COMMISSION STAFF WORKING DOCUMENT 2022 Country Report - Portugal Accompanying the document Recommendation for a COUNCIL RECOMMENDATION on the 2022 National Reform Programme of Portugal and delivering a Council opinion on the 2022 Stability Programme of Portugal
Date: 2022-05-23
Institutions: European Commission, Secretariat-General
Subjects: Portugal, circular economy, economic recovery, economic reform, energy policy, fiscal policy, renewable energy, stability pact, stability programme, waste management

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 23.5.2022  SWD(2022) 623 final  COMMISSION STAFF WORKING DOCUMENT 2022 Country Report - Portugal Accompanying the document Recommendation for a COUNCIL RECOMMENDATION on the 2022 National Reform Programme of Portugal and delivering a Council opinion on the 2022 Stability Programme of Portugal {COM(2022) 623 final} - {SWD(2022) 640 final}  
 
 
 
 
 
 
 
 
 
 
 
 
ECONOMIC AND EMPLOYMENT SNAPSHOT 

by  the  pandemic.  The  youth  unemployment 
rate, already above the EU average before the 
crisis, peaked at 26.1% in the third quarter of 
2020 and remained above 20% in 2021, with 
particularly  high  rates  in  the  Azores  and 
Madeira. 

Graph 1.1: Real GDP growth and selected 
labour market indicators 

Source: European Commission 

Regional disparities persist. Portugal’s GDP 
per  inhabitant  dropped  from  76%  of  the  EU 
average in 2020 to 74% in 2021, with Lisbon 
being  the  only  Portuguese  region  close  to the 
EU  average.  Portugal  continues 
to  face 
challenges in achieving a greater level of inter, 
and  intra-regional  cohesion.  The  capital  city 
region concentrates high value added activities 
and  public  services,  and  strong  disparities 
persist  between  Lisbon  and  the  rest  of  the 
country (see Annex 15). 

Portugal’s economy is on its way 
to recovery and expansion 

to 

(13% 

tourism 

exposure 

Portugal’s  economy  continues  to  recover 
after being hit hard by the pandemic. The 
economy was growing at a sound pace before 
the  COVID-19  crisis.  However,  the  country’s 
of 
large 
employment  in  2019) (1)  made  the  economy 
more  vulnerable  to  the  pandemic,  with  GDP 
contracting  by  8.4%  (see  Annex  19)  in  2020. 
Portugal’s  economy  grew  by  4.9%  in  2021, 
recovering  more  than  half  of  the  output  level 
lost  in  2020.  Thanks  to  the  relaxation  of 
restrictions,  Portugal’s  high  vaccination  rates, 
and  the  projected  recovery  in  the  export  of 
services  led  by  the  country’s  large  tourism 
sector,  growth  is  forecast  to  increase  further 
to  5.8%  in  2022.  GDP  is  estimated  to  have 
reached  pre-pandemic 
in  the  first 
quarter of 2022. Inflation increased to 0.9% in 
2021  and  is  expected  to  increase  further  to 
4.4%  in  2022,  amid  significant  volatility  in 
commodity  markets  affected  by  Russia’s 
invasion of Ukraine. 

levels 

The labour market showed resilience, but 
youth  unemployment  remains  high.  Most 
headline labour market indicators recovered to 
pre-pandemic  levels  in  2021.  Unemployment 
fell to 6.6% in 2021. Employment and activity 
rates  rebounded  to  historic  highs,  helped  by 
labour  support  schemes,  including  financial 
assistance under the EU instrument Support to 
mitigate Unemployment Risks in an Emergency 
(SURE) (see Annex 3), which offset the impact 
of the pandemic. With the phasing out of most 
support  schemes,  employment  is  projected  to 
increase at a much slower pace than GDP over 
2022  and  2023 
in 
precarious  employment  were  badly  affected 

(Graph  1.1).  Youth 

(1)  ‘Behavioural changes in tourism in times of Covid-19’, 

JRC121262 

2 

-10-505101520GDP growthEmployment growthUnemployment% 
                                                 
   
 
Public finances benefit from the 
recovery but economic imbalances 
remain  

tax 

situation 

budgetary 

Portugal’s 
has 
started  to  improve.  Starting  from  a  surplus 
of  0.1%  of  GDP  in  2019,  the  public  budget 
balance turned into a deficit of 5.8% of GDP in 
2020,  which  subsequently  eased  to  2.8%  of 
GDP in 2021. As the economic recovery takes 
hold,  the  phasing-out  of  crisis  mitigation 
measures  and  growing 
revenue  are 
projected to lead to a further reduction of the 
deficit in 2022 and 2023. Portugal’s sustained 
trend  of  low  public  investment  has  been 
reversed and public investment is projected to 
continue  to  increase  towards  historically  high 
levels  in  the  coming  years,  prompted  by 
implementation of the recovery and resilience 
plan  (RRP).  The  public  debt-to-GDP  ratio  has 
resumed  a  downward  path  in  2021,  but 
remained  one  of  the  highest  in  the  EU 
(127.4% 
in  2021).  Adverse  demographic 
trends and the growing public sector workforce 
are  exerting  pressure  on  public  expenditure. 
robust  budgetary 
Implementing  a  more 
long-lasting  and 
framework,  and  reducing 
emerging 
state-owned 
in 
vulnerabilities 
enterprises  remain  key  to  strengthening  the 
sustainability of Portugal’s public finances. 

Portugal is facing a number of persistent 
macroeconomic 
imbalances.  The  main 
imbalances  identified  in  the  In-Depth  Review 
for  Portugal (2)  relate  to  high  external,  private 
and  government  debt  in  a  context  of  low 
(see  Annex 17).  The 
productivity  growth 
outbreak  of  the  COVID-19  pandemic  in  2020 
has  temporarily  derailed  the  process  of 
adjustment,  particularly  of  Portugal’s  high 
debt-to-GDP  ratios.  The  economic  recovery  in 
2021,  together  with  the  projections  for  2022 
and 2023, suggest that the country is back on 
a more favourable track. 

After  improving  in  2019,  productivity 
growth (3)  deteriorated  in  2020  as  a 

(2)  SWD(2022) 637 

(3)  Productivity is measured as the ratio of output in real 

terms per hour worked (see Annex 19). 

result  of  the  outbreak  of  the  COVID-19 
pandemic.  Different  factors  determine  the 
observed  sluggish  productivity  growth 
in 
Portugal in recent years (see Annex 10). These 
factors include low levels of capital per worker, 
low levels of investment, moderate innovation 
capacity,  overall 
levels  of  the 
low  skill 
population,  and  a  business  environment 
hampered  by,  among  others,  a  complex  tax 
system and a judiciary with low efficiency.  

Sustainability and social indicators 
reflect a positive trajectory but 
challenges remain  

(SDGs) 

in  recent  years 

Portugal  continues  to  make  progress 
towards  all  of  the  UN’s  Sustainable 
Development  Goals 
despite 
indicators  have 
challenges.  Most  of  the 
evolved  favourably 
(see 
Annex 1). The improvement is most marked in 
the social and labour market areas (SDG 1 No 
poverty and SDG 8 Decent work and economic 
the  other  hand,  SDG 11 
growth).  On 
(Sustainable  cities  and  communities)  is  only 
improving slightly due to poor performance in 
the circular economy and waste management. 
Progress is visible for SDG 3 (Good health and 
wellbeing)  and  SDG 9  (Industry,  Innovation, 
Infrastructure)  but  the  situation  is  still  far 
below  the  EU  average.  This  reflects  some  of 
the  challenges  identified  in  the  upcoming 
sections  related  to  the  health  and  long-term 
care systems and innovation.  

in 

the 
performs  well 
Portugal 
implementation of the European Pillar of 
Social  Rights.  The  number  of  early  school 
leavers  from  education  and  training  has 
decreased  significantly.  Disability  and  gender 
employment  gaps  have  narrowed,  and 
childcare 
(see 
Annex 12). Income inequality diminished in the 
years  before  the  pandemic,  converging  with 
the  EU  average  as  reflected  by  inequality 
indicators  like  the  income  quintile  share  ratio 
or  the  GINI  coefficient (4).  The  at-risk-of-

coverage  has 

improved 

(4)  The income quintile ratio, or S20/S80, corresponds to 
ratio of total income received by the 20% of the 

3 

 
                                                 
                                                 
rate 

also 

(AROP) 

decreased 
poverty 
significantly  and  was  below  the  EU  average 
before  the  COVID-19  crisis  (see  Graph  1.2). 
Regional  disparities  persist  with  the  poverty 
rate  in  Madeira  and  the  Azores  remaining 
almost double than that of Lisbon.  

Graph 1.2: Poverty (AROP) and inequalities 
(GINI) 2011-2020 (%) 

they  could  also  discourage  individuals  from 
investing in their education due to the related 
lower  differentiation  between  the  wages  of 
the low- and high-skilled. Moreover, the impact 
of  the  COVID-19  pandemic  risks  halting  the 
positive  overall  trend.  The  poverty  gap,  which 
measures  the  depth  of  poverty,  increased  in 
2020.  National  data (6)  point 
the 
deterioration  of  social  indicators  in  poverty 
and  inequality  in  2021,  impacted  by  the 
pandemic. 

to 

emission 

is  expected  to  achieve 

its 
Portugal 
greenhouse  gas 
reduction 
targets.  Portugal  has  committed  to  reaching 
climate  neutrality  by  2050.  It  has  surpassed 
its EU  2020 emission reduction target for the 
sectors  not  covered  by  the  EU  Emissions 
Trading System. By continuing current policies, 
Portugal  is  expected  to  meet  its  2030  target 
by a wide margin (see Annex 5).  

Source: Eurostat, EU-SILC 

still 

Portugal 
coverage  and 
faces 
adequacy  challenges  in  social  protection. 
The  adequacy  of  the  minimum  income  is  low 
at  37.5%  of  the  poverty  threshold 
(EU: 
58.9%) (5) and the coverage of social benefits 
is  weak.  Gaps  also  persist  in  formal  coverage 
for  non-standard  workers.  In-work  poverty 
remains  also  relatively  high.  The  rate  of 
employed  people  at  risk  of  poverty  was  9.5% 
in  2020,  with  stronger  incidence  amongst 
part-time workers. The persistently low level of 
poverty  and  inequality  reduction  by  social 
transfers  (see  Annex 12)  points  to 
lower 
expenditure  on  social  protection  than  the  EU 
average  and  to  inefficiencies  in  the  structure 
and  design  of  the  social  protection  system. 
The  social  housing  stock,  while  being 
developed,  is  still  lagging  behind  demand. 
Energy  poverty 
is  also  a  challenge  (see 
Annex 6).  Whereas  recent  increases  of  the 
minimum  wage  may  reduce  in-work  poverty, 

population with the highest income to that received by 
the 20% of the population with the lowest income. The 
GINI coefficient measures the extent to which the 
distribution of income within a country deviates from a 
perfectly equal distribution.  

Portugal  has  a  high  share  of  renewable 
energy  but  its  potential  is  not  yet  fully 
used.  Solar  and  wind  energy,  in  particular 
offshore,  could  be  further  developed  (see 
Annex 5) given the country’s high potential. In 
addition,  the  strengthening  of  energy  cross-
border interconnections would help to improve 
the security of supply.  

Portugal  will  face  increasing  challenges 
due  to  climate  change.  Natural  hazards 
such  as  droughts  and  forest  fires  are 
increasing.  Climate  change  adaptation, 
in 
particular in forest and water management, is 
a major challenge for Portugal.  

Russia’s invasion of Ukraine is 
expected to have limited direct 
impact on the Portuguese recovery 

Russia’s  invasion  of  Ukraine  is  expected 
to have a limited direct economic impact 
on  Portugal,  yet  indirect  effects  may  be 
significant.  Portugal  has  a  low  dependency 
on Russian energy supply. In 2020, it imported 

(6)  Portuguese National Statistics Office (INE) 2021, Survey 

(5)  Joint Employment Report 2022 (incomes 2019) 

on Income and Living Conditions. 

4 

2527293133351517192123252011201220132014201520162017201820192020AROP - EUAROP - PTGINI- EU (right axis)GINI - PT (right axis) 
   
                                                                        
                                                 
Portugal  introduced  policies  to  address 
the  humanitarian  crisis  in  Ukraine.  A 
special  reception  scheme  to  grant  temporary 
protection  to  displaced  persons  from  Ukraine 
was  adopted.  This  regime  clarifies  the  legal 
status  of  the  displaced  persons  from  Ukraine 
and  facilitates  the  provision  of  housing, 
education and employment.  

the 

from  Russia  10%  of  its  natural  gas  (only 
liquefied  natural  gas,  which  is  more  easily 
replaceable)  while  not  importing  any  Russian 
coal  and  oil (7).  The  overall  trade  volume 
between Portugal and both Russia and Ukraine 
is  low.  Portugal  relies  on  Ukraine  for  some 
basic agricultural products such as cereals and 
oilseeds.  However, 
total  share  of 
agricultural  imports  from  Russia  and  Ukraine 
remains  small.  Nevertheless, 
indirect 
impact via global supply chain disruptions may 
be  significant.  Risks  relate  to  high  commodity 
prices,  particularly  energy,  but  also  metals, 
agricultural  products,  construction  materials 
and  car  parts.  In  terms  of  food  supply,  risks 
are  aggravated  by  local  factors  such  as  the 
droughts  in  Portugal,  which  are  increasing  in 
frequency  and  intensity,  negatively  impacting 
crop  yields  and  leading  to  higher  dependency 
on imported agricultural products. 

the 

Portugal  is  implementing  measures  to 
cushion  the  rise  in  energy  prices.  Those 
measures include a temporary subsidy on fuel 
consumption,  a  reduction 
in  fuel  tax,  a 
reimbursement of the additional VAT raised on 
the higher fuel prices via fuel tax, and a freeze 
on the carbon rate under the fuel tax. Sector-
specific measures include a temporary subsidy 
for the passenger transport sector (buses and 
taxis),  extended  benefits  under  vehicle  and 
fuel taxes for the road haulage sector, as well 
as a tax deduction under corporate income tax 
for  the  transport  sector  as  a  whole.  Portugal 
also  allocated  EUR 150  million  of  carbon  tax 
revenues  to  subsidise  the  national  electricity 
system.  This  should  help  lowering  access 
tariffs  to  the  electricity  grid.  In  addition,  a 
fixed  social  benefit  of  EUR 60  was  granted  in 
April  2022  to  low-income  households  most 
vulnerable  to  rising  food  prices.  The  overall 
budgetary 
is 
estimated  at  around  0.6%  of  GDP by the  end 
of  June  2022,  when  all  such  measures  are 
planned to expire.  

impact  of  these  measures 

(7)  Eurostat (2020), share of Russian imports over total 

imports of natural gas, crude oil and hard coal. Crude oil 
does not include refined oil products. Portugal imported 
4% of its refined oil from Russia in 2020. Accounting 
for the secondary dependence on Russian coal through 
intra-EU imports would lead to the estimation that 
Portugal has a 55% Russian import dependency on 
coal, noting that the share of coal in the energy mix is 
very small (2.6%).  

5 

 
                                                 
 
THE RECOVERY AND RESILIENCE PLAN IS UNDERWAY 
THE RECOVERY AND RESILIENCE PLAN IS UNDERWAY 

set  of 

Portugal is set to receive EUR 16.6 billion 
in  grants  and  loans.  The  RRP  includes  a 
reforms  and 
broad 
structural 
investments  addressing  most 
challenges 
identified  in  the  European  Semester  (see 
on 
These  measures 
Annex 4). 
strengthening  the  competitiveness  of  the 
Portuguese  economy,  improving  skills  and 
qualifications,  increasing  territorial  and  social 
cohesion,  and  boosting  public  and  private 
investment  to  support  the  digital  and  green 
transition (see Annex 2). 

focus 

Employment, education and fair 
society  

The  RRP  includes  various  measures  to 
increase  labour  market  participation  and 
address  high 
youth  unemployment, 
contributing to the implementation of the 
European  Pillar  of  Social  Rights.  The 
Decent  Work  Agenda  includes  legislation  to 
regulate platform work and ensure equal pay. 
It  is  complemented  by  hiring  subsidies  to 
create  sustainable  jobs.  These  measures  aim 
to reduce segmentation and precariousness in 
the  Portuguese  labour  market.  The  hiring 
subsidy  scheme  includes  a  specific  focus  on 
young  workers  to  help  address  high  levels  of 
youth  unemployment.  Major  education  and 
skills  measures,  which  focus  on  vocational 
training,  are  also  expected  to  support  the 
employment  of  young  people.  Providing  more 
permanent  and  quality  employment  for  youth 
remains  one  of 
key  employment 
the 
challenges for Portugal.  

socio-economic 

The RRP constitutes a strong response to 
the 
It 
addresses  structural  social  challenges  for 
populations  and  regions  in  need,  both  in 
mainland Portugal and in the regions of Azores 
and Madeira. As part of the RRP, Portugal has 

challenges. 

for 

the 

adopted national strategies to combat poverty 
inclusion  of  people  with 
and 
disabilities.  These  aim  to  improve  social  care 
facilities  and  the  coverage  of  social  services 
with a community-based approach.  

(see 

pressures 

increasing 

Annex 16). 

Portugal  is  taking  actions  to address the 
social  challenge  of  housing  affordability. 
Rising  housing  and  rental  prices (8) 
(see 
Annex 19) are creating affordability issues and 
are 
on 
financial 
households.  This  is  coupled  with  a  rise  in 
households’ indebtedness driven by household 
issuance  of  new 
credit  growth  and  the 
mortgages 
Despite 
improvements  since  2008,  the  proportion  of 
Portuguese  households  overburdened  by 
housing costs was of 4.1% in 2020, and more 
than  four  times  higher  for  households  below 
the  poverty  line.  Public  housing  accounts  for 
only  2%  of  the  total  stock.  The  RRP  includes 
EUR 2.73 billion of investments to increase the 
social  and  affordable  housing  supply  both  in 
mainland  Portugal  and  in  the  Azores  and 
Madeira regions, to create a public network for 
temporary  accommodation,  and  to  increase 
the 
student 
accommodation.  

affordable 

supply 

of 

is  expected 

The  RRP 
to  continue 
improving  education  outcomes  for  all. 
Despite  major  progress  in  most  education 
performance  indicators,  the  level  of  progress 
differs between Portuguese regions and socio-
economic  background  still  play  a  significant 
role  in  students’  performance  (see  Annex 13). 
Portugal  plans 
its  pre-school 
to  expand 
network, invest in the digitalisation of schools, 
and  improve  the  attractiveness  of  higher 
focus  on 
education.  Several  measures 
promoting  science  and  technology  fields  in 

(8)  House prices show signs of potential overvaluation in 
Portugal. The European Systemic Risk Board considers 
high flow risks (increasing prices, growing lending or 
rising indebtedness) to be present in the Portuguese 
real estate sector. 

6 

 
 
                                                 
 
in 
higher  education 
schools  through  science  clubs  and  technology 
laboratories. 

institutions  but  also 

is 

than 

lower 

includes 

introducing 

ambitious 
Portugal 
measures to address the overall low skill 
level  of 
its  adult  population.  Despite 
progress in recent decades, Portugal still has a 
significant  skills  deficit  relative  to  the  EU. 
the  population  has  not 
Around  half  of 
secondary 
completed  more 
education (9). 
a 
The 
RRP 
the  vocational 
reform  of 
comprehensive 
education  and  training  system  coupled  with 
major  investments  in  training  for  various 
social and age groups. These measures aim to 
upskill  and  reskill  workers  to  adapt  to  labour 
market needs, and broaden education, training 
and  lifelong  learning  opportunities.  On  digital 
skills,  while  slightly  above  the  EU  average, 
45%  of  the  Portuguese  population  still  lacks 
basic digital skills. This raises important equity 
and inclusion issues regarding access to public 
services that have gone online (see Annex 11). 
The RRP includes targeted measures to tackle 
the digital skills gap for various social and age 
groups,  including  civil  servants.  Investment  in 
digital  education  and  training  is  expected  to 
tackle  the  high  number  of  workers  who  lack 
basic  digital  skills  and  to  reskill  workers  with 
digital competences.  

Comprehensive  reforms  and  investments 
focus  on  long-standing  issues  of  the 
Portuguese  health  and  long-term  care 
systems.  The  National  Health  Service  has 
faced  a  challenging  situation  for  years.  It  has 
been  under  considerable  pressure  since  the 
outbreak  of  the  COVID-19  pandemic.  The 
health  emergency  has  disrupted  planned  care 
and  disease  detection (10),  against 
the 
backdrop  of  high  out-of-pocket  payments 
(direct  spending  on  healthcare  by  households, 
see Annex 14). The pandemic has also exposed 
long-term  care 
the  fragility  of  Portugal’s 

(9)  In 2020, amongst the population aged 15-64, 55.5% 

had more than lower secondary education compared to 
75% in the EU (Source: Eurostat). 

(10)  Around 34% of Portuguese people reported some 

unmet healthcare needs during the first 12 months of 
the pandemic, a much higher share than the EU 
average of 21%. Eurofound survey - Living, working and 
COVID-19 survey, May 2021  

7 

living. 

community-based 

system,  which  is  expected  to  face  increasing 
pressure in the coming years due to the ageing 
population.  The  RRP  introduces  reforms  and 
investments  to  strengthen  the  networks  of 
integrated  and  mental 
primary,  palliative, 
health  care  services  and  to  promote  de-
institutionalisation  (moving  from  institutional 
and 
to 
in 
independent 
infrastructure, equipment and digitalisation for 
hospitals  and  health  services  in  mainland 
Portugal and the Azores and Madeira are also 
included,  along  with  measures  to  encourage 
physical  activities  at  all  ages.  Crucially,  the 
RRP  includes  a  reform  to  strengthen  the 
efficiency and financial sustainability of public 
hospitals  through  an  improved  governance 
model  anchored  in  managerial  accountability 
and performance-based management.  

services) 
Investments 

Resilience and competitiveness  

implementation  of 

A  stronger  budgetary  framework  could 
underpin  the  recovery.  Efficiency-oriented 
spending  reviews  and  the  2015  Budgetary 
Framework Law remain of key importance for 
improving  the  quality  of  public  finances  and 
them  more  growth-friendly.  The 
making 
effective 
the  2015 
Budgetary Framework Law has been subject to 
systematic  delays  and  the  RRP 
includes 
decisive  steps  towards  its  implementation. 
These  should  go  hand  in  hand  with  the 
planned  upgrade  of  the  information  systems 
for  public  financial  management,  as  well  as 
full  adherence  to  the  new  accrual-based 
accounting system.  

