centres and the progressive ageing of the rural population has led to the abandonment of rural territories and traditional primary economic sectors. This led to the gradual expansion of forest areas, unplanned and unmanaged and with a high concentration of fuel load. These areas have a strong exposure to the danger of rural fires, which may result in the loss of human lives, extensive damage to land and property and the destruction of forests and the goods and services it produces. Portugal is the country in southern Europe with the largest share of burnt area in rural territories and the highest average number of fires. According to the European Forest Fire Information System (EFFIS), around 169 000 hectares were burnt on average per year between 2015 and 2019. The objectives of this component are i) to promote the active planning and management of vulnerable and high‑environmental value agricultural and forestry land, ii) to protect biodiversity by supporting the restoration of agricultural and forestry ecosystems, especially in burnt areas, iii) to contribute to territorial cohesion and job creation by revitalising the economic activities of rural territories, and iv) to increase the resilience of these territories by reducing the risk of fires through effective and efficient fire-prevention and, in case of fires, by reducing damage through effective and efficient fire-fighting. The component includes 3 reforms and 5 investments, with a total estimated cost of EUR 615 million. The component has an overall climate contribution of 100%, and a digital contribution of 14%. COMPONENT 9 – Water Management This component of the Portuguese recovery and resilience plan addresses the following challenges: deal with the high pressure on storage systems providing water supply and improve water efficiency to counteract the constraints imposed by the expected annual rainfall decrease, higher frequency of droughts, seasonality and water leakage increase. The objectives of the component are to mitigate water scarcity and ensure the resilience of the regions with the biggest drought issue and in critical need of effective to ensure water supply: Algarve, Alentejo and Madeira. Increased water resilience is of paramount importance to the development of these three regions, representing also a mandatory condition for tourism and ecosystems (especially in the Algarve and Madeira), agriculture (Alentejo and Madeira), economic activity reconfiguration (Alentejo) and to attend to combined pressures of peaks in irrigation needs and human consumption (Madeira). The component includes 3 investments, with a total estimated cost of EUR 390 million. The component has an overall climate contribution of 40%, and a digital contribution of 0%. COMPONENT 10 – Sea This component of the Portuguese recovery and resilience plan addresses the challenge to pave the way for a more competitive, cohesive,inclusive and furthermore a more decarbonised and sustainable sea economy, an area in which Portugal has strong potential. The component is expected to help seizing the opportunities arising from the climate and digital transitions in the sea economy. The objective of this component is to support the achievement of national objectives related to the productive potential of the sea economy. In particular the component seeks to ensure the sustainability and competitiveness of the sea-related business system. In addition, the component has the ambition to tackle at, at least partly, poverty in coastal communities, while ensuring a competitive and cohesive territory in a context of adaptation to climate and digital transitions, including with a focus on skills relevant for the sea sectors. The component is expected to also contribute to preserve the value of the services of the ocean ecosystem.