Measures  to  address  vulnerabilities  in 
state-owned enterprises are being taken. 
The  COVID-19  crisis  hit  many  Portuguese 
state-owned  enterprises,  in  particular,  those 
operating  in  the  transport  sector  that  have 
been  affected  by  the  containment  measures. 
The government granted capital injections and 
loans to some firms that operate the road, rail 
and  metro  networks.  Measures  to  swiftly 
identify  and  correct  deviations  from  the 
approved  budgets,  as  well  as  strengthen 
transparency  and  reporting  standards,  are 
being  implemented  at  a  gradual  pace.  To 

 
                                                 
room 

for 
for  business  R&D  but  with 
improvement on business investment, and the 
proportion  of 
small  and  medium-sized 
enterprises  introducing  innovation.  The  RRP 
includes  measures  to  support  R&I  based  on 
business-academia consortia and collaborative 
laboratories,  the  expansion  of  technology 
centres,  the  development of  digital  innovative 
products  and  processes,  and  the  provision  of 
services  by  interface  entities.  A  review  of  the 
2018-2030 
was 
completed,  aimed  at  improving  public-private 
partnerships  and  increasing  R&D  funding  and 
its  predictability.  In  addition,  the  RRP  includes 
reforms  and 
in  sectoral  R&I 
systems,  such  as  agriculture,  the  bioeconomy, 
(ocean-based 
the 
and 
economy). 

investments 

Innovation 

economy 

Strategy 

blue 

Green transition  

to 

to 

and 

R&I&D 

support 

reforms 

The  RRP  will  contribute  to  Portugal’s 
green  transition.  The  RRP  contributes  to 
climate  change  objectives  through  various 
measures,  which  account  for  EUR 6.29  billion 
(38% of the total allocation). The RRP includes 
investments 
promote 
sustainable public transport,  notably in Lisbon 
and Porto. The RRP  also includes reforms and 
for 
investments 
decarbonisation  and  to  boost  the  use  and 
production  of  hydrogen  and  renewable  gases, 
which  should  help  diversify  and  decarbonise 
the  energy  mix.  Other  measures 
in  the 
autonomous 
the  Azores  and 
Madeira will invest in renewables and storage 
solutions  and  will  revamp  the  electricity  grid. 
In  addition,  EUR 715  million  has  been 
allocated  to  the  decarbonisation  of  industrial 
processes. Measures for the development of a 
sustainable  blue  economy  will  also  contribute 
to 
Furthermore, 
adaptation  measures  in  the  field  of  water 
efficiency  and  landscape  management  are 
included to  help  Portugal better  deal  with the 
current and future impacts of climate change. 

regions  of 

transition 

green 

the 

increase responsibility and accountability, new 
management 
in 
contracts 
anchored 
performance-oriented 
incentives  for  public 
managers  were  incorporated  in  the  RRP  and 
entered into force in December 2021.  

for  viable 

The RRP aims to create a more business-
friendly  environment.  Despite  significant 
improvements  in  recent  years,  late  payments 
remain  problematic  for  small  and  medium-
sized  enterprises,  and  Portuguese  companies 
continue to be undercapitalised. A legal regime 
for  participatory  loans  was  established  in 
January  2022,  aimed  at  diversifying  their 
sources  of  financing.  RRP  measures  include 
the  establishment  and  capital  reinforcement 
of  the  National  Promotional  Bank  (Banco 
Português  de  Fomento)  to  improve  financing 
conditions 
companies.  While 
Portugal  has  shown  some  progress  on  the 
efficiency  of  insolvency  and  civil  enforcement 
proceedings, it still rates among the Members 
States with the lengthiest judicial proceedings, 
notably for administrative and tax justice (see 
Annex 11),  and  with  one  of  the  highest 
backlogs  of  pending  administrative  cases.  As 
part of the RRP, Portugal aims to modernise its 
to 
administrative  and 
streamline 
Additional 
structural  improvements  are  expected  from 
the  further  digitalisation  of  administrative 
late 
procedures, 
payments  by  public  buyers,  but  also  from the 
facilitation of investment through the removal 
of  barriers  to  licensing  scheduled  for  2025, 
and from the planned lifting of restrictions on 
regulated professions.  

tax  courts,  and 
procedures. 

in  particular 

related 

legal 

to 

system.  Despite  a 

The  RRP  has  the  potential  to  transform 
the  Portuguese  research  and  innovation 
(R&I) 
progressive 
improvement in recent years, Portugal still has 
a  moderate  level  of  R&D  intensity.  Coupled 
with  modest  cooperation  between  academia 
and businesses and the limited monitoring and 
the  smart  specialisation 
coordination  of 
agenda (11), 
the  potential 
upgrade  of  the  R&I  system.  Portugal  is  a 
moderate  innovator  (see  Annex 9),  with  a 
relatively  good  level  of  government  support 

this  hampers 

(11)  ‘Implementation of Smart Specialisation Strategies in 

Portugal: An assessment’, JRC121189 

8 

 
                                                 
in 

sizeable 

The RRP’s energy efficiency measures will 
contribute  to  reduce  emissions  and  to 
address  energy  poverty.  The  RRP  provides 
for 
building 
investments 
renovation,  including  schools,  and  is  expected 
to  make  a  sizeable  contribution  to  meet 
Portugal’s energy efficiency contribution to the 
EU target (12).  At the same time, rising energy 
prices disproportionately affect low and lower-
middle-income  households.  While  energy 
poverty  has  decreased  in  Portugal  in  recent 
years, it remains among the highest in the EU 
(see  Annex 6).  The  RRP 
includes  energy 
efficiency  measures  in  residential  and  non-
residential  buildings  and  in  social  housing, 
complemented  by  100 000  energy  efficiency 
vouchers for low-income households.  

Digital transition  

The  RRP  aims  to  strengthen  and  support 
the digital transition. Portugal is a medium 
performer  in  the  digital  area  (see  Annex 8).  It 
performs slightly above the EU average in the 
areas of basic and advanced digital skills (ICT 
specialists)  and  digital  public  services. 
It 
performs well above the EU average for fixed 
connectivity  and  the  use  of  AI  by  businesses. 
However,  it  lags  behind  in  5G  coverage.  Also, 
the  proportion  of  Portuguese  firms  with  at 
least  basic  digital  intensity,  and  using  cloud 
and big data applications, is still below the EU 
average. The RRP includes various measures to 
boost  the  digital  transition  (22%  of  the  total 
allocation).  The  most  prominent  measures 
address education and training in digital skills, 
the  digital  transformation  of  businesses,  and 
the digitalisation of public services. 

Box 1: 

Key deliverables expected under the Recovery and Resilience Plan in 2022-23 

  New law on regulated professions  

  Modernisation of the cadastral information system (land register) 

  Creation of specialised chambers in the higher administrative and tax courts 

  Legislative package for the re-organisation of the public administration 

  Creation of at least 30 000 permanent jobs (hiring subsidy programme) 

  Health-care reform (primary health care, mental health, long-term care services) 

  14 100 new or renovated vocational training stations 

  New system of special lanes for zero emission buses in Porto and 145 zero emission buses 

  Strengthening of the legal framework to develop the capital market 

  Capitalisation support for Portuguese businesses (EUR 1.3 billion) 

  12 000 small and medium-sized enterprises supported by digital commerce accelerators 

  3 000 additional dwellings for social housing and 7 000 student accommodation places 

  Digitalisation of schools 

  179 firefighting and fire-prevention vehicles, machinery and equipment 

(12)  35% increase of efficiency by 2030 in terms of primary 

energy intensity compared to 2005. 

9 

 
 
 
                                                 
 
several factors already mitigate the challenges 
arising  from  high  public  debt.  These  include 
Portugal’s  comfortable  cash  buffer, 
the 
gradual  lengthening  of  debt  maturity,  and  its 
relatively 
sources  and 
favourable  financing  conditions,  supported  by 
Eurosystem interventions in recent years.  

financing 

stable 

Graph 3.1: Old age dependency ratio 2020 – 
2050 (Member States above EU average in 
2050) 

FURTHER PRIORITIES AHEAD 
FURTHER PRIORITIES AHEAD 

in 

term. 

the  medium 

Beyond  the  challenges  addressed  in  the 
RRP,  as  outlined  above,  Portugal  faces 
additional  challenges.  Portugal’s  public 
finances  remain  sensitive  to  shocks,  with  the 
ageing  population  posing  an 
important 
The 
challenge 
modernisation  of  public  administration  will 
need  to  continue  to  allow  for  a  more 
competitive economy and a fairer society. The 
effects of climate change are a key structural 
challenge.  Similarly,  the  rise  in  energy  prices, 
aggravated  by  Russia’s  invasion  of  Ukraine, 
are  posing  challenges  for  Portugal,  which  is 
still  highly  dependent  on 
fuels. 
Furthermore, Portugal is still lagging behind on 
the  circular  economy,  a  key  aspect  for 
these 
sustainable 
challenges  will  help  to  make  further  progress 
on  achieving  SDGs  related  to  areas  where 
Portugal  still  performs  below  its  potential, 
such as sustainable cities (SDG 11), innovation 
(SDG 9),  health 
(SDG 3)  and  sustainable 
consumption and production (SDG 12). 

Addressing 

growth. 

fossil 

Ageing is exerting pressure on 
Portugal’s public finances in a 
high-debt context  

Portugal’s  high  public  debt-to-GDP  ratio 
makes  it  sensitive  to  shocks.  After  the 
peak  driven  by  the  COVID-19  pandemic  in 
2020,  the  public  debt-to-GDP  ratio  started  to 
in  2021.  According  to  the 
decline  again 
Commission  2022  spring  forecast,  it  would 
continue  to  decline  in  2022  and  2023.  At  the 
same  time,  any  worsening  of  Portugal’s 
economic  and  financing  conditions  could  lead 
to higher public debt-to-GDP ratios, compared 
to those projected by the Commission services 
(see Annex 20). This underlines the importance 
of  prudent  fiscal  policies,  alongside  economic 
growth, which would contribute to a sustained 
reduction  of  public  debt.  At  the  same  time, 

Source: European Commission 

Public  finances  are  under  pressure  from 
adverse  demographic  trends.  The  old-age 
dependency ratio (13)  stood at 34.5% in 2020, 
above  the  EU  average  of  32%.  Against  the 
background  of  rising  life  expectancy  and  a 
very low fertility rate, the ratio is projected to 
increase  significantly  to  62.8%  by  2050 
(Graph  3.1).  This  implies  that  Portugal  would 
go  from  having  approximately  three  working-
age  people  for  every  person  aged  over  65 
years to less than two working-age people. As 
a  direct  result  of  this  demographic  trend, 
pension spending is expected to rise to a peak 

(13)  Proportion of people aged 65 and over relative to those 

between 20 and 64. 

10 

01020304050607020202050 
 
  
                                                 
 
in  2035 (14).  This  is  compounded  by  expected 
additional  spending  needs,  notably  on  health 
and  long-term  care,  which  are  also  set  to 
increase  over  the  medium  to  long  term. 
Furthermore, while past reforms improved the 
long-term  sustainability  of 
the  pension 
system, recurrent special increases in pensions 
and early retirement reforms further added to 
the  upward  trend  driven  by  ageing.  All  these 
elements  combined  are  expected  to  have  a 
lasting effect on current spending. 

Portugal’s public sector 
employment faces performance 
and attractiveness challenges 

The  public  sector  workforce  has  been 
growing  steadily  in  recent  years,  putting 
pressure  on  public  expenditure.  The 
number  of  public  sector  workers  reached  its 
peak  of  the  last  decade  in  the  fourth  quarter 
of  2021,  leading  to  a  permanent  increase  in 
public  expenditure.  As  a  result,  Portugal’s 
spending on public sector wages exceeded the 
EU  average  by  more  than  1.3  percentage 
points  of  GDP  in  2021  (11.8%  of  GDP  in 
Portugal,  compared  to  10.5%  in  the  EU). 
Rationalising  the  public  sector  wage  bill  and 
employment  levels,  while  at  the  same  time 
ensuring  an  efficient  delivery  of  effective 
public  services,  is  important  for  safeguarding 
the  government’s  ability  to  adjust  public 
spending in line with shifting policy priorities or 
the need to smooth out economic fluctuations.  

A  key  challenge  is  to  adapt  the  public 
sector  workforce  to  changing  demands. 
Ageing  is  expected  to  lead  to  higher  demand 
for  health  and  long-term  care  services,  while 
the  fall  in  school-age  children  may  translate 
into  lower  demand  for  education  services. 
Public  sector  workers  are  also  ageing, 
especially  in  specific  sectors.  For  instance, 
Portugal has one of the highest proportions of 
teachers  aged  50  years  and  over  in  the  EU. 
Moreover,  there  are  challenges  with  staff 
retention in strategic sectors (notably in health 

and  long-term  care),  where  the  government 
competes  with  private  employers.  Although 
some  measures,  including  in  the  RRP,  aim  to 
upskill public sector workers and develop their 
digital and managerial skills, these risk falling 
short  of  a  cross-cutting  and  comprehensive 
overhaul of Portugal’s public sector workforce. 

Simpler tax and social protection 
systems would support 
sustainable and inclusive growth 

is 

The tax system remains very complex. The 
report  by  the  2019  Working  Group  on  Tax 
Benefits,  commissioned  by  the  Ministry  of 
Finance,  concluded  that  Portugal’s  tax  benefit 
system 
rather  cumbersome  and  not 
sufficiently  transparent  (more  than  500  tax 
benefits  have  been  identified,  spread  over 
more  than  60  legal  texts),  and  that  the 
economic efficiency of tax expenditures would 
from  consistent  monitoring  and 
benefit 
assessment (15). 
rate 
structure  of  the  corporate  income  tax  is 
and  municipal 
state 
compounded 
by 
surcharges, 
for 
complexity 
generating 
taxpayers and an additional burden for the tax 
administration (16).  Direct  tax  withholdings  are 
often too high (17), resulting in sizeable refund 
claims  in  the  subsequent  year  (structurally 
above 2% (18) of GDP in the recent past), which 
entails additional costs for both taxpayers and 
the tax administration. 

Furthermore, 

the 

There  is  scope  to  make  the  management 
of  taxes  and  social  contributions  more 
efficient and taxpayer friendly. This would 
improve the business environment and reduce 
administrative  costs  for  both  taxpayers  and 

(15)  ‘Tax benefits in Portugal – concept, methodology and 
practice’, Working Group on Tax Benefits, May 2019. 

(16)  Braz, C., Cabral, S., and Campos, M. M. (2022). ‘A micro-
level analysis of corporate income taxation in Portugal’, 
Economic Studies, Volume VIII, Number 1, Banco de 
Portugal. 

(17)  ‘Analysis of the Draft State Budget for 2022’, Public 

Finance Council, April 2022. 

(14)  ‘The 2021 Ageing Report’, European Commission, 

(18)  Budget Execution Reports, Directorate-General for the 

Institutional Paper 148, May 2021. 

Budget, Ministry of Finance.  

11 

 
                                                 
                                                 
the  EU  average 

the  tax  administration.  Paying  VAT  and  social 
contributions  appears  to  be  particularly  time-
consuming for businesses in Portugal. The size 
of  outstanding  tax  arrears  and  the  recurrent 
cost  of  tax  collection  are both  high  compared 
with 
(see  Annex 18). 
Specifically,  for  the  corporate  income  tax,  the 
Commission services estimate that a reduction 
of compliance costs to close to the EU average 
could  boost  GDP  by  close  to  0.5 % (19).  At  the 
same time, despite Portugal’s tax and customs 
administrations  investing  comparatively  less 
than  most  EU  Member  States  in  information 
and  communication  technologies,  the  e-filling 
of 
is  prevalent.  Overall,  a  more 
streamlined  and  better  coordinated  system  – 
covering both taxes and social  contributions  – 
is  still  lacking,  leading  to  the  duplication  of 
reporting  requirements  and  creating  room  for 
inspections  to  become  more  targeted  and 
effective. 

taxes 

The  complexity  of  the  social  protection 
its  effectiveness  and 
system  hinders 
adequacy.  The  impact  of  social  transfers  in 
reducing  poverty  is  below  the  EU  average. 
There is a multitude of social benefits directed 
at  vulnerable  groups,  often  serving  similar 
objectives and resulting in relatively low take-
up  rates.  This  leads  to  the  fragmentation  of 
the  social  protection  system,  a 
lack  of 
effective  focus  on  those  most  in  need,  and 
undue complexity. The process of verifying the 
eligibility  of  applications  for  social  benefits, 
such  as  the  minimum  income,  is  also  time-
insufficient 
consuming,  when 
administrative 
the 
necessary  checks 
timely  manner. 
in  a 
Administrative complexity generates costs and 
long waiting times. This may end up hindering 
the  social  protection’s  system  coverage,  with 
the people who are eligible running the risk of 
missing  out  on  receiving  social  benefits. 
Tackling  these  challenges  is  key  for  Portugal 

capacity 

conduct 

there 

to 

is 

to contribute to reaching the 2030 EU headline 
target on poverty reduction (see Annex 12). 

Portugal is particularly vulnerable 
to the effects of climate change 

is  facing 

schemes 
of 
result 

Portugal 
increasing  natural 
hazards.  Droughts,  floods,  coastal  erosion 
and  forest  fires  are  increasing  in  frequency 
intensity.  Effective  water  and  forest 
and 
management  is  crucial  for  tackling  falling 
water  levels  and  the  high  exposure  to  forest 
fires.  In  turn,  the  consequences  of  climate 
change,  including  extreme  weather  events 
such  as  droughts  and  wildfires,  carry  the 
imminent  risk  of  adversely  affecting  public 
finances. Emergency support directly linked to 
the  provision  of  assistance  to  households  or 
to 
ensure 
investment 
the 
infrastructure 
damaged 
replacement 
additional 
naturally 
public 
in 
spending (20).  The  RRP 
includes  measures 
related 
in 
transformation 
landscape 
vulnerable forest areas and the prevention and 
combating of rural fires. It also includes water 
management  measures,  as  water 
loss 
reduction and water resilience, focusing on the 
three  Portuguese  regions  suffering  the  most 
from water scarcity:  Alentejo, the Algarve and 
Madeira.  A  new  strategic  plan  for  water  and 
wastewater  is  under  development.  Further 
investments  throughout  the  country  would  be 
needed  in  areas  such  as  water  governance, 
water body rehabilitation and water efficiency 
(see  Annex 5).  Portugal  would  also  benefit 
from 
to 
the  deployment  of  alternatives 
hydropower as renewable energy sources.  

to 

(19)  The analysis used the CORTAX general equilibrium 
model and the framework described in Barrios, S., 
d’Andria, D., Gesualdo, M. (2019), ‘Reducing tax 
compliance costs through corporate tax base 
harmonisation in the European Union’, JRC Working 
Papers on Taxation and Structural Reforms No 2/2019. 
Tax compliance costs were expressed in relative terms 
to labour costs. The simulation incorporated a 40% 
reduction in tax compliance costs for all firms operating 
in Portugal, thus bringing them close to the EU average. 

(20)  Such fiscal risks have manifested recently in the context 
of the unprecedented large-scale wildfires occurring in 
2017, where Portugal benefited from the application of 
the ‘unusual event clause’ of the Stability and Growth 
Pact in relation to exceptional expenditure for 
preventive measures to protect the national territory 
against wildfires. 

12 

 
                                                 
                                                 
Waste management remains a 
major obstacle to ensuring 
environmental sustainability  

Graph 3.2: Municipal recycling rate (2015-
2020) 

(which 

includes 

in  Portugal 

Portugal  is  far  below  the  EU  average  on 
circular economy and waste management 
indicators.  The  quantity  of  municipal  waste 
generated 
is  around  the  EU 
average.  However,  the  average  municipal 
recycling  rate  is  low  and  decreasing  (Graph 
3.2). Portugal performs very poorly against the 
EU and missed the EU target of recycling half 
of municipal waste by 2020. In this regard, the 
EU  has  set  even  more  ambitious  targets  for 
the next decade. There are also major regional 
disparities,  with  many  regions  in  the  Centre 
and the region of Beja lagging behind in waste 
recycling, 
valorisation 
composting and re-using waste materials). The 
percentage  of  municipal  waste  that  is  still 
landfilled  (48%)  is  more  than  double  the  EU 
average.  Furthermore,  and  despite  some 
positive  developments  such  as  packaging 
recycling  and  recovery,  the  circular  material 
use  rate  (proportion  of  material  recycled  and 
fed back into the economy) was 2.2% in 2020, 
one  of  the  lowest  in  the  EU,  and  has  not 
significantly  improved  since  2015.  All  this 
holds back circular economy opportunities (see 
Annex  7).  The  RRP  addresses  some  circular 
economy  aspects  and  includes  a  new  waste 
management 
EU 
regulations.  Specific  support  measures  relate 
(use  of 
to  one  specific  waste  stream 
bioproducts  in  industry).  Broader  support  for 
improving waste management and the circular 
economy in Portugal would be needed. 

transposing 

regime, 

Source: Eurostat 

Energy supply needs to be made 
more diverse and resilient  

Portugal  has  a  high  share  of  renewable 
energy but is still dependent on imported 
fossil fuels. Portugal exceeded its renewable 
energy target in 2020 with a share of 34% of 
gross  final  energy  consumption (21)  and  60% 
in  2021,  mainly 
of  electricity  generation 
thanks  to  hydropower  and  wind  generation. 
However,  fossil  fuels  still  accounted  for  69% 
of  its  gross  inland  energy  consumption  in 
trend.  Oil 
2020,  despite  a  decreasing 
dependency  is  particularly  high  in  transport. 
Road  transport  continues  to  represent  a  large 
share  of  Portugal’s  energy  consumption  and 
GHG  emissions.  Portugal  imports  all  its  fossil 
fuels but it is not highly dependent on Russia, 
with  10%  of  its  natural  gas  (only  liquefied) 
imports  from  Russia  in  2020.  Nevertheless, 
Portugal’s current energy mix  is mostly based 
on oil. While coal for electricity production has 
been  phased  out  with  the  closing  of  the  last 
coal  power  plants,  the  share  of  gas (22)  used 
for power generation was 33% in 2020, partly 

(21)  Portugal has set targets of 31% in 2020 and 47% in 

2030. 

(22)  The vast majority of Portugal’s gas import are in the 

form of liquefied natural gas (LNG), making it easier to 
diversify its origin. 

13 

15202530354045505560201520162017201820192020European UnionPortugal% 
  
                                                 
measures,  Portugal  would  need  to  invest 
EUR 4.95  billion  per  year  until  2050  for  the 
full transformation of the Portuguese building 
stock (26). School buildings in particular require 
extensive renovation (see Annex 13).  Effective 
reforms  and  incentives  will  be  required  to 
transform  the  old  and  inefficient  building 
stock, which could also help to mitigate energy 
poverty.  

investments 

through  RRP 

because of lower hydropower availability as a 
result of frequent droughts. Portugal is taking 
steps  to  accelerate  renewables  deployment, 
including 
in 
renewables,  particularly  in  Madeira  and  the 
Azores. Portugal aims to achieve around 2 GW 
of  installed  capacity  to  produce  renewable 
hydrogen  by  2030  (reaching  5  GW  in  2050), 
imports.  However, 
leading 
Portugal  still  has  under-exploited  potential, 
especially related to offshore energy (23), local 
and  small-scale  solar  energy  generation,  and 
sustainable  biogas. Despite  the improvements 
achieved  with  the  introduction  of  the  recent 
legal  framework  for  renewables,  obstacles 
remain  in  the  Portuguese  system  for  issuing 
installing  and 
production 
connecting plants to the electric grid. 

to  fewer  gas 

licences  and 

Transmission  grids  and  cross-border 
limiting 
interconnections  are 
energy 
factors  for  the  electricity  system.  The 
level  of  electricity  interconnection  between 
Portugal and Spain has progressed and is now 
around  10% (24).  The  low  level  of  energy 
interconnection, 
in  particular  with  France, 
affects the whole  of the Iberian Peninsula. As 
stated  in  the  REPowerEU  Communication (25), 
increasing  the  interconnection  level  among 
these countries is critical. The current status of 
the  electricity  transmission  and  distribution 
grids,  including  electric  vehicle  charging  and 
smart meters, aggregation of energy use, and 
long 
storage/flexibility 
markets, remains a challenge for the resilience 
of  the  Portuguese  electricity  system  and  is 
renewable 
limiting 
includes 
energies.  The  Portuguese  RRP 
and 
investment 
in 
distribution  grids 
mainland Portugal.  

the 
in  Madeira,  but  not 

the  development  of 

transmission 

renewable 

term 

in 

Further energy efficiency measures would 
also reduce the  need  for  fossil  fuels.  The 
energy  renovation  rate  of  buildings  remains 
low for both public and private buildings. While 
renovation 
the 

includes 

sizeable 

RRP 

(23)  Portugal has currently 25 MW offshore wind capacity 
while the EU has 16 GW and aims to reach at least 
60 GW by 2030. 

(24)  The national target for 2030 stands at 15%. 

(25)  COM(2022) 108 final, 8 March 2022 

(26)  National Long-term Renovation Strategy (ELPRE) 

14 

 
                                                 
 
                                                 
KEY FINDINGS 
KEY FINDINGS 

Portugal’s  Recovery  and  Resilience  Plan 
includes measures to address a series of 
its structural challenges through:  

  increasing  employment,  addressing  youth 
unemployment and reducing labour market 
segmentation; 

  improving the skills of the adult population, 
including  those  related  to  the  digital 
transition; 

  ensuring the resilience and inclusiveness of 
the  social  protection,  health  and  long-term 
care  systems  in  view  of  the  demographic 
shifts; 

  strengthening  the  budgetary  framework 
and  the  financial  sustainability  of  state-
owned enterprises; 

  improving 

the  business 

environment, 
including  digitalisation,  firms’  productivity, 
the  R&I  system,  and  firms’  access  to 
financing. 

Beyond  the  reforms  and  investments  in 
the RRP, Portugal would benefit from: 

  simpler  tax  and  social  protection  systems 
to  reduce  the  associated  administrative 
burden, improve  the business  environment, 
and  strengthen 
the  effectiveness  and 
adequacy  of  minimum  income  and  other 
social benefits; 

  boosting  the  economic  potential  of  all 
Portuguese  regions  to  promote  social  and 
territorial  cohesion  and  develop  new 
sources of growth; 

  making the public sector more attractive to 
skilled  and  talented  staff,  to  improve  the 
efficiency  and  performance  of  the  public 
sector workforce; 

  improved water management to strengthen 
resilience  against  the  effects  of  climate 
change; 

  improved  waste  management  to  support 
the  transition  towards  a  circular  economy 
and  help  meet  EU  recycling  and  landfilling 
targets on a sustainable basis; 

  further  deployment  of  wind  and  solar 
energy, 
the 
strengthening  of  energy  interconnections 
and transmission infrastructure; 

including  offshore,  and 

  further sustainable transport and improved 

energy efficiency framework. 

15 

 
 
 
ANNEXES 

 
 
 
LIST OF ANNEXES 

Cross-cutting progress indicators 

Annex 1: Sustainable Development Goals 

Annex 2: Recovery and Resilience Plan - Implementation 

Annex 3: Other EU instruments for recovery and growth 

Annex 4: Progress in the implementation of country-specific recommendations 

Environmental sustainability 

Annex 5: Green Deal 

Annex 6: Employment and social impact of the green transition 

Productivity 

Annex 7: Resource efficiency and productivity 

Annex 8: Digital transition 

Annex 9: Innovation 

Annex 10: Industry and single market 

Annex 11: Public administration 

Fairness 

Annex 12: Employment, skills and social policy challenges in light of the European Pillar of Social Rights 

Annex 13: Education and skills 

Annex 14: Health and health systems 

Annex 15: Economic and social performance at regional level 

Macroeconomic stability 

Annex 16: Key financial sector developments 

Annex 17: Macroeconomic Imbalance Procedure assessment matrix 

Annex 18: Taxation 

Annex 19: Key economic and financial indicators 

Annex 20: Debt sustainability analysis 

LIST OF TABLES 

Table A2.1: 
Table A4.1: 
Table A5.1: 
Table A7.1: 
Table A8.1: 

Key elements of the Portuguese RRP 
Summary table in 2019, 2020 and 2021 CSRs 
Indicators underpinning the progress on EU Green Deal from macroeconomic perspective 
Selected resource efficiency indicators 
Key Digital Economy and Society Index Indicators 

19 

21 

21 

23 

26 

29 

32 

32 

36 

38 

38 

40 

42 

44 

47 

50 

50 

52 

54 

56 

59 

59 

61 

63 

65 

66 

23 
30 
35 
38 
41 

 
 
 
Table A9.1: 
Table A10.1: 
Table A11.1: 
Table A12.1: 
Table A13.1: 
Table A14.1: 
Table A15.1: 
Table A16.1: 
Table A18.1: 
Table A19.1: 
Table A20.1: 
Table A20.2: 

Key research, development and innovation indicators 
Key single market and industry indicators 
Public administration indicators 
Social Scoreboard for Portugal 
EU-level targets and other contextual indicators under the European Education Area strategic framework 
Key indicators, health 
Portugal, selected indicators at regional level 
Financial soundness indicators 
Indicators on taxation 
Key economic and financial indicators 
Debt sustainability analysis for Portugal 
Heat map of fiscal sustainability risks for Portugal 

LIST OF GRAPHS 

Graph A1.1: 

Progress towards SDGs in Portugal in the last five years 

Graph A2.1: 

Share of RRF fund contributing to each policy pillar 

Graph A2.2: 

Total grants disbursed under the RRF 

Graph A2.3: 

Total loans disbursed under the RRF 

Graph A2.4: 

Fulfilment status of milestones and targets 

Graph A3.1: 

ESIF 2014-2020 total budget by fund 

Graph A3.2: 

Cohesion policy contribution to the SDGs 

Graph A4.1: 

Portugal's progress on the 2019-2020 CSRs (2022 European Semester cycle) 

Graph A5.1: 

Fiscal aspects of the green transition  Taxation and government expenditure on environmental protection 

Graph A5.2: 

Thematic – Energy  Share in energy mix (solids, oil, gas, nuclear, renewables) 

Graph A5.3: 

Thematic – Biodiversity  Terrestrial protected areas and organic farming 

Graph A5.4: 

Thematic – Mobility  Share of zero emission vehicles (% of new registrations) 

Graph A6.1: 

Fair green transition challenges 

Graph A6.2: 

Energy poverty by income decile 

Graph A7.1: 

Municipal waste treatment 

Graph A11.1: 

Performance on evidence-based policy making indicators 

Graph A11.2: 

Performance on the single market public procurement indicator 

Graph A14.1: 

Life expectancy at birth, years 

Graph A14.2: 

Projected increase in public expenditure on healthcare over 2019-2070 (AWG reference scenario) 

Graph A15.1: 

Portugal, selected indicators at regional level 

Graph A15.2: 

Territories most affected by the climate transition in Portugal 

Graph A15.3: 

Unemployment in Portugal 

Graph A18.1: 

Indicators on tax wedge 

43 
45 
49 
51 
53 
55 
56 
59 
63 
65 
66 
67 

22 

23 

24 

24 

25 

26 

27 

29 

32 

33 

34 

34 

37 

37 

39 

47 

48 

54 

54 

56 

57 

57 

64 

20 

 
 
 
 
CROSS-CUTTING PROGRESS INDICATORS 
ANNEX 1: SUSTAINABLE DEVELOPMENT GOALS 
ANNEX 1: SUSTAINABLE DEVELOPMENT GOALS 

from  the  EU  average,  in  particular  on  noise 
pollution, road deaths, obesity rate and healthy life 
years  at  birth  (59.2  years  in  2019  against  64.6 
years  for  the  EU).  On  education,  the  tertiary 
education  attainment  rate  (population  aged  25-
34)  in  Portugal  increased from  35.0%  in  2016  to 
47.5%  in  2021  and  is  now  slightly  above  the  EU 
average  for the participation  of  adults in  learning 
(12.9%). The Portuguese RRP includes far-reaching 
measures  to  progress  towards  a  more  equal  and 
healthy society,  such as a reform of primary care 
services  and  investments  in  community-based 
social services. 

labour  market 

Portugal  is  improving  on  SDG  indicators 
related  to  productivity  (SDG  4,  8,  9).  Basic 
digital  skills  among  the  adult  population  are 
progressing (55% in 2021) and on par with the EU 
is 
average.  The  Portuguese 
performing  relatively  well  in  comparison  with  the 
EU average, with a high employment rate (75.9%) 
and a sharp decrease of long-term unemployment 
from  (2.9%  in  2021).  R&D  and  innovation,  while 
improving, remain an area of concern. Only 1.62% 
of GDP was allocated to R&D in 2020 (EU: 2.32%), 
the number of patent applications to the European 
Patent  Office  (EPO)  per  million  inhabitants,  while 
improving in recent years, remains very low at 24 
in 2020 (EU: 147). The ambitious RRP measures to 
improve the business-academia link, increase R&D, 
or  reform  vocational  education  and  training  have 
the potential to transform the Portuguese business 
sector and the R&I system. The RRP also includes 
the  lifting  of  some  restrictions  on  regulated 
professions. 

Portugal  is  performing  well  or  improving  on 
SDG  indicators  related  to  macroeconomic 
stability  (8,  16).  Portugal  is  closing its  gap  with 
the  EU  in terms  of  investment  share  of GDP  with 
19.1%  in  2020  (EU:  22.33%).  The  expenditure  on 
law courts from central government progresses in 
line  with  the  rest  of  the  EU.  The  share  of 
population reporting a crime, violence or vandalism 
dropped  to  6.6%  in  2020  (EU:  10.9%).  The  RRP 
includes  measures  to  modernise  administrative 
and tax courts. 

This  Annex  assesses  Portugal’s  progress  on 
the  Sustainable  Development  Goals  (SDGs) 
along  the  four  dimensions  of  competitive 
sustainability.  The  17  SDGs  and  their  related 
indicators  provide  a  policy  framework  under  the 
UN’s  2030  Agenda  for  Sustainable  Development. 
The  aim  is  to  end  all  forms  of  poverty,  fight 
inequalities  and  tackle  climate  change,  while 
ensuring that no one is left behind. The EU and its 
Member  States  are  committed  to  this  historic 
global  framework  agreement  and  to  playing  an 
active  role  in  maximising  progress  on  the  SDGs. 
The graph below is based on the EU SDG indicator 
set  developed  to  monitor  progress  on  SDGs  in  an 
EU context. 

is 

final 

related 

indicators 

increased 
in  gross 

improving 
Portugal  performs  well  or 
overall  on  SDG 
to 
environmental sustainability (SDG 2, 7, 9, 11, 
the  share  of 
12,  13).  Portugal 
renewable 
energy 
energy 
consumption from 30.5% in 2015 to 34% in 2020, 
which  is  high  in  comparison  to  the  EU  average 
(22.1% in  2020).  The circular  economy indicators, 
on  the  other  hand,  still  pose  a  challenge:  the 
municipal waste recycling rate further deteriorated 
to  26.5%  in  2020  (against  47.8%  for  the  EU 
average) and the circular material use rate is only 
one  fifth  of  the  EU  average.  Various  measures  in 
Portugal’s recovery and resilience plan (RRP), such 
as energy efficiency renovations, the extension of 
metro  lines,  increased  use  of  bioproducts  in 
industry, and the decarbonisation of industry,  aim 
to  further  contribute  to  general  greenhouse  gas 
emission savings. 

is 

Portugal  performs  well  or 
improving 
overall  on  SDG  indicators  assessing  the 
fairness of society and the economy (SDG 1, 
2,  3,  4,  5,  8,  10) (27).  Almost  all  poverty 
indicators  have  improved  markedly  in  Portugal 
between  2015  and  2020  and  are  now  firmly 
better than the EU average. Inequalities have also 
reduced  but  some  challenges 
remain.  The 
difference between  cities and  rural  areas  (‘urban-
rural  gap’)  remains  high  and  the  citizenship  gap 
(difference  between  EU  and  non  EU  nationals) 
increases  for  employment  and  the  integration  of 
young  people.  Despite  some  improvements,  most 
of the health and well-being indicators are still far 

(27)  See Annex 12. 

21 

 
 
                                                 
 
 
 
 
Graph A1.1: Progress towards SDGs in Portugal in the last five years 

For detailed datasets on the various SDGs see the annual ESTAT report ‘Sustainable development in the European Union’, 
https://ec.europa.eu/eurostat/product?code=KS-09-22-019; Extensive country-specific data on the short-term progress of Member 
States can be found here: Key findings - Sustainable development indicators - Eurostat (europa.eu). 
Source: Eurostat, latest update of 28 April 2022. Data mainly refer to 2015-2020 and 2016-2021. 

22 

 
 
ANNEX 2: RECOVERY AND RESILIENCE PLAN - IMPLEMENTATION 
ANNEX 2: RECOVERY AND RESILIENCE PLAN - IMPLEMENTATION 

The  Recovery  and  Resilience  Facility  (RRF)  is 
the  centrepiece  of  the  EU’s  efforts  to 
support  its  recovery  from  the  COVID-19 
pandemic,  fast  forward  the  twin  transition 
and  strengthen  resilience  against  future 
shocks.  Portugal  submitted  its  recovery  and 
resilience  plan  (RRP)  on  22  April  2021.  The 
Commission  adopted  a  positive  assessment  of 
Portugal’s  RRP  on  16  June  2021,  which  was 
approved by the Council on 13 July 2021 (28). This 
paved  the  way  for  disbursing  EUR 13.9  billion  in 
grants  and  EUR 2.7  billion  in  loans  under  the  RRF 
over  2021-2026.  The  financing  agreement,  the 
loan  agreement  and  operational  arrangement 
were  signed  on  27  July  2021,  29  July  2021  and 
18  January  2022  respectively.  The  key  elements 
of the Portuguese RRP are set out in Table A2.1.  

Table A2.1: Key elements of the Portuguese RRP 

(1) Pfeiffer P., Varga J. and in ’t Veld J. (2021), ‘Quantifying 
Spillovers of NGEU investment’, European Economy Discussion 
Papers, No. 144 and Afman et al. (2021), “An overview of the 
economics of the Recovery and Resilience Facility”, Quarterly 
Report on the Euro Area (QREA), Vol. 20, No. 3 pp. 7-16.  
Source: European Commission 

Graph A2.1: Share of RRF fund contributing to each policy pillar 

(1) Each measure contributes towards two policy areas of the six pillars, therefore the total contribution to all pillars displayed on 
this chart amounts to 200% of the estimated cost of the Portuguese RRP. The bottom part represents the amount of the primary 
pillar, the top part the amount of the secondary pillar. 
Source: RRF Scoreboard 

(28)  Council Implementing Decision of 13 July 2021 on the 

approval of the assessment of the recovery and resilience 
plan for Portugal. 

23 

Total allocation EUR 13.9 billion in grants (6.5% of 2019 GDP) and EUR 2.7 billion in loansInvestments and Reforms 83 investments and 32 reforms Total number of Milestones and Targets341Estimated macroeconomic impact (1) Raise GDP by 2.4% by 2026 (0.4% in spillover effects)Pre-financing disbursed EUR 2.2 billion (August 2021) First instalment EUR 1.16 billion (May 2022)0%10%20%30%40%50%60%Green transitionDigitaltransformationSmart,sustainable andinclusive growthSocial andterritorialcohesionHealth, andeconomic,social andinstitutionalresiliencePolicies for thenext generation 
 
 
 
 
                                                 
 
 
   
 
 
 
 
 
  
The  Portuguese  RRP  includes  a  balanced 
response  to  the  RRF’s  six  policy  pillars (29). 
Most  of  the  components  in  the  plan  are  directly 
related  to  the  green  and  digital  transitions.  The 
remaining  policy  areas,  such  as  social  and 
territorial  cohesion  or  health  and  economic  social 
and institutional resilience, including with a view to 
increasing  crisis  reaction  capacity  and  crisis 
preparedness,  were  appropriately  addressed 
through  the  different  measures  included  in  the 
RRP.  Graph  A2.1  shows  the  share  of  funds 
contributing to each of the RRF’s six policy pillars. 

positively  assessed  by 

Implementation  of  the  Portuguese  plan  is 
underway.  The  Commission  disbursed  EUR 2.2 
billion to Portugal in pre-financing in August 2021, 
equivalent to 13% of the total financial allocation, 
to  support  the  implementation  of  the  crucial 
investment  and  reform  measures  included  in  the 
Portuguese  RRP.  The  Portuguese  first  payment 
the 
request  was 
Commission, taking into account the opinion of the 
Economic  and  Financial  Committee  (EFC),  leading 
to  a  disbursement  of  EUR 1.16  billion  in  financial 
support (net of pre-financing) on 9 May 2022. The 
related  38  milestones  and  targets  cover  reforms 
and  investments  in  the  areas  of  health,  housing, 
social policies, innovation, infrastructure, skills and 
‘blue  economy’,  bio-
education,  forestry,  the 
economy,  decarbonisation  of  industry,  hydrogen, 
public  finances  and  public  administration.  Their 
satisfactory  fulfilment  helps  address  the  related 
country-specific  recommendations  addressed  to 
Portugal in 2019 and 2020 (see Annex 4). Overall, 
Portugal  reports  a  timely  implementation  of  the 
milestones  and  targets  due  by  the  end  of  Q1 
2022, which does not however prejudge the timing 
of  submission  of  subsequent  payment  requests 
nor the formal assessment of the fulfilment of the 
relevant milestones  and  targets.  Graphs  A2.2  and 
A2.3  display  the  amount  of  grants  and  loans 
disbursed so far to Portugal under the RRF. 

subsequently assessed as satisfactorily fulfilled by 
the Commission. 

Graph A2.2: Total grants disbursed under the RRF 

(1) This graph displays the amount of grants disbursed so far 
under the RRF. Grants are non-repayable financial 
contributions. The total amount of grants given to each 
Member State is determined by an allocation key and total 
estimated cost of the respective recovery and resilience plan. 
Source: RRF Scoreboard 
https://ec.europa.eu/economy_finance/recovery-and-resilience-
scoreboard/country_overview.html?lang=en  

Graph A2.3: Total loans disbursed under the RRF 

(1) This graph displays the amount of loans disbursed so far 
under the RRF. Loans are repayable financial contributions. 
The total amount of loans given to each Member State is 
determined by the assessment of its loans request and 
cannot exceed 6.8% of its 2019 GNI. 
Source: RRF Scoreboard. 
https://ec.europa.eu/economy_finance/recovery-and-resilience-
scoreboard/country_overview.html?lang=en 

in  the 
The  progress  made  by  Portugal 
implementation of its plan is published in the 
Recovery  and  Resilience  Scoreboard.  The 
Scoreboard also gives an overview of the progress 
of  implementing  of  the  RRF  as  a  whole,  in  a 
transparent manner. Graph A2.4 shows the current 
state  of  play  of  fulfilment  of  milestones  and 
and 
targets, 

completed 

Portugal 

by 

as 

(29)  Regulation (EU) 2021/241 of the European Parliament and 

of the Council of 12 February 2021 establishing the 
Recovery and Resilience Facility. 