The component includes 1 reform and 4 investments, with a total estimated cost of EUR 252 million. The component has an overall climate contribution of 45%, and a digital contribution of 0.6%. COMPONENT 11 – Decarbonisation of Industry This component of the Portuguese recovery and resilience plan addresses the challenge of the contribution of the industry and industrial processes to achieving the objectives of carbon neutrality, as identified in the Carbon Neutrality Roadmap 2050 and the National Energy and Climate Plan 2030. This requires a structural transformation, based on the reconfiguration of industrial activity, changes in production processes and the way in which the resources are used. The measure of this component aims at promoting decarbonisation, energy and resource efficiency, and the use of alternative energy sources in the industrial processes. The projects to be supported are expected to also be linked to new technologies, innovation and digitisation of industry, seeking greater efficiency in the various production and organisational processes. The component is set to contribute to the climate transition of the Portuguese industry and support its competitiveness. The component includes 1 investment, with a total estimated cost of EUR 715 million. The component has an overall climate contribution of 100%, and a digital contribution of 0%. COMPONENT 12 – Bioeconomy This component of the Portuguese recovery and resilience plan addresses the challenge of the development of a viable, sustainable, circular and competitive bioeconomy. Such a transition is expected to support the modernisation and consolidation of industry by creating new value chains and greener industrial processes. The objective of this component is to promote and accelerate the development of high value-added products from biological resources as an alternative to fossil-based materials. The measures of this component aim at supporting structural changes linked to this transition and is set to contribute to address current global and local challenges, including climate change, the reduction of dependence on fossil resources and sustainable development. Three sectors (textiles and clothing, footwear and natural resin) are expected to be specifically supported for the development of bio-based products and to become more resource efficient. The component includes 1 reform and 1 investment, with a total estimated cost of EUR 145 million. The component has an overall climate contribution of 96%, and a digital contribution of 0%. COMPONENT 13 – Energy Efficiency in Buildings This component of the Portuguese recovery and resilience plan addresses the following challenges: The residential sector accounts for 18% of energy consumption and the services sector for another 14%. Buildings, therefore, play an important role for Portugal to achieve its carbon neutrality targets. Measures in this area, and in particular in the residential segment, can also help to alleviate energy poverty, which remains an important concern in Portugal with the percentage of households unable to keep homes adequately warm still at 19% in 2019. Portugal has committed to achieving carbon neutrality by 2050 and, therefore, needs to promote the decarbonisation of its building stock, while improving housing conditions (indoor comfort and quality) and affordability. This is set to be achieved by focusing on urban regeneration and increasing the energy performance of buildings and by combining energy efficiency and renewable energy with electrification, and targeting in particular low-income households to tackle energy poverty. The objectives of the component are to renovate public and private buildings to improve their energy performance and comfort, while reducing greenhouse gas emissions, and the country’s energy bill and dependence, mitigate energy poverty and to incorporate renewable energy sources the built environment. This should provide numerous social, environmental and economic benefits for people and businesses, such as the creation of local jobs and reduction of air pollution. The component includes 3 investments, with a total estimated cost of EUR 610 million. The component has an overall climate contribution of 100%, and a digital contribution of 0%. COMPONENT 14 – Hydrogen and Renewables Portugal has made a commitment to achieve carbon neutrality by 2050, positioning the country among those taking the lead in the fight against climate change under the Paris Agreement. The Carbon Neutrality Roadmap 2050 (RNC 2050) sets as decarbonisation targets to be achieved an emission reduction of more than 85% compared to 2005 and a carbon sequestration capacity of 13 million tonnes. The component addresses the so-called hard to abate sectors by promoting the deployment of renewable hydrogen. The objectives of the component are to promote the energy transition and decarbonisation of industry and transport with a strong focus on the production of renewable hydrogen and other renewable gases. In the case of the Autonomous Regions, the focus is on deployment of renewable energy (geothermal, wind, photovoltaic and hydropower) and storage. This component is key to reduce national energy dependency through the production of energy from local sources, to improve the trade balance, and to enhance the resilience of the domestic economy. The component includes 1 reform, and 3 investments, with a total estimated cost of EUR 370 million. The component has an overall climate contribution of 100%, and a digital contribution of 0%. COMPONENT 15 – Sustainable Mobility This component of the Portuguese recovery and resilience plan addresses several challenges of the transport sector: the need to reduce greenhouse gas and pollutant emissions, the need to reduce the dependence on a private car, and the need to guarantee better social cohesion in urban areas.