24 

€ 2.36billion€ 959.87million 
                                                 
  
 
  
 
Graph A2.4: Fulfilment status of milestones and 
targets 

(1) This graph displays the share of satisfactorily fulfilled 
milestones and targets. A milestone or target is fulfilled once 
a Member State has provided evidence to the Commission 
that it has completed the milestone or target and the 
Commission has assessed it positively in an implementing 
decision. 
Source: RRF Scoreboard. 
https://ec.europa.eu/economy_finance/recovery-and-resilience-
scoreboard/country_overview.html?lang=en 

25 

Satisfactorily fulfilledNot fulfilled 
  
ANNEX 3: OTHER EU INSTRUMENTS FOR RECOVERY AND GROWTH 
ANNEX 3: OTHER EU INSTRUMENTS FOR RECOVERY AND GROWTH 

The EU’s budget of more than EUR 1.2 trillion 
for  2021-2027  is  the  investment  lever  to 
help  implement  EU  priorities.  Underpinned  by 
an  additional  amount  of  about  EUR  800  billion 
largest 
through  NextGenerationEU  and 
instrument, the Recovery and Resilience Facility, it 
represents  significant  firepower  to  support  the 
recovery and sustainable growth. 

its 

funds 

support 

partnership 

agreements 

In  2021-2027,  EU  cohesion  policy  funds (30) 
will 
development 
long-term 
objectives in Portugal by investing EUR 23.80 
billion (31)  including  EUR 223.8 million  from  the 
Just  Transition  Fund  to  alleviate  the  socio-
economic  impacts  of  the  green  transition  in  the 
most vulnerable regions. The 2021-2027 cohesion 
and 
policy 
programmes are take into account the 2019-2020 
country-specific  recommendations,  as  well  as 
recent  developments  and  investment  guidance 
provided  as  part  of  the  European  Semester, 
ensuring  appropriate  prioritisation,  taking 
into 
account  synergies  and  complementarities  with 
other EU funding. In addition, Portugal will benefit 
from  EUR  6.1  billion  support  for  the  2023-27 
period from the Common Agricultural Policy, which 
supports  social,  environmental,  and  economic 
sustainability  and  innovation  in  agriculture  and 
rural  areas,  contributing  to  the  European  Green 
Deal, and ensuring long-term food security. 

In  2014-2020,  the  European  Structural  and 
Investment Funds (ESIF) for Portugal are set 
to  invest  EUR 28.84  billion (32)  from  the  EU 
budget.  The 
including 
national  financing  amounts  to  EUR 36.31 
billion  (Graph  A3.1),  representing  around  2.67% 
of  GDP  for  2014-2020  and  110.18%  of  public 
investment (33).  By  31  December  2021,  122%  of 
the  total  was  allocated  to  specific  projects  and 

investment 

total 

education, 

vocational 

73%  was  reported  as  spent,  leaving  EUR 9.74 
billion to be spent by the end of 2023 (34). Among 
the  11  objectives  the  most  relevant  ones  for 
cohesion  policy  funding  in  Portugal  are  R&I, 
competitiveness  of  small  and  medium-sized 
training, 
enterprises, 
environment  protection  and  resource  efficiency 
(EUR 17.7  billion).  By  the  end  of  2020,  cohesion 
policy 
supported 
13 870  businesses,  with  over  1 200  set  to 
introduce  new  products  and  around  385 
businesses  cooperating  with  research  institutions, 
30 573  new  direct  jobs,  almost  253 000  long-
term  unemployed  and  contributed  to  9.5  million 
kWh/year  of 
in  public 
buildings. 

reduced  consumption 

(implemented) 

investments 

Graph A3.1: ESIF 2014-2020 total budget by fund 

(1) EUR billion, % 
(2) The data for the EAFRD and REACT-EU refer to the period 
2014-2022. 
Source: European Commission, Cohesion open data 

to 

Cohesion  policy  funds  already  contribute 
Sustainable 
substantially 
Development  Goals  (SDGs)  objectives. 
In 
Portugal,  these  funds  support  11  of  the  17  SDGs 
with up to 93% of expenditure contributing to the 
attainment of the goals. (see Graph A3.2)  

the 

(30)  European Regional Development Fund (ERDF), European 

Social Fund+ (ESF+), Cohesion Fund (CF), Just Transition Fund 
(JTF), Interreg. 

(31)  Current prices, source: Cohesion Open Data  

(32)  ESIF includes cohesion policy funds (ERDF, ESF, CF, Interreg) 
and European Agricultural Fund for Rural Development 
(EAFRD) and European Maritime and Fisheries Fund (EMFF). 
According to the ‘N+3 rule’, the funds committed for the 
years 2014-2020 must be spent by 2023 at the latest (by 
2025 for EAFRD). Data source: Cohesion Open data, cut-off 
date 31.12.2021 for ERDF, ESF+, CF, Interreg; cut-off date 
31.12.2020 for EAFRD and EMFF. 

already 

REACT-EU (Recovery Assistance for Cohesion 
the  Territories  of  Europe),  under 
and 
NextGenerationEU, 
provided 
EUR 1 596.3  million  of  additional  funding  to 
the  2014-2020  cohesion  policy  programmes 
in Portugal to ensure a balanced recovery, boost 
convergence  and  provide  vital  support  to  regions 
following  the  coronavirus  outbreak.  REACT-EU 
provided  support in Portugal  to SMEs operating in 
the sectors most affected by the coronavirus crisis, 

(33)  Public investment is gross fixed capital formation plus 

(34)  Including REACT-EU. ESIF data on 

capital transfers, general government. 

https://cohesiondata.ec.europa.eu/countries/PT 

26 

3.279%6.5418%0.501%16.5146%8.9925%0.491%CFEAFRDEMFFERDFESFYEI 
 
                                                 
  
                                                 
 
Graph A3.2: Cohesion policy contribution to the SDGs 

(1) EUR billion 
Source: European Commission, DG REGIO 

as  well  as  for  the  digital  transformation  of 
companies,  employment  activation  measures, 
training  and  skills  development,  the  purchase  of 
vaccines, 
healthcare, 
improving  education,  and  boosting  investments  in 
climate transition.  

strengthening 

primary 

It 

The  Coronavirus  Response 
Investment 
Initiative (35) provided the first EU emergency 
support to Portugal in relation to the COVID-
19  pandemic. 
introduced  extraordinary 
flexibility  enabling  Portugal  to  shift  resources  to 
purchase  protective  equipment  and  healthcare 
material,  support  economic  stabilisation,  provide 
grants  for  R&D  into  COVID-19,  and  support  to 
school’s  digital 
includes 
resources  for  immediate  public  health  needs 
to  enterprises 
(EUR 97  million)  and  support 
(EUR 55  million)  Portugal  also  benefited  from  the 
temporary  100%  EU 
incurred 
measures  in  cohesion  policy,  with  approximately 
EUR 1 046  million  in  2021  through  100%  co-
financing. 

transformation.  This 

financing  of 

received 

support  under 

the 
Portugal 
European  instrument  for  temporary  support 
to  mitigate  unemployment  risks 
in  an 
emergency  (SURE)  to  finance  short-time 
work  schemes,  similar  measures  and  as  an 
ancillary,  health-related  measures. 
The 
Council granted financial assistance under SURE to 

Portugal  in  September  2020  for  a  maximum  of 
EUR 5.934  billion,  which  was  disbursed  by 
29 March  2022.  SURE 
is  estimated  to  have 
supported  approximately  25%  of  workers  and 
firms for at least one month in 2020 and 15% of 
workers  and  20%  of  firms  in  2021,  primarily  in 
accommodation  and  food  services,  wholesale  and 
retail  trade,  and  other  services.  Portugal 
is 
estimated to have saved a total of EUR 0.38 billion 
on  interest  payments  as  a  result  of  SURE’s  lower 
interest rates. 

the 

provides 

Commission 

tailor-made 
The 
Support 
Technical 
via 
expertise 
Instrument 
to  help  Portugal  design  and 
implement  growth-enhancing  reforms,  including 
for  implementing  its  recovery  and  resilience  plan 
received 
(RRP).  Since  2017,  Portugal  has 
assistance  through  49  technical  support  projects. 
Those  delivered  in  2021  aimed  for  example  to 
improve  Portugal’s  capacity  to  collect  and  use 
impact 
statistical  data  to  support  regulatory 
assessment 
the 
to 
implementation  of  the  Commission’s  "one  in,  one 
out"  approach  for  regulatory  simplification.  The 
Commission 
in 
implementing specific reforms and investments in 
the RRP, for instance in the digital transition of the 
justice sector. In 2022, new projects will be started 
to  support,  among  others,  gender  mainstreaming 
in public policy and budgetary processes. 

contribute 

Portugal 

assisted 

so  as 

also 

to 

(35)  Re-allocating ESIF resources according to Regulation (EU) 

2020/460 of the European Parliament and of the Council of 
30 March 2020, and Regulation (EU) 2020/558 of the 
European Parliament and of the Council of 23 April 2020. 

Portugal  also  benefits  from  other  EU 
programmes.  These 
the  Connecting 
Europe  Facility,  which  allocated  EU  funding  of 
EUR 719.5 million to specific projects on strategic 

include 

27 

0.380.380.560.640.720.760.871.984.885.669.51048SDG 15 Life on landSDG 11 Sustainable cities and communitiesSDG 13 Climate actionSDG 3 Good health and well beingSDG 6 Clean water and sanitationSDG 12 Responsible consumption and productionSDG 7 Affordable and clean energySDG 1 No povertySDG 9 Industry, innovation, infrastructureSDG 4 Quality educationSDG 8 Decent work and economic growth 
                                                 
  
transport  networks  for  2014-2020,  and  Horizon 
2020,  which  allocated  EU  funding  of  EUR 1 150 
million. 

28 

 
ANNEX 4: PROGRESS IN THE IMPLEMENTATION OF COUNTRY-SPECIFIC 
ANNEX 4: PROGRESS IN THE IMPLEMENTATION OF COUNTRY-SPECIFIC 
RECOMMENDATIONS 
RECOMMENDATIONS 

Graph A4.1: Portugal's progress on the 2019-2020 
CSRs (2022 European Semester cycle) 

Source: European Commission 

The  Commission  assessed  the  2019-2021 
country-specific  recommendations  (CSRs) (36) 
addressed  to  Portugal  in  the  context  of  the 
European  Semester.  The  assessment  takes  into 
account  the  policy  action  taken  by  Portugal  to 
date (37),  as  well  as  the  commitments  in  the 
Recovery  and  Resilience  Plan  (RRP) (38).  At  this 
early  stage  of  the  RRP  implementation,  overall 
65%  of  the  CSRs  focusing  on  structural  issues  in 
2019  and  2020  have  recorded  at  least  “some 
progress”,  while  35%  recorded  “limited  progress” 
(see Graph A4.1). Considerable additional progress 
in  addressing  structural  CSRs  is  expected  in  the 
years to come with the further implementation of 
the RRP 

(36)  2021 CSRs: https://eur-lex.europa.eu/legal-

content/EN/TXT/?uri=CELEX%3A32021H0729%2822%29&qi
d=1627675454457  
2020 CSRs: https://eur-
lex.europa.eu/search.html?textScope0=ti&lang=en&scope=E
URLEX&qid=1526385017799&type=quick&AU_CODED=CO
NSIL&DD_YEAR=2020&andText0=recommendation&DD_M
ONTH=07  
2019 CSRs: https://eur-
lex.europa.eu/search.html?textScope0=ti&lang=en&scope=E
URLEX&qid=1526385017799&type=quick&AU_CODED=CO
NSIL&DD_YEAR=2019&andText0=recommendation&DD_M
ONTH=07 

(37)  Incl. policy action reported in the National Reform 

Programme, as well as in the RRF reporting (bi-annual 
reporting on the progress with implementation of milestones 
and targets and resulting from the payment request 
assessment). 

(38)  Member States were asked to effectively address all or a 

significant subset of the relevant country-specific 
recommendations issued by the Council in 2019 and 2020 in 
their RRPs. The CSR assessment presented here takes into 
account the degree of implementation of the measures 
included in the RRP and of those done outside of the RRP at 
the time of assessment. Measures foreseen in the annex of 
the adopted Council Implementing Decision on the approval 
of the assessment of the RRP which are not yet adopted nor 
implemented but considered as credibly announced, in line 
with the CSR assessment methodology, warrant “limited 
progress”. Once implemented, these measures can lead to 
“some/substantial progress” or “full implementation”, 
depending on their relevance. 

29 

Limited Progress35%Some Progress61%Substantial Progress4% 
 
                                                 
     
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Table A4.1: Summary table in 2019, 2020 and 2021 CSRs 

(Continued on the next page) 

30 

PortugalAssessment in May 2022*RRP coverage of CSRs until 2026**2019 CSR1Some ProgressAchieve the medium-term budgetary objective in 2020, taking into account the allowance linked to unusual events for which a temporary deviation is granted. Use windfall gains to accelerate the reduction of the general government debt ratio.Not relevant anymoreNot applicableImprovethequalityofpublicfinancesbyprioritisinggrowth-enhancingspendingwhilestrengtheningoverallexpenditurecontrol,costefficiencyandadequatebudgeting,withafocusinparticularona durable reduction of arrears in hospitals.Limited ProgressRelevant RRP measures being planned as of 2022Improve the financial sustainability of State-owned enterprises, while ensuring more timely, transparent and comprehensive monitoring.Some ProgressRelevant RRP measures being implemented as of 20212019 CSR 2Some ProgressAdopt measures to address labour market segmentation.Some ProgressRelevant RRP measures being implemented as of 2021Improve the skills level of the population, in particular their digital literacy, including by making adult learning more relevant to the needs of the labour market.Some ProgressRelevant RRP measures being implemented as of 2021Increase the number of higher education graduates, particularly in science and information technology.Some ProgressRelevant RRP measures being implemented as of 2021Improve the effectiveness and adequacy of the social safety net.Some ProgressRelevant RRP measures being implemented as of 20212019 CSR 3Limited ProgressFocus investment-related economic policy on research and innovation,Some ProgressRelevant RRP measures being implemented as of 2021railway transport and port infrastructure,Limited ProgressRelevant RRP measures being planned as of 2022low carbon and energy transition and extending energy interconnections, taking into account regional disparities.Limited ProgressRelevant RRP measures being implemented as of 20212019 CSR4Some ProgressAllow for a swifter recovery of the collateral tied to non-performing loans by increasing the efficiency of insolvency and recovery proceedings.Some ProgressRelevant RRP measures being planned as of 2022Reducetheadministrativeandregulatoryburdenonbusinesses,mainly by reducing sector-specific barriers to licensing.Limited ProgressRelevant RRP measures being implemented as of 2021Developaroadmaptoreducerestrictionsinhighlyregulatedprofessions.Limited ProgressRelevant RRP measures being planned as of 2022Increasetheefficiencyofadministrativeandtaxcourts,inparticularby decreasing the length of proceedings.Some ProgressRelevant RRP measures being planned as of 20222020 CSR1Limited ProgressInlinewiththegeneralescapeclause,takeallnecessarymeasurestoeffectivelyaddressthepandemic,sustaintheeconomyandsupporttheensuingrecovery.Wheneconomicconditionsallow,pursuefiscalpoliciesaimedatachievingprudentmedium-termfiscalpositionsandensuringdebtsustainability,whileenhancinginvestment. Not relevant anymoreNot applicableStrengthen the resilience of the health system Limited ProgressRelevant RRP measures being planned as of 2022and ensure equal access to quality health and long-term care. Limited ProgressRelevant RRP measures being planned as of 2022 
 
 
 
 
 
 
 
 
 
 
  
 
Table (continued) 

* See footnote 38  
** Measures indicated as “being implemented as of 2021” are only those included in the first RRF payment request submitted by 
Portugal and positively assessed by the European Commission. 
Source: European Commission 

31 

2020 CSR2Some ProgressSupport employment and prioritise measures to preserve jobs. Some ProgressRelevant RRP measures being planned as of 2022Guarantee sufficient and effective social protection and income support. Some ProgressRelevant RRP measures being implemented as of 2021Support the use of digital technologies to ensure equal access to quality education and training Some ProgressRelevant RRP measures being implemented as of 2021and to boost firms’ competitivenessSome ProgressRelevant RRP measures being implemented as of 20212020 CSR 3Some ProgressImplement the temporary measures aimed at securing access to liquidity for firms, in particular small and medium-sized enterprises. Substantial ProgressRelevant RRP measures being implemented as of 2021Front-load mature public investment projects and Limited ProgressRelevant RRP measures being implemented as of 2021promote private investment to foster the economic recovery. Some ProgressRelevant RRP measures being implemented as of 2021Focusinvestmentonthegreenanddigitaltransition,inparticularonclean and and efficient production and use of energy, Some ProgressRelevant RRP measures being implemented as of 2021rail infrastructure Limited Progressand innovation.Some ProgressRelevant RRP measures being implemented as of 20212020 CSR 4Some progressIncrease the efficiency of administrative and tax courtsSome ProgressRelevant RRP measures being planned as of 20222021 CSR1Substantial ProgressIn2022,usetheRecoveryandResilienceFacilitytofinanceadditionalinvestmentinsupportoftherecoverywhilepursuingaprudentfiscalpolicy.Preservenationallyfinancedinvestment.Limitthe growth of nationally financed current expenditure.Full implementationNot applicableWheneconomicconditionsallow,pursueafiscalpolicyaimedatachievingprudentmedium-termfiscalpositionsandensuringfiscalsustainability in the medium term.Substantial ProgressNot applicableAtthesametime,enhanceinvestmenttoboostgrowthpotential.Payparticularattentiontothecompositionofpublicfinances,bothontherevenueandexpendituresidesofthebudget,andtothequalityofbudgetarymeasures,toensureasustainableandinclusiverecovery.Prioritisesustainableandgrowth-enhancinginvestment,notablysupporting the green and digital transition.Full implementationNot applicableGiveprioritytofiscal-structuralreformsthatwillhelpprovidefinancingforpublicpolicyprioritiesandcontributetothelong-termsustainabilityofpublicfinances,includingbystrengtheningthecoverage,adequacy,andsustainabilityofhealthandsocialprotection systems for all.Some ProgressNot applicable 
 
  
 
ENVIRONMENTAL SUSTAINABILITY 
ENVIRONMENTAL SUSTAINABILITY 
ANNEX 5: GREEN DEAL 
ANNEX 5: GREEN DEAL 

intends 

The  European  Green  Deal 
to 
transform the  EU  into a  fair and prosperous 
society,  with  a  modern,  resource-efficient 
and competitive economy where there are no 
net  emissions  of  greenhouse  gases  in  2050 
and  where  economic  growth  is  decoupled 
from resource use. This annex offers a snapshot 
of  the  most  significant  and  economically  relevant 
developments in Portugal in the respective building 
blocks  of 
is 
complemented by Annex 6 on the employment and 
social  impact  of  the  green  transition  and  Annex 7 
for circular economy aspects of the Green Deal. 

the  European  Green  Deal. 

It 

Portugal  is  on  track  to  achieve  its  domestic 
greenhouse  gas  reduction  targets  and  to 
surpass  its  share of  the  EU  target.  Portugal’s 
government  has  committed  in  its  Roadmap  for 
Carbon  Neutrality  2050  to  reaching  climate 
neutrality by 2050, with an intermediary target of 
45-55% emissions reductions by 2030 (compared 
to  2005)  and  65-75%  by  2040.  By  2020,  the 
country’s  total  greenhouse  gas  emissions  were 
just below 1990 levels. At the same time, Portugal 
has  exceeded  its  EU  2020  emission  reduction 
target  for  the  sectors  not  covered  by  the  EU 
Emissions  Trading  System  (buildings,  road  and 
domestic  maritime  transport,  agriculture,  waste 
and  small 
industries).  By  continuing  current 
policies,  Portugal  is  expected  to  largely  meet  its 
increased 2030 GHG emission reduction target, in 
line  with  the  European  Climate  law.  Transport, 
mainly  road  transport,  continues  to  represent  a 
large  share  of  Portugal’s  energy  consumption, 
which  in  2019  represented  28%  of  the  total 
greenhouse  gas  emissions.  The  national  energy 
and climate plan (NECP) provides a broad overview 
of  the  measures  planned  to  achieve  Portugal’s 
climate and energy targets (39). However, these are 
not  always  well  defined  and  there  is  scope  for 
strengthening  policies  and  measures,  in  particular 
by addressing emissions reductions in the building 
and transport sectors. In its recovery and resilience 
plan, Portugal allocates 38% of the plan to climate 
objectives  and  outlines  crucial 
reforms  and 
investments  to  further  the  transition  to  a  more 

sustainable, 
economy (40). 

low-carbon  and  climate-resilient 

revenues 

investing 

Portugal’s 

total  environmental 

from 
While 
environmental  tax  collection  are  above  the 
in  environmental 
EU  average, 
fuel 
fossil 
protection  and  decreasing 
subsidies  both  present  more  of  a  challenge. 
Portugal’s  environmental  tax  revenues,  both  as  a 
share of total tax revenues and as a share of GDP, 
are higher than the EU average, with energy taxes 
largely  driving 
taxes.  A 
considerable percentage is also taken up by taxes 
on  transport  and,  to  a  smaller  extent,  taxes  on 
the 
the  same 
pollution.  At 
Portuguese  government 
smaller 
proportion  of  its  expenditure  on  environmental 
protection than in the EU overall, while  fossil  fuel 
subsidies  have  been  steadily  increasing  since 
2016.  Meanwhile,  the  climate  risk  to  public 
finances  due  to  uninsured  assets  is  considered 
low/medium,  with  a  significant  proportion  of 
losses.  For  more 
related 
uninsured  climate 
indicators on taxation, see Annex 18. 

time,  however, 
spends  a 

Graph A5.1: Fiscal aspects of the green transition  
Taxation and government expenditure on 
environmental protection 

Source: Eurostat 

(39)  Portugal’s NECP will require an update in view of the higher 
ambition proposed for greenhouse gas emission reduction, 
renewables and energy efficiency; but also to reflect changes 
of the energy mix in view of reducing import dependency. 

(40)  The share of financial allocation contributing to climate 

objectives has been calculated using Annex VI of the RRF 
Regulation. 

32 

0.02.04.06.08.0Environmental taxes (%of GDP)Environmental taxes (%of total taxation)Government expenditureon environmentalprotection (% of totalexpenditure)PT (2020)EU27 (2020) 
 
 
                                                 
   
 
                                                 
 
 
Graph A5.2: Thematic – Energy  
Share in energy mix (solids, oil, gas, nuclear, 
renewables) 

(1) The energy mix is based on gross inland consumption, and 
excludes heat and electricity. The share of renewables 
includes biofuels and non-renewable waste. 
Source: Eurostat 

Portugal  remains  reliant  on  imported  fossil 
fuels,  which  accounted  for  69%  of  gross 
inland energy consumption in 2020 (42% oil, 
24% natural gas and 3% coal).  All oil, natural 
gas  and  coal  is  imported.  The  NECP  includes  the 
ambition  to  reduce  energy  import  dependency  to 
65%  by  2030,  anticipates  a  renewable  energy 
contribution to the EU’s 2030 target of 47% of the 
gross final energy consumption, and aims to reach 
80%  renewable  electricity  by  2030.  Portugal  is 
taking steps to accelerate renewables deployment, 
especially for solar photovoltaics, and is finalising 
new  hydropower  projects.  Portugal  surpassed  its 
renewable  energy  target  of  31%  of  gross  final 
energy  consumption  in  2020,  reaching  a  34% 
renewables  share.  Thanks  mainly  to  hydropower 
and  wind  generation,  renewables  covered  60%  of 
electricity generation in 2020 (wind and solar were 
responsible  for  23.2%  and  3.2%  respectively  of 
total 
electricity  generation).  However,  gas 
consumption has increased rapidly since 2014 due 
to  an  increase  in  demand  from  power  plants, 
partly because of lower hydropower availability as 
a  result  of  frequent  droughts.  The  proportion  of 
gas  used  for  power  generation  accounts  for  62% 
of  total  gas  consumption  in  2020,  while  industry 
accounts for 24% and buildings for 11%. There is 
high use of bioenergy in industry and buildings. In 
response  to  policy  and  market  pressures,  the 
private  operators  of  Portugal’s  two  coal-fired 
power  plants  closed  both  plants  in  2021.  The 
government  indicates  that  natural  gas  electricity 
generation will be maintained until at least 2040.  

Portugal  boasts  a  rich  biodiversity.  20.6%  of 
the Portuguese territory belongs to the EU Natura 
2000  network  (EU  average:  18.5%).  However,  a 

protected. 

Therefore, 

scientific  assessment  of  Natura  2000  in  Portugal 
that  some  species  and  habitats, 
concluded 
particularly  in  the  marine  environment,  are  not 
sufficiently 
additional 
designations  would  be  needed  to  extend  the 
Natura 2000 network, particularly for marine sites. 
Management plans of the sites already designated 
should  identify  the  conservation  objectives  and 
conservation measures and provide the necessary 
resources.  Complementary  measures  are  still 
required  to  ensure  the  proper  implementation  of 
the EU Invasive Alien Species Regulation.  

In 

particular, 

In terms of air pollution, Portugal presents a 
mixed  picture.  While  emissions  of  several  air 
pollutants  have  decreased  in  Portugal  during  the 
last  decades,  air  quality  in  Portugal  continues  to 
give cause for concern, mainly related to nitrogen 
dioxide. 
transport 
exacerbates  air  quality  and  traffic  congestion 
problems  in  Portugal’s  major  metropolitan  areas, 
namely Lisbon, Porto and Braga, leading to health 
and  economic  costs.  Furthermore,  Portugal  is 
considered  at  high  risk  of  missing  its  emission 
reduction  commitments  for  various  air  pollutants 
under  the  Directive  2016/2284  (the  National 
Emissions Reduction Commitments Directive). 

personal 

such  as 

Despite the progress that Portugal has made 
in  recent  years  and  the  measures  included 
under  the  recovery  and  resilience  plan, 
challenges  remain  in  water  management, 
especially in the areas of water governance, 
water  body 
rehabilitation  and  water 
efficiency.  Further  actions  would  be  needed  to 
in 
improve  water  management, 
wastewater collection and treatment, reduction of 
leaks  in  the  networks  and  general  water  supply, 
promoting  the  reuse  of  treated  wastewater  for 
improving  monitoring 
appropriate 
(quality  and  quantity),  as  well  as  nature-based 
solutions  for  river  restoration.  At  municipal  level, 
the  water  sector  remains  fragmented  and  the 
reorganisation  of  water  and  wastewater  services 
has  not  yet  shown  its  full  potential.  Further 
measures  are  also  needed  to  deal  with  water 
scarcity  and  droughts.  Water  policies  should 
ensure  that  all  relevant  sectors  are  prepared  for 
future 
requires 
improvements in the monitoring of projected water 
availability and the integration of water policy into 
the relevant sectoral policies. 

impacts,  which 

purposes, 

climate 

In terms of mobility, in Portugal the share of zero-
emission vehicles  in  new vehicle  registrations  has 

33 

020406080100200520102015201820192020PTSolid fossil fuels, peat and oil shaleOilGasNuclearRenewables 
  
grown  very  dynamically  in  recent  years.  The 
electrification  of  the  railway  network  is  more 
advanced than on average in the EU. 

Graph A5.3: Thematic – Biodiversity  
Terrestrial protected areas and organic farming 

(1) For terrestrial protected areas for 2018, and data for the 
EU average (2016, 2017) is lacking. 
Source: EEA (terrestrial protected areas) and Eurostat 
(organic farming). 

Graph A5.4: Thematic – Mobility  
Share of zero emission vehicles (% of new 
registrations) 

(1) Zero emission vehicles (passenger cars) include battery 
and fuel cell electric vehicles (BEV, FCEV). 
Source: European Alternative Fuels Observatory.  

34 

020402016201720192020PTTerrestrial protected areas (% total area)Area under organic farming (% total utilised agricultural area)EU27 (terrestrial)EU27 (organic)0.02.04.06.08.010.0201620172018201920202021% of new registrationsPTEU27 
   
 
   
 
Table A5.1: Indicators underpinning the progress on EU Green Deal from macroeconomic perspective 

(1) The 2030 non-ETS GHG target is based on the Effort Sharing Regulation. The FF55 targets are based on the COM proposal to 
increase EU's climate ambition by 2030. Renewables and Energy Efficiency targets and national contributions under the 
Governance Regulation (Regulation (EU) 2018/1999).  
(2) Distance to target is the gap between Member States’ 2030 target under the Effort Sharing Regulation and projected 
emissions, with existing measures (WEM) and with additional measures (WAM) respectively, as a percentage of 2005 base year 
emissions.   
(3) Percentage of total revenues from taxes and social contributions (excluding imputed social contributions). Revenues from the 
ETS are included in environmental tax revenues (in 2017 they amounted to 1.5% of total environmental tax revenues at the EU 
level).  
(4) Covers expenditure on gross fixed capital formation to be used for the production of environmental protection services (i.e. 
abatement and prevention of pollution) covering all sectors, i.e. government, industry and specialised providers.  
(5) The climate protection gap indicator is part of the European adaptation strategy (February 2021), and is defined as the share 
of non-insured economic losses caused by climate-related disasters.  
(6) Sulphur oxides (SO2 equivalent), Ammonia, Particulates < 10µm, Nitrogen oxides in total economy (divided by GDP).  
(7) Transportation and storage (NACE Section H).  
(8) Zero emission vehicles include battery electric vehicles (BEV) and fuel cell electric vehicles (FCEV).  
(9) European Commission Report (2019) 'Benchmarking smart metering deployment in the EU-28'.  
(10) European Commission (2021). Each year the DESI is re-calculated for all countries for previous years to reflect any possible 
change in the choice of indicators and corrections to the underlying data. Country scores and rankings may thus differ compared 
with previous publications. 
Source: Eurostat, JRC, European Commission, EEA, EAFO. 

35 

TargetTarget2005201920202030WEMWAM2030WEMWAMNon-ETS GHG emission reduction target (1)MTCO2 eq; %; pp (2)48.6-15%-19%-17%2124-29%912200520162017201820192020Share of energy from renewable sources in gross final consumption of energy (1)%20%31%31%30%31%34%47%Energy efficiency: primary energy consumption (1)Mtoe24.921.822.822.622.119.521.5Energy efficiency: final energy consumption (1)Mtoe19.016.216.616.917.115.014.9201520162017201820192020201820192020Environmental taxes (% of GDP)% of GDP2.42.62.62.62.52.42.42.42.2Environmental taxes (% of total taxation)% of taxation (3)7.07.67.67.47.36.86.05.95.6Government expenditure on environmental protection% of total exp.1.251.251.331.391.481.411.661.701.61Investment in environmental protection% of GDP (4) 0.380.270.300.31--0.420.380.41Fossil fuel subsidiesEUR2020bn0.650.600.720.780.94-56.8755.70-Climate protection gap (5)score 1-4Net GHG emissions1990 = 10011611312411811399797669GHG emissions intensity of the economykg/EUR'100.410.390.400.370.340.350.320.310.30Energy intensity of the economykgoe/EUR'100.130.130.130.120.120.120.120.110.11Final energy consumption (FEC)2015=100100.0101.2103.5105.5107.193.9103.5102.994.6FEC in residential building sector2015=100100.0102.5101.8104.6105.1109.5101.9101.3101.3FEC in services building sector2015=100100.097.297.7101.0100.191.6102.4100.194.4Smog-precursor emission intensity (to GDP) (4)tonne/EUR'10 (6)1.481.431.411.321.26-0.990.93-Years of life lost caused due to air pollution by PM2.5per 100.000 inh.570469583541523-863762-Years of life lost due to air pollution by NO2per 100.000 inh.9258858457-12099-Nitrate in ground watermg NO3/litre16.819.318.518.318.0-21.720.7-Terrestrial protected areas% of total-22.222.3-22.322.3-25.725.7Marine protected areas% of total-3.8--4.5--10.7-Organic farming% of total utilised agricultural area6.56.77.05.98.28.18.08.59.100-0606-1212-18Net land takeper 10,000 km213.011.05.0201520162017201820192020201820192020GHG emissions intensity of transport (to GVA) (7)kg/EUR'101.201.201.171.161.200.950.890.870.83Share of zero emission vehicles (8)% in new registrations0.40.40.82.03.15.41.01.95.435112130288812Share of electrified railways%64.464.964.464.467.1-55.656.0-27.729.028.728.427.3-28.928.8-YearPTEUShare of smart meters in total metering points (9) - electricity% of total201825.035.8Share of smart meters in total metering points (9) - gas% of total20180.013.1ICT used for environmental sustainability (10)%202185.565.9Progress to policy targetsNational contribution to PORTUGALEU'Fit for 55'DistanceDistanceDigitalFiscal and financialindicators2 out of 4 (increase from historical level of 1.5). This is a low/medium risk category (4 being a high risk).ClimateEnergyPollutionBiodiversity2000-20062006-20122012-201831.011.04.1MobilityNumber of plug-in electric vehicles per charging pointCongestion (average number of hours spent in road congestion per year by a representative commuting driver) 
 
  
 
ANNEX 6: EMPLOYMENT AND SOCIAL IMPACT OF THE GREEN TRANSITION 
ANNEX 6: EMPLOYMENT AND SOCIAL IMPACT OF THE GREEN TRANSITION 

The  green  transition  not  only  encompasses 
environmental 
to 
improvements 
sustainability, but also includes a significant 
social  dimension. While  measures  in this  regard 
include the opportunity for sustainable growth and 
job creation, it must also be ensured that no one is 
left  behind  and  all groups  in  society  benefit  from 
the  transition.  Portugal  faces  challenges  on  the 
way  to  a  fair  green  transition,  with  a  relatively 
high  level  of  energy  poverty  and  a  need  for 
significant investments.  

Portugal’s recovery and resilience plan (RRP) 
includes  some  skills  and  social  investments 
contributing  to  a  fair  green  transition.  Under 
the  ‘Skills  and  Qualifications’  component,  at  least 
two  investments  are  adapted  to  the  need  for 
economic  specialisation  resulting  from  the  green 
transition, while the ‘Social Responses’ component 
provides  three 
investments  aligned  with  this 
aspect.  More  specifically,  the  modernisation  of 
course  content  offered  by  vocational  education 
and training institutions and the adult qualification 
and  lifelong  learning  investments  (in  the  Azores) 
contribute  to  achieving  a  fair  transition.  Projects 
intended  to  improve  the  social  services  network 
and  facilities  in  mainland  Portugal  and  in  the 
outermost  regions  contain  energy  efficiency  and 
clean  urban  transport  features  to  support  the 
achievement of the climate target. In synergy with 
the Recovery and Resilience Facility, the European 
Social  Fund  Plus  will  help  employment,  skills  and 
social  investments  that  will  support  a  fair  green 
transition.  The  Just  Transition  Fund  (EUR  224 
million;  current  prices)  will  help  mitigate  the 
impact  of  the  transition  in  three  Portuguese 
NUTS II  regions  (Norte,  Centro,  Alentejo).  The 
Portuguese national  energy  and climate plan fails 
to  properly  integrate  just  and  fair  transition 
aspects  on  social,  employment  and  skills  impacts. 
It  also  fails  to  sufficiently  develop  approach  to 
identify and address energy poverty aspects.  

Portugal  has  slightly  reduced  its  carbon 
footprint, while significant investment is still 
needed  to  meet  the  carbon  neutrality  goal. 
Portugal's  greenhouse  gas 
(GHG)  emissions 
intensity  in  terms  of  gross  value  added  slightly 
decreased  between  2015  and  2020,  remaining 
around  30%  above  the  EU  average,  where  the 
energy  and  transport  sectors  are  the  main  GHG 
emitters (41).  The  footprint  per  worker  stands  at 

(41)  SWD(2020) 521 final, Annex D.  

in 

the  Portuguese  economy 

10.68  tonnes  of  GHG  emissions  (see  Figure  1), 
below the EU average (13.61 in the EU). Declining 
sectors 
include 
petroleum  refineries  and  fossil  fuel  based  energy 
production,  while  transformations  are  expected  in 
the  paper  industry (42).  Energy  intensive  sectors 
provide  employment  for  2.5%  of  the  total 
employed  workforce,  for  which  up-  and  reskilling, 
job  search  assistance  and  support  is  particularly 
important  (see  Annex  15).  Jobs  in  environmental 
goods  and  services  correspond  to  the  EU  average 
share of employment of the (2.2%) (43), while wind 
and  solar  potential  as  well  as  energy  efficiency 
offer  further  opportunities  for  green  jobs (44). 
Labour shortages in sectors linked to the transition 
to a climate-neutral economy have been identified 
transport 
construction,  energy  and 
the 
in 
sectors (45). 

As  for  the  social  dimension  of  the  green 
to  essential  energy 
transition,  access 
services  remains  a  challenge,  with  energy 
poverty  levels  significantly  higher  than  the 
EU  average.  A  relatively  high  proportion  of  the 
population  at  risk  of  poverty  lives  in  rural  areas 
(21.1% vs 18.7% in the EU) (46). The proportion of 
the  population  unable  to  keep  their  homes 
adequately  warm  remains  relatively  high  (almost 
double  the  EU  average  of  8.2%),  despite  having 
decreased from 23.8% in 2015 to 17.5% in 2020. 
Lower-income  groups  are  most  affected  (see 
Figure  2).  Consumption  patterns  vary  across  the 
population: the average carbon footprint of the top 
10%  of  emitters  is  about  5.6  times  higher  than 
that  of  the  bottom  50%  of  the  population  (5.3 
times in the EU). 

(42)  SWD(2021) 275 final. 

(43)  There is currently no common EU-wide definition of green 
jobs. The environmental goods and services sector (EGSS) 
accounts only report on an economic sector that generates 
environmental products, i.e. goods and services produced for 
environmental protection or resource management. 

(44)

https://publications.jrc.ec.europa.eu/repository/handle/J

RC126047 

(45)  Eurofound (2021), Tackling labour shortages in EU Member 

States, Publications Office of the European Union, 
Luxembourg. 

(46)  Based on COM(2021) 568 final (Annex I) as a proxy for 

potential transport challenges in the context of the green 
transition (e.g. due to vulnerability to fuel prices). 

36 

 
 
                                                 
                                                 
 
 
Graph A6.1: Fair green transition challenges 

accompanying  environmental  taxation  can  have 
the potential to foster progressivity and to have a 
positive  impact  on  the  disposable  income  of 
households in the lowest segments of the income 
distribution (49). 

(1) Numbers are the normalised indicator performance, 
signifying factors relative to EU-27 average 
Source: Eurostat, World Inequality Database 

Graph A6.2: Energy poverty by income decile 

Source: Eurostat EU-SILC survey (2020) 

Tax  systems  are  key  to  ensuring  a  fair 
transition  towards  climate  neutrality (47). 
Portugal’s  revenues  from  total  environmental 
taxes  slightly  increased  from  2.42%  of  GDP  in 
2015 to 2.53% in 2019, but slightly decreased to 
2.38%  in  2020  (2.24% in  the  EU).  The  labour tax 
wedge  for  low-income  earners (48)  had  remained 
constant  at  28.1%,  at  least  since  2010,  but 
increased  to  35.1%  in  2021,  compared  to  31.9% 
in the EU (see Annex 18). Redistributive measures 

(47)  COM(2021) 801 final. 

(48)  Tax wedge for a single earner at 50% of the national 
average wage (Tax and benefits database, European 
Commission/OECD). 

(49)  SWD(2021) 641 final PART 3/3, on distributional effects of 

energy taxation revision, based on the European Commission 
Joint Research Centre GEM-E3 and Euromod models. 

37 

0.00.51.01.52.02.53.0GHG tonnes perEuro of grossadded value(MS/EU)GHG tonnes perworker (MS/EU)Employmentshare in energy-intensiveindustries (MS/EU)Share ofpopulation inrural areas at riskof poverty(MS/EU)Energy poverty(MS/EU)Carbon inequality(MS/EU)PortugalEU 2020Portugal 20150%5%10%15%20%25%30%35%40%12345678910Unable to keep home adequately warm (per income decile)Income decilePortugalEuropean Union 
  
 
  
                                                 
                                                 
PRODUCTIVITY 
PRODUCTIVITY 
ANNEX 7: RESOURCE EFFICIENCY AND PRODUCTIVITY 
ANNEX 7: RESOURCE EFFICIENCY AND PRODUCTIVITY 

productivity 
in  Portugal  has  not  significantly 
improved  since  2015  and  keeps  the  country  well 
below the EU average of 2.2 PPS.  

Portugal  is  one  of  the  countries  which  has 
missed  the  EU  target  of  recycling  50%  of 
municipal waste by 2020. The overall recycling 
rate  was  28.9%  in  2019  and  26.5%  in  2020 
(provisional  data),  against  an  EU  average  of 
47.8%.  The  EU  has  set  even  more  ambitious 
targets  for the  next  decade,  including  achieving a 
rate  of  55%  of  recycling  of  municipal  waste  by 
2025.  There  are  also  big  differences  across  the 
Portuguese  regions.  Therefore,  significant  efforts 
prevention, 
increase 
are 
minimisation,  sorting,  reuse  and  recycling  of 
waste, thereby diverting waste away from landfills 
or incinerators, and to modernising waste recycling 
facilities.  Supporting  circular 
and 
economy  innovations  and  business  models  could 
further support the circular economy in Portugal.  

treatment 

needed 

the 

to 

A successful transition to a circular economy 
requires  social  and  technological  innovation 
as  the  full  potential  of  a  circular  economy 
can  only  be  reached  when  implemented 
across  all  value  chains.  Therefore,  eco-
innovation is an important enabling factor for the 
circular  economy.  Product  design  approaches  and 
new business models can help to produce systemic 
innovations,  creating  new  business 
circularity 

while 

minimising 

The  efficient  use  of  resources  is  key  to 
ensuring  competitiveness  and open strategic 
autonomy, 
the 
environmental  impact.  The  green  transition 
presents  a  major  opportunity  for  European 
clean 
creating  markets 
industry 
technologies  and  products.  It  will  have  an  impact 
across  the  entire  value  chains  in  sectors  such  as 
energy and transport, construction and renovation, 
food  and  electronics,  helping  create  sustainable, 
local and well-paid jobs across Europe.  

for 

by 

Portugal  is  far  below  the  EU  average  on 
circular  economy  and  waste  management 
indicators.  The  circular 
(secondary)  use  of 
material  has  been  almost  stable  since  2015, 
varying  from  2.1%  to  2.2%  in  2020,  which 
relegates  Portugal  to  25th  place,  well  below  the 
EU average of 12.8% of material recycled and fed 
back into the economy in overall material use.  

expresses 

productivity 
how 
Resource 
the  economy  uses  material 
efficiently 
Improving 
to  produce  wealth. 
resources 
resource  productivity  can  help 
to  minimise 
negative  impacts  on  the  environment  and  reduce 
dependency on volatile raw material markets. With 
1.4  purchasing  power  standards  (PPS)  generated 
per  kg  of  material  consumed  in  2020,  resource 

Table A7.1: Selected resource efficiency indicators 

Source: Eurostat 

38 

SUB-POLICY AREA201520162017201820192020EU27 CircularityResource Productivity (Purchasing power standard (PPS) per kilogram)1.41.51.41.41.51.42.22020Material Intensity (kg/EUR)0.70.70.70.70.70.70.42020Circular Material Use Rate (%)2.12.12.02.22.32.212.82020Material footprint (Tones/capita)15.915.017.016.817.1-14.62019Waste Waste generation (kg/capita, total waste)-1427-1546--52342018Landfilling (% of total waste treated)-34.7-34.3--38.52018Recycling rate (% of municipal waste)29.830.929.129.128.926.547.82020Hazardous waste (% of municipal waste)-5.7-7.0--4.32018CompetitivenessGross value added in environmental goods and services sector (% of GDP)2.32.32.32.32.3-2.32019Private investment in circular economy (% of GDP)0.10.10.10.1--0.12018Latest year EU 27 
 
 
 
 
 
 
  
 
Graph A7.1: Municipal waste treatment 

Source: Eurostat 

opportunities.  