The objective of this component is to reduce emissions and enhance public transport by expanding the networks, making them more accessible, and strengthening public transport planning capabilities. This is expected to lead to more users of public transport, to encourage the modal shift from private car to public transport and promote better transport management and planning capabilities. To this end, this component consists of reforms and investments that promote sustainable public transport through the extension of the Lisbon and Porto metro, the construction of a light rail system in Lisbon, a bus rapid transit system in Porto, and the purchase of zero emission buses for public transport. The component includes 1 reform and 5 investments, with a total estimated cost of EUR 967 million. The component has an overall climate contribution of 100%, and a digital contribution of 0%. COMPONENT 16 – Enterprises 4.0 This component of the Portuguese recovery and resilience plan addresses the challenges related to the low digitalisation of enterprises. According to the results of the Digital Economy and Society Index (DESI 2020), Portugal ranks 19th in the EU and below the EU average. The most fragile dimensions in the case of Portugal are those of ‘Human Capital’ and ‘Use of Internet Services’ and some dimension of the ‘Integrating digital technologies’, all of which reflect limitations on the digital capacity and performance of companies. The objectives of the component are to target the business sector, in particular SMEs and their employees, with investments to accelerate the digital transition complemented by strengthening the digital skills of the employed workforce. The investments foresee the following actions: -Strengthening of the digital skills of employees in the business sector; -Modernisation of the business model of companies as well as their production processes, including the digitalisation of workflows such as business management, innovative products and invoicing; -Creation of new digital marketing channels for products and services; -Innovation and incorporation of advanced digital technologies into the business model of firms; and -Fostering of digitally based entrepreneurship. The component includes 1 reform, and 3 investments, with a total estimated cost of EUR 650 million. The component has an overall climate contribution of 0%, and a digital contribution of 100%. COMPONENT 17 – Quality and Sustainability of Public Finances The component addresses challenges related to Portugal’s high public debt-to-GDP ratio, which was aggravated further due to the COVID-19 crisis. The size of Portugal’s public debt-to-GDP ratio constraints the available fiscal space and, when economic conditions allow, calls for the need to ensure fiscal sustainability in the medium term. In that context, stronger framework conditions for fiscal policy are expected to contribute to a more growth-friendly path for stronger fiscal sustainability. The objective of the component is to enhance public financial management in Portugal and to bridge existing gaps in fiscal-structural reforms. Among others, these goals include: -delivering on the full and effective implementation of the 2015 Budgetary Framework Law and the associated structural changes in terms of budgeting, accounting and information systems; -increasing efficiency savings through the greater uptake of centralised procurement and spending reviews, which are planned to be integrated in the regular budgetary process and subject to systematic ex-post evaluations; -improving the financial performance of state-owned enterprises through greater transparency, enhanced monitoring and stronger governance, with management becoming more accountable and performance-oriented; and, -stepping up the efficiency of the revenue administration – including both the Tax and Customs Authority and Social Security services – through exploiting the available scope for greater digitalisation and business-friendliness. The component includes 1 reform and 3 investments, with a total estimated cost of EUR 406 million. The component has an overall climate contribution of 0% and a digital contribution of 100%. COMPONENT 18 – Economic Justice and Business Environment

This component of the Portuguese recovery and resilience plan targets the challenge of inefficiencies in the Portuguese justice system as well as remaining bottlenecks in business licencing. The length of administrative and tax procedures has been decreasing in recent years, but remains one of the highest in the EU, and the number of pending cases (case backlog) remains comparatively high. The business environment is also hindered by the low effectiveness of collateral and bankruptcy laws and by heavy licencing procedures in some sectors. The objective of the component is to strengthen and make more efficient the relations between citizens and companies with the State as well as reduce the burden and complexity that inhibit business activity with impact on productivity. It addresses two longstanding issues: obstacles in obtaining business licences and inefficiencies in the justice system, as well as the adoption of the ‘digital by definition’ paradigm in the justice system and its promotion in the licencing procedures, both as regards the functioning of courts and on interaction with stakeholders. The component includes 1 reform and 1 investment, with a total estimated cost of EUR 267 million. The component has an overall climate contribution of 0%, and a digital contribution of 100%. COMPONENT 19 – Digital Public Administration This component of the Portuguese recovery and resilience plan focuses on the need to provide better, simpler and more digital public services. While Portugal is well placed when it comes to the provision of digital services, fragmentation and duplication of requirements remain key obstacles to an efficient and user oriented public administration. This reform aims at tackling these challenges. The component aims at a better public service, by means of fostering the use of technological solutions and strengthening proximity for simpler, secure, effective and efficient access for citizens and busin