Portugal  registered  a  total  score  of  115  in 
the  Eco-Innovation  Scoreboard  of  2021,  just 
below  the  EU  average  of  121. 
In  three 
components  of  the  2021  Eco-innovation  index, 
Portugal  performs  below  the  EU  average  (eco-
innovation inputs, eco-innovation outputs, resource 
efficiency  outcomes),  while  it  performs  above the 
EU  average 
in  two  of  them  (eco-innovation 
activities, socio-economic outcomes).  

39 

 
 
  
ANNEX 8: DIGITAL TRANSITION 
ANNEX 8: DIGITAL TRANSITION 

The Digital Economy and Society Index (DESI) 
monitors EU Member States’ digital progress. 
The  areas  of  human  capital,  digital  connectivity, 
the 
technologies  by 
businesses  and  digital  public  services  reflect  the 
Digital  Decade’s  four  cardinal  points (50).  This 
Annex describes Portugal’s DESI performance.  

integration  of  digital 

Portugal is a good performer in digital public 
services.  Portugal’s  performance  on  providing 
digital public services to businesses is in line with 
the  EU  average,  while  exceeding  it  for  digital 
public services offered to citizens. 

to 

contribution 

reforms  and 

the  digital 
Portugal’s 
objectives  represents  22%  of  its  recovery 
and  resilience  plan  allocation (51).  The  most 
prominent  digital 
investments 
address  education  and  training  in  digital  skills; 
digital 
and 
digitalisation  of 
lever  for: 
sustainable public finances, an investment-friendly 
business  environment;  and  an  efficient  public 
administration.  

of 
the  State  as  a 

transformation 

businesses; 

On  human  capital,  Portugal  has  a  medium 
performance.  It  scores  slightly  above  the  EU 
average  for  both  basic  digital  skills  and  for  the 
share  of  ICT  specialists.  The  proportion  of  female 
ICT specialists also surpasses the EU average. Still 
Portugal  has  significant  room  for  improvement  to 
catch up with the top performers. Improving digital 
skills is a national priority reflected in the RRP with 
initiatives for various population groups.  

On  connectivity,  Portugal  shows  mixed 
results.  It  performs  well  in  fixed  very  high-
capacity  network  (VHCN)  coverage,  significantly 
surpassing  the  EU  average.  However,  it  is  well 
behind in 5G coverage. Although in 2022 some 5G 
coverage  is  available  the  roll-out  is  delayed 
compared  to  other  EU  countries.  Additional  effort 
would  ensure  that  fixed  VHCN  coverage  and 
especially  5G  mobile 
reach  all 
households, including those in rural areas.  

coverage 

On  the  integration  of  digital  technology, 
Portugal  has  room  for  improvement.  The 
share of Portuguese businesses with at least basic 
digital  intensity  is  approaching  the  EU  average. 
The same applies to the share of businesses using 
cloud  or  big  data  applications.  The  share  of 
businesses using Artificial Intelligence is far ahead 
of the EU average.  

(50)  2030 Digital Compass: the European Way for the Digital 

Decade Communication, COM (2021) 118 final 

(51)  The share of financial allocation contributing to digital 

objectives has been calculated using Annex VII of the RRF 
Regulation. 

40 

 
 
                                                 
 
Table A8.1: Key Digital Economy and Society Index Indicators 

(*) The 5G coverage indicator does not measure users’ experience, which may be affected by a variety of factors such as the type 
of device used, environmental conditions, number of concurrent users and network capacity. 5G coverage refers to the percentage 
of populated areas as reported by operators and national regulatory authorities.(1)  
Source: Digital Economy and Society Index 

41 

EUEU top-performanceHuman capitalDESI 2020DESI 2021DESI 2022DESI 2022DESI 2022At least basic digital skillsNANA55%54%79%% individuals202120212021ICT specialists3.5%4.0%4.7%4.5%8.0%% individuals in employment aged 15-7420192020202120212021Female ICT specialists18%21%21%19%28%% ICT specialists20192020202120212021ConnectivityFixed Very High Capacity Network (VHCN) coverage83%87%91%70%100%% households201920202021202120215G coverage (*)NA0%0%66%99.7%% populated areas2020202120212021Integration of digital technologySMEs with at least a basic level of digital intensityNANA52%55%86%% SMEs202120212021Big data13%11%11%14%31%% enterprises20182020202020202020CloudNANA29%34%69%% enterprises202120212021Artificial IntelligenceNANA17%8%24%% enterprises202120212021Digital public servicesDigital public services for citizensNANA7975100Score (0 to 100)202120212021Digital public services for businessesNANA8282100Score (0 to 100)202120212021Portugal 
 
  
 
The  growing  support  to  business  innovation 
over  the  last  decade  has  not  yet  translated 
into  a  significant  improvement  in  Portugal’s 
innovation  performance.  Total  public  support 
for  business  enterprise  expenditure  on  R&D  more 
than  doubled  over  the  last  decade,  growing  from 
0.128% in 2010 to 0.264% in 2019, partly driven 
by  an  increasingly  generous  R&D  tax  incentive 
scheme.  Business  R&D  spending  also  increased, 
growing from 0.71% of GDP in 2010 to 0.92% of 
GDP  in  2020,  but  remains  well  below  the  EU 
average.  As  a 
for 
innovation  capacity  of 
in 
improvement 
businesses.  Despite  a  steady  increase  from  2010 
to 2018, patenting activity remains limited (1.1 in 
2018, well below the EU average of 3.5). 

result, 
the 

is  scope 

there 

ANNEX 9: INNOVATION 
ANNEX 9: INNOVATION 

This  Annex  provides  a  general  overview  of 
the  performance  of  Portugal’s  research  and 
innovation system.  

Portugal  is  a  moderate  innovator  according 
to  the  2021  edition  of  the  European 
Innovation  Scoreboard (52).  Total  R&D  intensity 
remains  relatively  low,  at 1.62%  of  GDP  in  2020, 
compared to the EU average of 2.32% of GDP.  

Portugal  benefits  from  a  good  public 
research system, but it struggles to enhance 
cooperation between academia and business. 
The country has a good public science base able to 
attract  talent,  as  demonstrated  by  its  increasing 
and above EU average performance in the number 
of new graduates in science and engineering (18.6 
in  2019,  compared  to  13.0  in  2010).  However, 
Portugal  scores  below  the  EU  average  for  public-
private  scientific  co-publications  as  a  percentage 
of  total  publications  (5.5  in  2020).  Furthermore, 
additional  public  resources  could  be  invested  to 
strengthen  the  research  system.  While  there  has 
been  a  slight  upswing  in  recent  years,  public 
expenditure on R&D remained stagnant in the last 
decade and below the EU average (0.66% of GDP 
in  2020).  To  tackle  this  challenge,  the  country 
its  recovery  and  resilience  plan, 
included 
particularly under Component 5, a set of measures 
to 
improve  and  simplify  academia-business 
partnerships.  Moreover,  the  plan  provides  for  a 
R&D 
multiannual 
investment  and  reach  the  total  target  of  3%  of 
GDP by 2030.  

framework 

increase 

to 

in 

(52)  2021 European Innovation Scoreboard, Country profile: 

Portugal https://ec.europa.eu/docsroom/documents/45931/att
achments/1/translations/en/renditions/native  

42 

 
 
                                                 
 
Table A9.1: Key research, development and innovation indicators 

Source: DG Research and Innovation - Common R&I Strategy and Foresight Service - Chief Economist Unit;  
Data: Eurostat, OECD, DG JRC, Science-Metrix (Scopus database and EPO’s Patent Statistical database), Invest Europe 

43 

CompoundEUannual growthaverage2010-20R&D Intensity (GERD as % of GDP)1.541.241.351.401.620.522.32Public expenditure on R&D as % of GDP0.680.650.630.640.66-1.990.78Business enterprise expenditure on R&D (BERD) as % of GDP0.710.580.690.730.922.711.53Scientific publications of the country within the top 10% most cited publications worldwide as % of total publications of the country 9.68.89::-0.99.9PCT patent applications per billion GDP (in PPS)0.60.81.1:: 8,33.5Public-private scientific co-publications as % of total publications55.35.65.55.519.05New graduates in science & engineering per thousand pop. aged 25-341316.21818.6:2.716.3Total public sector support for BERD as % of GDP0.1280.1550.2280.264:8.40.196R&D tax incentives: foregone revenues as % of GDP0.090.110.170.201:9.30.1Share of environment-related patents in total patent applications filed under PCT (%)21,6  14,18,1  :: -11,5 12,8 Venture Capital (market statistics) as % of GDP0.0280.0290.0140.0180.019-3.50.054Employment in fast-growing enterprises in 50% most innovative sectors3.156.26.9:9.35.52020Portugal2010201520182019Finance for innovation and Economic renewalKey indicators Quality of the R&I systemAcademia-business cooperationHuman capital and skills availabilityPublic support for business enterprise expenditure on R&D (BERD)Green innovation  
 
 
  
 
ANNEX 10: INDUSTRY AND SINGLE MARKET 
ANNEX 10: INDUSTRY AND SINGLE MARKET 

in the core areas of competition and transparency, 
but  also  in  the  participation  of  SMEs  in  public 
procurement and the quality of data.  

The  Portuguese  economy  is  well  integrated 
into the single market with the proportion of 
value  added  imported  for the rest of  the  EU 
within  the  EU  average.  However,  structural 
barriers  limit  competition  in  the  provision  of 
business  services,  in  particular  restrictions  on 
highly  regulated  professions.  The  RRP  reform 
aimed  at  reducing  these  is  planned  to  enter  into 
force  by  the  end  of  2022.  Regarding  the 
burdensome licensing requirements that constitute 
barriers  to 
includes  a 
legislative  package  on  the  removal  of  barriers  to 
licensing for 2025.  

investment, 

the  RRP 

Portugal has been relatively less affected by 
recent global supply chain disruptions due to 
the  pandemic,  with  the  notable  exception  of 
the  car  and  components  industry.  However, 
Portugal  is  now  facing  the  rise  in  prices  and 
shortages  exacerbated  by  Russia’s  invasion  of 
Ukraine. Globally, 5% and 7% of Portuguese firms 
reported  shortages  in  materials  and  in  labour  in 
2021  against  EU  averages  26%  and  14%.  The 
Portuguese  economy  is  less  open  to  extra-EU 
trade  than  the  EU  average,  as  shown  by  the 
relatively  high  ratio  of  intra-  versus  extra-EU 
trade.  On  the  other  hand,  the  pandemic  has 
highlighted Portugal’s high exposure to tourism in 
particular in  the  Algarve, Madeira  and  the  Azores. 
Globally, Portuguese firms are less confident than 
the EU average in investment protection.  

prosperity,  well-being 

Productivity  growth  is  a  critical  driver  of 
and 
economic 
convergence over the long run. A major source 
of  productivity  for  the  EU  economy  is  a  well-
functioning single market, where fair and effective 
competition  and  a  business  friendly  environment 
are  ensured, 
in  which  small  and  medium 
enterprises  (SMEs)  can  operate  and  innovate 
without  difficulty.  Businesses  and  industry  rely 
heavily  on  robust  supply  chains  and  are  facing 
bottlenecks that bear a negative impact on firms’ 
productivity 
levels,  employment,  turnover  and 
entry/exit  rates.  This  may  impact  the  Member 
States’  capacity  to  deliver  on  Europe’s  green  and 
digital transformation. 

low 

relatively 

levels  of 

Productivity (53)  growth 
in  Portugal  has 
remained  sluggish.  Productivity  growth  is  held 
back  in  particular  by  low  levels  of  capital  per 
worker, 
investment, 
moderate  innovation  capacity,  overall  skills  level 
below the EU average and other factors related to 
the  business  environment,  in  particular  the  large 
share  of  micro  and  undercapitalised  firms,  an 
underdeveloped  capital  market,  inefficiencies  in 
the  justice  system  and  regulatory  restrictions 
weighing on competition (54).  

totalling  EUR 1 425 million  for 

The  business  environment  shows  a  mixed 
picture  in  Portugal.  Portugal  is  one  of  the 
strongest  performers  in  entrepreneurship (55).  It 
scores better than the EU average on bankruptcies 
and at the EU average level  on business creation. 
While access to loans is above EU average, access 
to finance remains constrained in terms of equity. 
The recovery and resilience plan (RRP) includes two 
measures 
the 
support  to  firms  in  the  form  of  equity  and  quasi 
equity.  Late  payments  are  still  a  critical  issue 
despite improvements, with 38.1% of SMEs stating 
that they experienced payment delays in the last 6 
months. Late payments in Portugal are mainly due 
to public entities, which is why the RRP reforms of 
the  governance  model  of  public  hospitals  and  to 
modernise 
financial 
simplify 
management  can  be  expected  to  contribute  to 
improving the situation. Portugal does not perform 
satisfactorily  on  public  procurement,  in  particular 

public 

and 

(53)  Productivity is measured as the ratio of output in real terms 

per hour worked (see Annex 19). 

(54)  Commission Staff Working Document Analysis of the 

recovery and resilience plan of Portugal, SWD/2021/146. 

(55)  SME Country factsheet, 2021. 

44 

 
 
                                                 
 
Table A10.1: Key single market and industry indicators 

(Continued on the next page) 

45 

SUB-POLICY AREAINDICATOR NAMEDESCRIPTION20212020201920182017Growth ratesEU27 average*Value added by source (domestic)VA that depends on domestic intermediate inputs, % [source: OECD (TiVA), 2018]68.4162.6%Value added by source (EU)VA imported from the rest of the EU, % [source: OECD (TiVA), 2018]19.7419.7%Value added by source (extra-EU)% VA imported from the rest of the world, % [source: OECD (TiVA), 2018]11.917.6%Cost competitivenessProducer energy price (industry)Index (2015=100) [source: Eurostat, sts_inppd_a]122.192.5106.1110.9103.617.9%127.3Material Shortage using survey dataAverage (across sectors) of firms facing constraints, % [source: ECFIN CBS]5233367%26%Labour Shortage using survey dataAverage (across sectors) of firms facing constraints, % [source: ECFIN CBS]7698540%14%Sectoral producer pricesAverage (across sectors), 2021 compared to 2020 and 2019, index [source:Eurostat]4.5%5.4%Concentration in selected raw materialsImport concentration a basket of critical raw materials, index [source: COMEXT]0.180.180.180.170.176%17%Installed renewables electricity capacity Share of renewable electricity to total capacity, % [source:Eurostat, nrg_inf_epc]67.2067.2067.2067.100%Net Private investmentsChange in private capital stock, net of depreciation, % GDP [source: Ameco]0.11.20.80.4-75.0%2.6%Net Public investmentsChange in public capital stock, net of depreciation, % GDP [source: Ameco]-0.6-0.8-0.8-0.9-33%0.4%Investment dynamicsHEADLINE INDICATORSEconomic structureRESILIENCEShortages/supply chain disruptionsStrategic dependencies 
 
 
 
  
 
Table (continued) 

(*) latest available 
Source: See above in the table the respective source for each indicator in the column "Description". 

46 

Single Market integrationIntra-EU tradeRatio of Intra-EU trade to Extra-EU trade, index [source: Ameco]2.932.732.632.552.4420%1.59Professional services restrictivenessRegulatory restrictiveness indicatorRestrictiveness of access to and exercise of regulated professions (professions with above median restrictiveness, out of the 7 professions analysed in SWD (2021)185 [source: SWD (2021)185; SWD(2016)436 final])5   50%3.37Professional qualifications recognitionRecognition decisions w/o compensationProfessionals qualified in another EU MS applying to host MS, % over total decisions taken by host MS [source: Regulated professions database]87.945%Transposition - overall5 sub-indicators, sum of scores [source: Single Market Scoreboard]Above averageAbove averageAbove averageAbove averageInfringements - overall4 sub-indicators, sum of scores [source: Single Market Scoreboard]Below averageBelow averageOn averageBelow averageInvestment protectionConfidence in investment protectionCompanies confident that their investment is protected by the law and courts of MS if something goes wrong, % of all firms surveyed [source: Flash Eurobarometer 504]4356%BankruptciesIndex (2015=100) [source: Eurostat, sts_rb_a]38.837.849.648.4-19.8%70.1 (2020)Business registrationsIndex (2015=100) [source: Eurostat, sts_rb_a]104.4137.2125.6110-5.1%105.6Late paymentsShare of SMEs experiencing late payments in past 6 months, % [source: SAFE]38.141.640.3n.a.n.a.-5%45%EIF Access to finance index - LoanComposite: SME external financing over last 6 months, index from 0 to 1 (the higher the better) [source: EIF SME Access to Finance Index]0.740.620.560.5827.6%0.56 (2020)EIF Access to finance index - EquityComposite: VC/GDP, IPO/GDP, SMEs using equity, index from 0 to 1 (the higher the better) [source: EIF SME Access to Finance Index]0.070.070.070.070.9%0.18 (2020)% of rejected or refused loansSMEs whose bank loans’ applications were refused or rejected, % [source: SAFE]65.79.6105.74.5%12.4%SME contractorsContractors which are SMEs, % of total [source: Single Market Scoreboard]4233413423.5%63%SME bidsBids from SMEs, % of total [source: Single Market Scoreboard]445379425%70.8%Business demographyAccess to financeBUSINESS ENVIRONMENT - SMEsPublic procurement SINGLE MARKETCompliance - cooperation EC and MS 
 
  
 
ANNEX 11: PUBLIC ADMINISTRATION 
ANNEX 11: PUBLIC ADMINISTRATION 

capacity 

administrative 

Good 
enables 
economic  prosperity,  social  progress  and 
fairness. Public administrations at all government 
levels deliver crisis response, ensure the provision 
of  public  services,  and  contribute  to  building 
resilience  for  the  sustainable  development  of  the 
EU economy.  

Portugal’s  public  administration  performs 
around  the  EU  average  but  its  effectiveness 
can  be  improved (56).  In  particular,  there  is 
significant  room  to  strengthen  evidence-based 
policymaking  in  Portugal,  especially  in  terms  of 
regulatory 
stakeholder 
impact  assessments, 
engagement,  and  the  ex-post  evaluation  of 
legislation  (Graph  A11.1).  At  the  same  time,  the 
national  parliament  has  been  taking  initiatives  to 
improve  the  transparency  of  the  government’s 
legislative process. The legislative proposals by the 
government  should  be  accompanied  by  studies 
and documents that justify and underpin them, as 
well  as  by  consultative  opinions  from  interested 
parties.  The  Portuguese  government  guarantees 
the possibility  of public  consultation  of  regulatory 
or legislative proposals through an online platform 
(ConsultaLEX), launched in 2019. 

of 

the 

and 

number 

instance) 
pending 
administrative  cases  remain  comparatively  high. 
Yet,  the  quality  of  the  justice  system  is  good 
overall,  and  digital  tools  are  used  in  courts  to 
some extent.  As regards judicial independence, no 
systemic deficiencies have been reported (57). 

than 

the  EU-27  average. 

The  ageing  of  the  public  sector  workforce 
and its insufficient training risk undermining 
administrative  capacity.  Portugal  has  a  lower 
proportion  of  public  sector  workers  with  tertiary 
education 
The 
comparatively  low  participation  in  adult  learning 
may  hinder  upskilling.  Risks 
to  sustaining 
administrative capacity can also originate from the 
relatively  high  proportion of  public  sector  workers 
between  55  and  74  years,  especially  in  strategic 
sectors.  For  example,  Portugal  has  one  of  the 
highest proportions in the EU of teachers aged 50 
years and over. Portugal implements programmes 
focused on human capital and skills. 

Graph A11.1: Performance on evidence-based 
policy making indicators 

(RRP)  aims,  among  others 

Despite  Portugal’s  above-average  quality  of 
digital  public  services,  the  share  of  e-
government users is globally low. Against that 
background,  Portugal’s  recovery  and  resilience 
to 
plan 
modernise  the  country’s  public  administration 
through 
improving  public 
employees’  motivation  and  qualifications  (notably 
for retention purposes), and decentralising powers 
to local governments. 

investing 

things, 

IT, 

in 

Portugal is lagging behind on the provision of 
open  government  data  compared  to  the  EU 
average. This situation weakens the potential for 
citizens’  to  hold  their  institutions  to  account 
through  information  checks.  Nevertheless,  the 
‘More Transparency’ portal launched in April 2021 
allows citizens to consult information about State 
providers. 

(1) RIA: Regulatory impact assessment 
Source: OECD (iREG indicators) 

its  efficiency,  especially 

justice  system  faces  challenges  as 
The 
in  the 
regards 
administrative 
In 
administrative  courts,  the  disposition  time  (847 
days  in  first  instance  and  877  days  in  second 

courts. 

and 

tax 

(56)  Worldwide Governance Indicators, 2020 

(57)  For more detailed analysis of the performance of the justice 
system in Portugal, see the 2022 EU Justice Scoreboard 
(forthcoming) and the country chapter for Portugal in the 
Commission’s 2022 Rule of Law Report (forthcoming). 

47 

00,20,40,60,811,21,41,61,8PTEU27averagePTEU27averageMethodologyRIAOversightStakeholder consulationSystematic adoptionEx-post evaluationTransparency 
 
                                                 
   
 
                                                 
 
Graph A11.2: Performance on the single market 
public procurement indicator 

(1) The competition and transparency indicators are triple-
weighted, whereas the efficiency and quality indicators have 
unitary weights. All others receive a 1/3 weighting in the SMS 
composite indicator.  
Source: Single market scoreboard 2020 data 

transparency. 

Selected  elements  of  Portugal’s  public 
financial  management  warrant  attention. 
Portugal  does  not  perform  satisfactorily  on public 
procurement,  in  particular  in  the  core  areas  of 
competition  and 
In  addition, 
improvements  could  be  made  in  the  participation 
of  small  and  medium-sized  enterprises  in  public 
procurement  and  quality  of  data  (Graph A11.2). 
Portugal is also ranking at the bottom in terms of 
national  medium-term 
the 
budgetary  framework 
lower 
index,  owing  to 
coverage  of  the  targets/ceilings  included  in  the 
link 
national  medium-term  fiscal  plans, 
between the targets/ceilings in those plans and the 
annual budgets, and a lower level of detail. At the 
same time, a recent amendment of the Budgetary 
Framework  Law,  which  has  already  entered  into 
force and is therefore not reflected in that index, is 
expected to address some of these concerns (58). 

Commission´s 

the 

(58)  Law No 10-B/2022 of 28 April, amending the Budgetary 

Framework Law. 

48 

 
 
                                                 
Table A11.1: Public administration indicators 

(1) High values stand for good performance barring indicators # 7 and 8. 
(2) Measures the user centricity (including for cross-border services) and transparency of digital public services as well as the 
existence of key enablers for the provision of those services. 
(3) Break in the series in 2021. 
(4) Defined as the absolute value of the difference between the share of men and women in senior civil service positions. 
Source: ICT use survey, Eurostat (# 1); E-government benchmark report (# 2); Open data maturity report (# 3); Fiscal Governance 
Database (# 4, 9, 10); Labour Force Survey, Eurostat (# 5, 6, 8), European Institute for Gender Equality (# 7), Single Market 
Scoreboard public procurement composite indicator (# 11); OECD Indicators of Regulatory Policy and Governance (# 12). 

49 

PT20172018201920202021EU27161.055.054.057.059.070.82nananana79.170.93nananana65.881.1466.471.471.460.0na56.8532.832.032.834.837.455.3613.113.613.513.717.518.6715.65.07.81.01.621.8824.625.026.926.626.521.390.620.620.620.62na0.72102.12.12.12.1na1.511-4.0-5.3-3.7-6.7na-0.7121.03nana1.27na1.7Index of regulatory policy and governance practices in the areas of stakeholder engagement, Regulatory Impact Assessment (RIA) and ex post evaluation of legislation Educational attainment level, adult learning, gender parity and ageingOpen government and independent fiscal institutionsParticipation rate of public administration employees in adult learning (3)Gender parity in senior civil service positions (4)Share of public sector workers between 55 and 74 years (3)E-government Public Financial Management Evidence-based policy makingIndicator (1)Medium term budgetary framework indexStrength of fiscal rules indexPublic procurement composite indicatorShare of individuals who used internet within the last year to interact with public authorities (%)2021 e-government benchmark´s overall score (2) 2021 open data maturity indexScope Index of Fiscal InstitutionsShare of public administration employees with tertiary education, levels 5-8  (3) 
 
  
 
FAIRNESS 
FAIRNESS 
ANNEX 12: EMPLOYMENT, SKILLS AND SOCIAL POLICY CHALLENGES IN LIGHT OF 
ANNEX 12: EMPLOYMENT, SKILLS AND SOCIAL POLICY CHALLENGES IN LIGHT OF 
THE EUROPEAN PILLAR OF SOCIAL RIGHTS  
THE EUROPEAN PILLAR OF SOCIAL RIGHTS  

The European Pillar of Social Rights provides 
for  upward  convergence 
the  compass 
towards better working and living conditions 
in the EU. The implementation of its 20 principles 
on  equal  opportunities  and  access  to  the  labour 
market,  fair  working  conditions,  social  protection 
and inclusion, supported by the 2030 EU headline 
targets  on  employment,  skills  and  poverty 
reduction, will strengthen the EU’s drive towards a 
digital,  green  and  fair  transition.  This  Annex 
provides  an  overview  of  Portugal’s  progress  in 
achieving  the  goals  under  the  European  Pillar  of 
Social Rights. 

The  Portuguese  labour  market  proved  to  be 
resilient  during  the  COVID-19  crisis.  The 
employment  rate  has  decreased  slightly  as  a 
result  of  the  pandemic  and  the  unemployment 
rate increase was less severe than expected (from 
6.7%  in  2019  to  7%  in  2020);  in  2021  it  had 
decreased  to  6.6%.  Young  people  were  most 
negatively  impacted  by  the  crisis.  as  reflected  by 
the increase in the youth unemployment rate from 
18.3%  in  2019  to  23.4%  in  2021.  The  rate  of 
young  people  (from  15  to  29  years)  not  in 
employment,  education  or  training  increased  in 
2020  but  improved  again  to  9.5%  in  2021  (EU: 
13.2%). Ensuring that young people have access to 
quality  employment  and  more  stable  contracts  is 
essential  for  Portugal  to  be  able  to  contribute  to 
reaching 
target  on 
the  2030  EU  headline 
employment. 

An  increasing  number  of  students  chose  to 
remain 
in  education  and  training,  but 
educational  attainment  remains  low  among 
the  adult  population.  The  early  school  leaving 
rate decreased sharply in recent years and stands 
at  5.9%  in  2021,  almost  4  percentage  points 
below 
regional 
the  EU  average.  However, 
disparities range from 6.6% in the Centro region to 
23.2% in the Azores. Despite recent improvements, 
Portugal  faces  a  structural  skills  deficit  with  a 
large  proportion  of  the  population  having  low 
educational  attainment.  This  calls  for  investment 
in  adult  education  and  improvements  in  basic 
skills,  such  as  numeracy,  literacy  and  digital.  The 
Portuguese  recovery  and  resilience  plan  (RRP) 
includes an encompassing skills and qualifications 
component  which  aims 
the 
vocational  education  and  training  system,  to 
upskill adults and promote permanent and quality 

to  modernize 

to 

In  addition 

the  significant 
employment. 
vocational  education  and  training 
investment 
under the RRP, the European Social Fund Plus can 
be  mobilised  to  further improve  adult learning (in 
light  of  the  2021  participation  rate  of  12.9%  for 
learning  over  the  past  four 
participation 
weeks (59),  which  was  above  the  EU  average  of 
10.8%)  and  provide  basic  skills  to  those  with  low 
qualifications. Making use of available EU funding 
is  essential  for  Portugal  to  contribute  to  reaching 
the 2030 EU headline target on skills.  

in 

sub-components 

(at-risk-of-poverty 

Although  poverty  and  social  exclusion  risks 
in  recent  years, 
show  positive  trends 
challenges remain. The share of people at risk of 
poverty  or  social  exclusion  continued  to  fall  from 
21.1%  in  2019  to  20%  in  2020,  below  the  EU 
average (21.6%). This decrease reflected a drop in 
all 
rate, 
severe  material  and  social  deprivation  and  the 
share  of  people  living  in  very  low  work  intensity 
households).  In  2020  social  transfers  (excluding 
pensions)  reduced  the  at-risk-of-poverty  rate  by 
26%  (an  increase  by  1.8  percentage  points  from 
2019),  remaining  significantly  below  the  EU 
in  social 
average  of  32.7%.  Gaps 
protection coverage for several categories of non-
standard  workers, 
regards 
unemployment  and  sickness  benefits.  These  gaps 
in access are relevant given the high proportion of 
employees with temporary contracts (close to 18% 
in 2020) and the proportion of solo self-employed 
(around  11%  of  the  population  in  employment). 
Improving the efficiency and capacity of the social 
protection  system,  access  to  social  services, 
including long-term care, and promoting accessible 
and  affordable  housing  are  essential  for  Portugal 
to  contribute  to  reaching  the  2030  EU  headline 
target on poverty reduction. 

in  particular  as 

remain 

(59)  The indicator on adult learning participation over the previous 
four weeks is used in the country report, rather than the 
indicator on learning over the previous 12 months, as Adult 
Education Survey (AES) data for the 12-month indicator are 
only available for 2016 at the moment, while the new 
Labour Force Survey (LFS) indicator agreed for use in the 
social scoreboard and as 2030 headline target on skills will 
only be available in 2023. 

50 

 
 
 
                                                 
 
 
Table A12.1: Social Scoreboard for Portugal 

Update of 29 April 2022. Members States are classified on 
the Social Scoreboard according to a statistical methodology 
agreed with the EMCO and SPC Committees. It looks jointly at 
levels and changes of the indicators in comparison with the 
respective EU averages and classifies Member States in seven 
categories. For methodological details, please consult the 
Joint Employment Report 2022. Due to changes in the 
definition of the individuals' level of digital skills in 2021, 
exceptionally only levels are used in the assessment of this 
indicator; NEET: neither in employment nor in education and 
training; GDHI: gross disposable household income. 
Source: For methodological details, please consult the 
proposal for a Joint Employment Report 2021, COM(2020) 
744 final 

51 

5.955.09.55.95.075.96.62.9106.020.021.926.018.24.153.01.6Critical situationTo watchWeak but improvingGood but to monitorOn averageEqual opportunities and access to the labour marketEarly leavers from education and training(% of population aged 18-24) (2021)Youth NEET(% of total population aged 15-29) (2021)Gender employment gap (percentage points) (2021)Income quintile ratio (S80/S20) (2020)Individuals' level of digital skills (% of population 16-74) (2021)Dynamic labour markets and fair working conditionsSocial protection and inclusionAt risk of poverty or social exclusion for children (in %) (2020)Disability employment gap (ratio) (2020)Better than averageAt risk of poverty or social exclusion (in %) (2020)Employment rate(% population aged 20-64) (2021)Unemployment rate(% population aged 15-74) (2021)Long term unemployment(% population aged 15-74) (2021)GDHI per capita growth (2008=100) (2020)Best performersImpact of social transfers (other than pensions) on poverty reduction (% reduction of AROP) (2020)Children aged less than 3 years in formal childcare (% of under 3-years-olds) (2020)Self-reported unmet need for medical care (% of population 16+) (2020)Housing cost overburden (% of population) (2020) 
 
  
 
ANNEX 13: EDUCATION AND SKILLS 
ANNEX 13: EDUCATION AND SKILLS 

This  Annex  outlines  the  main  challenges  for 
Portugal’s  education  and  training  system  in 
light of the EU-level targets of the European 
Education  Area  strategic  framework  and 
other  contextual  indicators,  based  on  the 
analysis  from  the  2021  Education  and 
Training  Monitor.  Portugal’s  education  and 
training  system  struggles  with  quality  and  equity 
challenges  that  risk  to  worsen  due  to  the 
pandemic.  Portugal  lags  significantly  behind  the 
EU-level targets on participation in early childhood 
education and tertiary educational attainment. The 
number  of  school  teachers  over  50  and  the 
teachers/student ratio largely exceed EU average.  

policy 

reforms 

Education 

Despite  major  progress  in  most  education 
performance  indicators,  equity  challenges 
persist. 
and 
implemented  measures  seem  to  have  had  a 
positive effect in reducing the rate of early leavers 
from education and training, improving basic skills, 
and 
fostering  higher  education  enrolment. 
However,  the  level  of  progress  differs  between 
socio-economic 
Portuguese 
background still plays an important role in student 
performance.  The  recovery  and  resilience  plan 
(RRP)  includes measures to support quality in and 
equal  access  to  education,  in  particular  through 
the  digitalisation  of  schools  and  a  reform  of 
vocational education and training (VET).  

regions, 

and 

Steps  forward  for  the  universalisation  of 
early  childhood  education  and  care  (ECEC) 
participation.  Supported  by 
the 
Portuguese  government  plans  to  expand  its  pre-
school  network,  aimed  to  provide  free  access  to 
ECEC to all 3-years-old.  

the  RRP, 

School  buildings  require  renovation.  Most  of 
the  Portuguese  schools  were  built  during  the 
1970s  and  1980s,  and  about  50%  of  these  have 
not  yet  been  renovated.  The  Secondary  School 
Modernisation Programme, launched in 2007, was 
interrupted  during 
financial  assistance 
the 
programme’s  period  (2011-2014).  Supported  by 
the ERDF, the national programme for the removal 
of  asbestos  from  school  buildings  (from  ECEC  to 
compulsory  education)  was  announced  in  June 
2020. A total of 599 schools will benefit from the 
planned  investment  to  remove  950 000  square 
metres  of  asbestos.  The  current  curriculum 
changes,  new  philosophy  of  students’  profile  and 
require  different  ways  of 
school  autonomy 

52 

organising  school  space  and  modernising  school 
premises.  

The  COVID-19 pandemic  may  have  increased 
educational 
inequalities  among  students. 
Equity  measures  for  education  taken  by  the 
government  were 
important  to  mitigate  the 
adverse  effects  of  the  pandemic.  The  21|23 
Escola+  Plan (60)  aims  at  recovering  students’ 
learning  losses  during  confinement.  The  National 
Council of Education (CNE) reports (61) that 23% of 
students  may  not  have  participated  regularly  in 
learning 
school  activities  during  the  distance 
period,  mainly  children  and  youngster  from 
socioeconomically  disadvantaged  backgrounds 
being  insufficiently  involved.  Anxiety  levels  in 
children  intensified,  reflected  in  behavioural  and 
sleep  disorders.  Those  between  16  and  24  years 
of  age  reported  anxiety,  signs  of  depression, 
irritability and a feeling of loneliness. One quarter 
of  teachers  surveyed  acknowledged  a  lack  of 
competence,  knowledge  or  experience  for  using 
distance  learning  methodologies.  Half  of  them 
considered  that 
learning  was  not  disrupted, 
although  70%  noted  an  increased  number  of 
students  with  learning  difficulties,  especially  in 
primary schools (76%).  

An  ageing  teacher  population  and  shortages 
in  certain  fields 
is  becoming  a  major 
educational  challenge.  The  CNE  highlights (62) 
the  gradual  increase  in  the  number  of  teachers 
retiring  each  year.  In  the  coming  years,  this 
situation  will  be  exacerbated,  since  there  is  a 
simultaneous  gradual  decline  in  the  number  of 
Master  degree  graduates  in  education.  Currently 
there  is  already  a  lack  of  qualified  teachers  for 
various subjects. As stated by trade unions (63),this 
is  particularly  acute  in  the  metropolitan  area  of 
Lisbon  and  in  the  Algarve  region.  According  to  a 
study (64)  carried  out  by  Portuguese  education 
authorities,  around  34 500  extra  teachers  would 

(60)  https://escolamais.dge.mec.pt/  

https://www.cnedu.pt/content/noticias/estudos/Estudo_
AssembleiaRepublica-Efeitos_da_pandemia_COVID-19.pdf  

(61)

(62)

https://www.cnedu.pt/content/edicoes/estudos_e_relat
orios/Estudo_Selecao_e_Recrutamento_de_Docentes_julho2
019.pdf 

(63)  https://www.spliu.pt/spliu488.pdf  

(64)  ‘Study for the Diagnostic of Teaching Needs from 2021 to 
2030’, Portuguese Directorate General for Statistics on 
Education and Science, November 2021.  

 
 
                                                 
 
 
 
be  necessary  to  avoid  shortages  by  2030/2031. 
According  to  the  same  study,  20%  of  today’s 
teachers  will  retire  within  the  next  five  years  and 
58%  within  10  years.  Teacher  shortages  are 
particularly  acute  in  Azores  where  a  specific 
support  programme  for  teachers  will  be  unveiled 
in 2022.  

the country, in partnerships with Higher Educations 
centres,  museums, 
Institutions, 
innovation-based  companies,  associations  and 
NGO's.  

research 

teachers  need 

The  attractiveness  of  higher  education  is 
growing.  The  2021/2022  academic  year  had  the 
second  highest  number  of  students  competing  to 
enter  in  tertiary  studies  since  1989.  There  were 
more  applications  from  students,  including  those 
coming  from  VET  and  specialised  artistic  courses 
who  have  to  sit  for  special  entry  exams  since 
2020.  Higher  education 
to 
modernise  their  teaching  methods  and  being 
offered enough training on technological skills and 
digital 
resources.  To  promote  STEAM  fields 
(science,  technology,  engineering,  the  arts  and 
mathematics), the RRP includes the Adult Impulse 
and the Impulse Youth STEAM programmes, which 
help universities organise, plan and design STEAM 
courses/programmes, 
with 
in 
employers  and  municipalities.  Another  initiative 
supported by  the  RRP,  is to  create  650  additional 
Ciência  Viva  (Living  Science)  school  clubs  across 

association 

Table A13.1: EU-level targets and other contextual indicators under the European Education Area 
strategic framework 

(1) The 2018 EU average on PISA reading performance does not include ES; d = definition differs, u = low reliability, : = not 
available; Data is not yet available for the remaining EU-level targets under the European Education Area strategic framework, 
covering underachievement in digital skills, exposure of vocational educational training graduates to work based learning and 
participation of adults in learning. 
Source: Eurostat (UOE, LFS); OECD (PISA). 

53 

96%88.7%d91.9%92.2%2019, d92.8%2019Reading< 15%17.2% 20.4%20.2%201822.5%2018Mathematics< 15%23.8% 22.2%23.3%201822.9%2018Science< 15%17.4% 21.1%19.6%201822.3%2018< 9 %13.7%11.0%5.9%9.7%Men16.4%12.5%7.7%11.4%Women11.0%9.4%4.1% 7.9%Cities11.8%9.6%5.0% 8.7%Rural areas17.3%12.2%7.3%10.0%Native13.5%10.0%5.9%8.5%EU-born:u20.7%:u21.4%Non EU-born16.1%23.4%:u21.6%45%33.1%36.5%47.5%41.2%Men25.4%31.2%38.3%35.7%Women40.6%41.8%56.5%46.8%Cities40.5%46.2%53.5%51.4%Rural areas24.1%26.9%35.7%29.6%Native33.4%37.7%47.6%42.1%EU-born40.1%32.7%56.3%40.7%Non EU-born26.3%27.0%41.1%34.7%36.0% 38.3%45.8%201938.9%2019Tertiary educational attainment (age 25-34)TotalBy genderBy degree of urbanisationBy country of birthShare of school teachers (ISCED 1-3) who are 50 years or overParticipation in early childhood education (age 3+)Low achieving 15-year-olds in:Early leavers from education and training (age 18-24)TotalBy genderBy degree of urbanisationBy country of birth20152021IndicatorTargetPortugalEU27PortugalEU27 
 
 
 
  
 
ANNEX 14: HEALTH AND HEALTH SYSTEMS 
ANNEX 14: HEALTH AND HEALTH SYSTEMS 

Especially  relevant  in  light  of  the  ongoing 
COVID-19 pandemic, resilient health care is a 
prerequisite  for  a  sustainable  economy  and 
society.  This  Annex  provides  a  snapshot  of  the 
healthcare sector in Portugal.  

Life expectancy in Portugal is slightly higher 
than the EU-27 average, but it fell by almost 
10 months in 2020 due to COVID-19. As of 17 
April  2022,  Portugal  reported  2.14  cumulative 
COVID-19  deaths  per  1 000  inhabitants  and  364 
confirmed  cumulative  COVID-19  cases  per  1 000 
inhabitants. Portugal fares well in avoiding deaths 
in  general,  including  those  from  treatable  causes. 
That  notwithstanding,  obesity  is  a  growing  public 
health 
issue  among  adults  and  adolescents. 
Furthermore,  the  COVID-19  pandemic  disrupted 
cancer  detection  programmes,  resulting 
in  a 
temporary reduction in screening rates in 2020. 

Graph A14.1: Life expectancy at birth, years 

Source: Eurostat database 

Graph A14.2: Projected increase in public 
expenditure on healthcare over 2019-2070 (AWG 
reference scenario) 

Source: European Commission/EPC (2021) 

In  Portugal,  health  spending  relative  to  GDP 
has  been  continuously  below  the  EU-27 
average. In 2019, health spending per capita was 

54 

health 

of 
low 

about  33%  lower  than  the  EU-27  average.  The 
is 
expenditure 
share 
public 
comparatively 
in  Portugal.  This 
(61%) 
translates  into  one  of  the  highest  proportions  of 
out-of-pocket payments for health care in the EU, 
which  in  Portugal  is  almost  twice  the  EU-27 
average.  Based  on  the  age  profile  of  the 
Portuguese  population,  public  expenditure  on 
health  is  projected  to  increase  by  1.6  percentage 
(compared  to  0.9 
points  of  GDP  by  2070 
the 
percentage 
thereby 
accentuating 
sustainability 
fiscal 
challenges in the long term. 

possible 

points 

EU), 

for 

The  COVID-19  pandemic  has  highlighted  the 
structural  challenges  underlying  Portugal’s 
health  system.  The  country’s  National  Health 
Service has faced a challenging situation for years 
due  to  rising  spending  on  wages,  medicines,  and 
medical  services,  alongside  inner  weaknesses  in 
budgetary  planning  and  cost-efficiency,  with 
knock-on effects on hospital arrears and, possibly, 
also  supply-chain  relationships.  These  pressures 
have coexisted with shortages of health staff and 
in  workforce  planning  across 
shortcomings 
geographies  and medical  specialties.  In  particular, 
and  despite  the  number  of  health  professionals 
being on the rise for the past decade, the nursing 
workforce  per  1 000  inhabitants  was  still  below 
the EU average in 2019. 

Portugal’s recovery and resilience plan (RRP) 
is  rich  in  health  reforms  and  investments.  It 
includes a set of mutually reinforcing initiatives to 
strengthen  the  response  capacity  of  the  National 
Health Service in the fields of primary, mental and 
long-term  health  care,  combined  with  efficiency-
oriented  measures  to  enhance  the  governance, 
cost-efficiency,  access  and  quality  of  public 
hospital  services.  Investments  are  also  geared 
towards digitalising the National Health Service as 
a whole, with specific measures also targeting the 
outermost  regions  of  Madeira  and  the  Azores. 
long-term  health  care 
Primary,  mental  and 
services are planned to become strongly anchored 
on  local  services  and  community-based  care.  The 
plan  also  contains  ancillary  measures  to  promote 
a greater uptake of centralised purchasing and the 
dissemination  of  best  governance  practices, 
including  the  enhanced  monitoring  of  public 
hospitals’ performance and stronger accountability 
of  hospital  managers  with  respect  to  cost-
efficiency and quality of service. 

80.580.980.981.81.380.481.381.381.681.581.981.1201520162017201820192020EUPortugal6.65.70.91.602468EUPortugal% of GDP20192070increase 
 
  
 
  
 
Table A14.1: Key indicators, health 

(1) Doctors' density data refer to practising doctors in all countries except FI, EL, PT (licensed to practice) and SK (professionally 
active).  
(2) Nurses' density data refer to practising nurses in all countries (imputation from year 2014 for FI) except IE, FR, PT, SK 
(professionally active) and EL (nurses working in hospitals only). More information: https://ec.europa.eu/health/state-health-
eu/country-health-profiles_en 
Source: Eurostat Database; except: * Eurostat Database and OECD, ** ECDC. 

55 

20162017201820192020EU average (latest year) Treatable mortality per 100 000 population (mortality avoidable through optimal quality healthcare)88.984.082.979.092.1 (2017)Cancer mortality per 100 000 population245.8243.5243.3244.8252.5 (2017)Current expenditure on health, % GDP 9.49.39.49.59.9 (2019)Public share of health expenditure, % of current health expenditure61.761.261.261.079.5 (2018)Spending on prevention, % of current health expenditure 1.81.81.81.82.8 (2018)Acute care beds per 100 000 population325.0324.7329.3332.7387.4 (2019)Doctors per 1 000 population *4.85.05.25.33.8 (2018)Nurses per 1 000 population *6.56.76.97.18.2 (2018)Consumption of antibacterials for systemic use in the community, daily defined dose per 1 000 inhabitants per day **17.516.917.717.913.714.5 (2020) 
 
     
 
ANNEX 15: ECONOMIC AND SOCIAL PERFORMANCE AT REGIONAL LEVEL 
ANNEX 15: ECONOMIC AND SOCIAL PERFORMANCE AT REGIONAL LEVEL 

all 

across 

is  an 

regions. 

The  regional  dimension 
important 
factor  when  assessing  economic  and  social 
developments  in  Member  States.  Taking  into 
account  this  dimension  enables  a  well-calibrated 
and targeted policy response that fosters cohesion 
and  ensures  sustainable  and  resilient  economic 
Regional 
development 
disparities remain significant in Portugal. In 2020, 
Lisbon  was  the  only  region  in  Portugal,  which 
accounted  for  GDP  per  capita  close  to  the  EU 
average.  In  five  out  of  seven  regions,  GDP  per 
capita  was  less  than  75%  of  the  EU  average. 
During  the  last  decade,  Portugal  GDP  per  capita 
grew  slower  than  the  EU  average,  despite  most 
regions  showing  a  sustained  growth  since  the 
2011-2012,  and  having  showed  converged  with 
the  EU  average  until  the  onset  of  the  COVID-19 
pandemic.  Lisbon  is  the  exception,  although  its 
growth  in  in  the  last  decade  did  not  prevent  GDP 
per  capita  from  dropping  to  just  below  the  EU 
average in 2020.  

During  2010-2019,  Portuguese  regions'  GDP 
per capita grew at a slower pace than the EU 
average.  In  2019,  Portugal’s  GDP  per  inhabitant 
represented  79%  of  the  EU  average.  Lisbon 
recorded  the  highest  GDP  per  capita  among  the 
Portuguese  regions  and  was  the  only  region  in 
Portugal  with  a  higher  level  of  GDP  than  the  EU 
average.  The  Algarve  and  Madeira  were  the  two 
regions  with  GDP  per  capita  closest  to  the  EU 
average (i.e. 88% and 76%).  

Graph A15.1: Portugal, selected indicators at 
regional level 

(1) Bubble sizes correspond to population size 
Source: European Commission 

Portugal  continues  to  face  the  challenge  of 
achieving a greater level of inter-, and intra-
regional  cohesion.  The  most  dynamic  average 
growth  during  2010-2019  was  recorded  in  the 
Norte,  followed  by  the  Algarve,  and  the  Centro. 
There  is  also  an  upward  trend  in  the  remaining 
regions.  Strong  disparities  persist  between 
mainland  Portugal  and  its  outermost  regions.  The 
proportion  of  people  at  risk  of  poverty  or  social 
exclusion  in  the  Azores  (32.4%)  and  Madeira 
(32.9%)  is  particularly  high  (Portuguese  average 
19.8%).  These regions are facing rapid population 
ageing  linked  to  youth  migration.  Disparities  in 
GDP  per  capita  are  also  caused  by  the  important 
labour productivity disparities between coastal and 
remote  areas  as  well  as  between  metropolitan 
areas and small cities and towns.  

Table A15.1: Portugal, selected indicators at regional level 

Source: Eurostat 

56 

0.00.20.40.60.81.01.21.41.61.82.05060708090100110120130Annual real GDP per head growth 2010-2019GDP (PPS) per head in 2010 (EU = 100)Capital regionOther NUTS2 regions 
 
 
 
   
 
 
 
 
Labour productivity (as measured by the real 
gross value added per worker) is 74% of the 
EU  average.  All  regions  continued  to  grow 
steadily  in  the  years  following  the  financial  crisis 
except  the  region  of  Lisbon,  which  registered  a 
small  decrease  and  continued  to  be  the  region  in 
Portugal  with  the  highest  labour  productivity  per 
capita (90% of the EU average in 2018).  

territories 

Portuguese 
face 
Several 
challenges 
in  the  transition  to  climate 
neutrality  including  Alentejo  Litoral  and  Médio 
Tejo,  where  the  two  respective  coal-fired  power 
plants in the municipality of Sines and in Pego, in 
the municipality of Abrantes were closed in 2021. 
These  plants  were  the  largest  greenhouse  gas 
emitters in Portugal, all sectors included. 

Graph A15.2: Territories most affected by the 
climate transition in Portugal 

Portugal  is  a  moderate  innovating  country 
characterised by differences in terms of R&I 
potential  at  regional  level.  The  regions  of 
Lisbon,  the  Centro  and  Norte  concentrate  92%  of 
the  R&D  Units,  almost  95%  of  researchers,  and 
94%  of  business  R&D  expenditure.  In  2019,  total 
expenditure  on  R&D  in  Portugal  accounted  for 
1.4%  of  GDP  (rising  from  0.72%  in  2000),  being 
particularly  significant  in  the  business  sector, 
which  in  2019  represented  more  than  50%  of 
total expenditure on R&D (it was less than 30% in 
2000).  Nevertheless,  Portugal  continues  to  record 
below  the  EU  average  percentages  of  in-house 
business  process  innovators,  non-R&D  innovation 
expenditures,  innovative  SMEs  collaborating  with 
others, and medium and high tech goods exports.  

Graph A15.3: Unemployment in Portugal 

Source: European Commission 

Highly  polluting  manufacturing  of  refined 
petroleum  products  and  plastics  are  also 
located  in  Sines  and  Matosinhos  (in  the 
Metropolitan Area of Porto). Portugal has proposed 
three  additional  territories  to  be  supported  under 
the  Just  Transition  Mechanism,  namely  Aveiro, 
Coimbra,  and  Leiria  (Centro  Litoral  region), 
which  are  being  assessed  by  the  Commission. 
Portugal argues that these four territories are the 
most negatively affected by the climate transition, 
in  particular  with  regard  to  expected  job  losses 
and the transformation of production processes. 

Source: European Commission 

In 2020, the level of unemployment (age 15-
74)  in  Portugal  reached  6.8%,  which  is 
slightly  below  the  EU  average 
(7.1%). 
Unemployment  is  highest  in  the  Algarve  (8.3%) 
and  Madeira  (7.9%),  and  the  region  of  Lisbon 
(7.7%),  followed  by  the  Norte  (6.8%),  the  Azores 
(6.1%)  and  lowest  in  Centro  (5.6%)  and  Alentejo 
(5.9%). The latest population projections for 2080 
indicate  that  the  population  could  fall  from  10.3 
million  to  8.2  million.  As  a  result  of  demographic 
trends,  the  ageing  ratio  in  Portugal  will  almost 
double, from 159 to 300 elderly  people  for every 
100 young people in 2080. If this trend occurs as 
projected,  it  will  produce  systemic  and  structural 
effects  on  the  country's  ability  to  develop,  both 
economically and socially. The main challenges are 

57 

 
 
 
to 

youth 

tackling 

related 
unemployment, 
modernisation  of  institutions  and  employment 
services,  sustainability  of  the  social  security 
model,  precariousness  of  the 
labour  market, 
improvement  of  qualifications,  promoting  social 
inclusion, and eradication of poverty.  

The COVID-19 crisis has hit particularly hard 
the  sectors  and  the  regions  with  economies 
depending  on  transport  and  tourism, 
in 
particular  in  Madeira,  where  tourism  represents 
approximately  25%  of  GDP.  The  Azores  and 
in 
Madeira  have  recorded  a  slower  uptake 
economic  activity,  compared  to  the  Portuguese 
average: in December 2020, the economic activity 
index  variation  compared  to  the  same  month  of 
2019  was  -2.5  in  the  Azores  and  -3.5  in  Madeira 
while  the  national  average  was  -1.2.  Given  the 
outermost  regions’  special  characteristics  and 
location,  diversifying  the  economy  and  ensuring 
cooperation  with  other  regions  will  be  important 
for their economic development and resilience.  

58 

 
 
MACROECONOMIC STABILITY 
MACROECONOMIC STABILITY 
ANNEX 16: KEY FINANCIAL SECTOR DEVELOPMENTS 
ANNEX 16: KEY FINANCIAL SECTOR DEVELOPMENTS 

This  Annex  provides  an  overview  of  key 
developments  in  Portugal’s  financial  sector. 
The  banking  sector  remained  stable  through  the 
economic  downturn  caused  by  the  pandemic.  The 
pandemic  brought  interrupted  the  gradual  post-
financial  crisis 
the  Portuguese 
recovery  of 
economy  and  its  banking  system.  Given  that 
pandemic-sensitive  industries  (tourism,  hospitality 
and  transportation)  play  a  substantial  role  in  the 
economy  and  represent  between  5%  and  15%  of 
banks’ loan portfolios, the authorities put in place 
an  effective  array  of  support  measures  -  such  as 
moratoria  and  guarantees  –  to  assist  firms  and, 
indirectly, also to preserve financial stability. Most 
support  measures  stopped  in  early  2021  with 
credit  moratoria  ending  definitely  in  Q4  2021. 
Portuguese  banks  maintained  a  strong  financial 
position 
throughout  2020-2021.  The  sector 
cautiously  made  provisions  to  face  expected 
future loan losses. The non-performing loans (NPL) 
coverage  ratio  rose  to  55%  in  Q3  2021  from  a 
pre-pandemic  level  of  51.5%.  In  parallel,  NPLs 
throughout  2020-2021, 
continued 
mainly  through  sales  and  write  offs,  dropping  to 
4%  in  September  2021,  down  from  6.1%  in  end-
2019, just before the onset of the pandemic. The 
stable 
sector's 
throughout 2021 at an average of 17.8% (Capital 
Adequacy  Ratio),  however  capital  ratios  remain 
disparate  among  lenders  and  generally  lower 
compared to most EU Member States (EU average 
19.3%  in  September  2021).  More  recently,  the 

capital  metrics 

to  decline 

remained 

strong  post-COVID  economic  recovery  is  helping 
most  banks  to  generate  positive  profit  margins. 
The  return  on  equity  reached  4.7%  in  the  first 
three  quarters  of  2021,  allowing  lenders  more 
flexibility  going  forward.  Overall,  banks  display 
healthy  balance  sheets  that  seem  to  be  able  to 
accommodate a possible delayed increase in NPLs. 

Portugal’s banks have a substantial exposure 
to real estate. Loans for house purchase account 
for 45% of banks’ credit to the private sector (Q3 
2021), slightly above the euro area average of at 
44%.  Altogether,  close  to  a  third  of  the  sector’s 
aggregate balance sheet is exposed to commercial 
and  residential  real  estate  assets.  Although 
households’ indebtedness-to-GDP remains well off 
its peak level  reached back in 2009 (92%), it has 
risen  from  65%  (end  of-2019)  to  68.7%  (Q3 
2021)  and  currently  exceeds  the  euro  area 
average by approximately 8 percentage points. To 
a  large  extent,  the  rise  in  Portuguese  household 
indebtedness  has  been  driven  by  quite  dynamic 
household credit growth (3.8%), and particularly by 
the  amount  of  new  mortgages,  which  grew  by 
4.4%  in  2021  and  showed  an  accelerating  trend 
throughout the year. This expanding credit growth 
also  feeds  back  into  rapidly  rising  real  estate 
prices.  However,  more  recently,  there  are  some 
signals  of  a  deceleration  in  mortgages  growth. 
Portuguese  real  estate,  alongside  travel  and 
tourism  has  been  a  major  driver  of  the  post-
financial  crisis  recovery.  As  a  result,  Portuguese 

Table A16.1: Financial soundness indicators 

(1) Last data: Q3 2021 
Source: ECB, Eurostat, Refinitiv 

59 

20172018201920202021Total assets of the banking sector (% of GDP)200.8190.8181.2206.7207.5Share (total assets) of the five largest bank (%)73.173.073.373.6-Share (total assets) of domestic credit institutions (%)169.768.368.468.569.5Financial soundness indicators:1- non-performing loans (% of total loans)13.39.46.14.94.0- capital adequacy ratio (%)15.215.216.718.117.8- return on equity (%)-0.82.74.30.04.7NFC credit growth (year-on-year % change)-0.31.80.99.54.5HH credit growth (year-on-year % change)-0.20.91.21.63.8Cost-to-income ratio (%)152.960.259.256.051.1Loan-to-deposit ratio (%)178.976.276.472.169.5Central bank liquidity as % of liabilities6.95.85.49.210.8Private sector debt (% of GDP)163.0155.1149.5163.7-Long-term interest rate spread versus Bund (basis points)273.4144.3101.092.666.8Market funding ratio (%)42.843.745.245.8-Green bond issuance (bn EUR)--1.11.52.1 
 
 
 
 
 
  
 
house  prices  have  experienced  one  of  the  fastest 
growth  rates  in  the  EU  in  2015–2021.  A  fast 
accumulation  of  household  debt,  in  particular  at 
variable  rates,  may  lead  to  defaults  on  loans 
payments  when  debt  levels  prove  unsustainable, 
following,  for  instance,  a  surge  in  interest  rates. 
High property valuations would thus be difficult to 
sustain in the event of higher interest rates, which 
in  turn  could  trigger  a  correction 
in  some 
overvalued  real  estate  segments,  affecting  the 
economy  and  the  financial  system  alike  through 
various channels. Against this backdrop,  Banco de 
macroprudential 
Portugal’s 
recommendation,  aimed  at  lowering  to  30  years 
the  average  maturity  for  mortgage-backed  loans, 
may  improve  borrowers’  risk  profiles  and  help 
reduce the pace  of  mortgage  lending  growth.  The 
set  of macroprudential measures already in place 
has  been  successful  in  bringing  down  the  loan  to 
value  ratio  for  housing  loans  to  below  80% 
threshold.  This  contributed  to  limit  the  role  of 
domestic  bank’s  credit  in  the  growth  of  house 
price, 
increasing  also  banks’  resilience  to  a 
potential decline in retail real estate prices. 

recent 

60 

 
ANNEX 17: MACROECONOMIC IMBALANCE PROCEDURE ASSESSMENT MATRIX 
ANNEX 17: MACROECONOMIC IMBALANCE PROCEDURE ASSESSMENT MATRIX 

to 

the 

taken 

improve 

potential and to mitigate structural weaknesses in 
the corporate sector, notably through the set-up of 
a EUR 1.3 billion capitalisation fund (0.6% of GDP). 
In  the  area  of  education,  incremental  steps  are 
being  taken  in  order  to  increase  digital  education 
and training for all. At the same time, policy action 
has  been 
financial 
sustainability  of  state-owned  enterprises,  through 
a  new  management  contract  containing  a  system 
of  incentives  to  support  managers’  performance. 
Moreover,  a  number  of  measures  are  foreseen  in 
Portugal’s  RRP (66)  that  can  help  to  enhance  the 
quality  and  composition  of  public  finances, 
strengthen  the  financial  sustainability  of  the 
National  Health  Service,  and  further  mitigate 
vulnerabilities  in  some  state-owned  enterprises. 
Weaknesses  in  the  business  environment  persist, 
in  particular  related  to  sector-specific  regulatory 
and  administrative  burden,  including  regulatory 
restrictions  in  regulated  professions.  Reforms  in 
these areas are also embedded in Portugal’s RRP. 
The  tax  and  social  protection  systems  remain 
complex  and  the  ensuing  administrative  burden 
could be reduced, in particular by simplifying both 
administrative 
frameworks 
efficiency. 

enhancing 

and 

For  those  reasons,  and  more  generally  on  the 
basis  of  the  elements  of  the  in-depth  review 
undertaken for Portugal  under Regulation (EU) No 
1176/2011  on  the  prevention  and  correction  of 
macroeconomic imbalances as summarised  in the 
Staff  Working  Document  (SWD  (2022)637  final), 
the  Commission  has  considered 
its 
Communication  “European  Semester  –  2022 
Spring  Package”  (COM(2022)600  final)  that 
Portugal 
experience 
macroeconomic imbalances. 

continues 

to 

in 

The  Macroeconomic 
Imbalance  Procedure 
matrix presents the main elements of the in-
depth  review  undertaken  for  Portugal  in 
accordance  with  Article  5  of  Regulation  (EU) 
No 1176/2011 on the prevention and correction of 
macroeconomic imbalances, as summarized in the 
Staff  Working  Document 
(2022)637 
final ) (65). For Member States selected in the 2022 
Alert Mechanism Report it presents, separately for 
each  source  of  imbalance  and  adjustment  issue, 
the  main  findings  regarding  the  gravity  and  the 
evolution  of  the  identified  challenges,  as  well  as 
policy response and gaps. 

(SWD 

The Portuguese economy continues to face a 
large  stock  of  external,  government  and 
private debt, in a context of low productivity 
growth. High levels of non-performing loans have 
fallen  considerably  and  now  pose  more  limited 
risks. Government and external debt-to-GDP ratios 
resumed a downward trend as of 2021 but remain 
sizeable.  In  2021  the  NIIP-to-GDP  ratio  improved 
substantially,  moving  beyond  its  pre-pandemic 
the 
level  but  standing  significantly  beyond 
estimated  prudential 
threshold.  The  current 
account  balance  turned  negative  in  2020-2021, 
mainly  due  to  the  pandemic-driven  shock  in  the 
tourism  sector.  In  addition,  productivity  growth  is 
low,  hampering  the  deleveraging  process.  The 
ratios  of  private  and  government  debt  to  GDP 
resumed  their  downward  trajectory  in  2021  but 
remained above their pre-pandemic levels.  

Debt  ratios  have  resumed  a  downward 
trajectory  in  2021,  helped  by  the  economic 
recovery  following  the  outbreak  of  COVID-
19.  The  government  and  external  debt-to-GDP 
ratios are forecast to continue decreasing in 2022 
and 2023. The current account balance is forecast 
to remain negative, facing a one-off deterioration 
in  2022  in  light  of  high  prices  of  energy  imports, 
and  to  start  narrowing  in  2023.  The  external 
position  (NIIP)  is  set  to  further  benefit  from  the 
expected RRP grants and GDP growth. 

Policy  progress  has  been  made  to  address 
imbalances, also  through  the  RRP,  but policy 
challenges remain. Authorities have taken steps 
in support of the country’s exports and investment 

(65)  European Commission (2022), COMMISSION STAFF 

WORKING DOCUMENT In-Depth Review for Portugal in 
accordance with Article 5 of Regulation (EU) No 1176/2011 
on the prevention and correction of macroeconomic 
imbalances. 

(66)  https://ec.europa.eu/economy_finance/recovery-and-

resilience-
scoreboard/index.html#:~:text=What%20is%20it%3F,of%20t
he%20Covid%2D19%20pandemic. 

61 

 
 
                                                 
 
 
 
 
 
 
                                                 
 
Table A17.1: Assessment of Macroeconomic Imbalances matrix 

Gravity of the challenge 

Evolution and prospects 

Policy response 

Imbalances (unsustainable trends, vulnerabilities and associated risks) 

External balance 

net 

The 
investment 
international 
position  (NIIP)  is  estimated  at  -96%  of 
GDP  at  the  end  of  2021,  standing 
beyond 
prudential 
threshold  of  -52%.  Non-defaultable 
instruments  account  for  about  60%  of 
the NIIP. 

estimated 

the 

Private debt 

The  current  account  was  below  the 
country-specific  norm  and  the  value 
required  to  reach  the  country  specific 
prudential  NIIP  benchmark  over  a  10-
year  period.  This  points  out  to  further 
adjustment needs. 

The  high  stock of  private debt is mainly 
a  legacy  of  the  past  in  Portugal  but 
related  risks  have  been  reinforced  with 
the outbreak of the COVID-19 pandemic. 
Private  debt  is  estimated  at  164%  of 
GDP  at  the  end  of  2020  and  160%  at 
is  still 
the  end  of  2021,  which 
estimated 
significantly 
and 
country-specific 
both 
prudential 
households 
non-financial 
corporations. 

the 
fundamentals 
for 

benchmarks, 
and 

above 

The  stock  of  non-performing  loans  is 
estimated  at  3.6%  at  the  end  of  2021 
and  pose  a  considerably  lower  risk  in 
comparison to previous periods. 

Following  a  steady  improvement  during 
2015-2019,  the  outbreak  of  COVID-19 
worsened  the  NIIP  position  in  2020.  In 
2021,  the  NIIP  started  to  improve  again, 
ending the year at -96% of GDP relative to 
-105%  a  year  earlier.  It  is  projected  to 
improve  further  in  2022-2023,  benefiting 
from  the  gradual  recovery  in  tourism,  RRP 
grants, and nominal GDP growth. 

The  current  account  posted  a  deficit  of 
1.1%  of  GDP  in  both  2020  and  2021, 
following  several  years  of  a  positive 
balance.  It  is  forecast  to  worsen  in  2022, 
due  to  exceptionally  high  prices  of  energy 
imports, but to start narrowing afterwards. 

Unit  labour  costs  are  projected  to  move 
broadly in line with Portugal’s main trading 
partners.  Export  market  shares  are  set  to 
gradually increase in the medium term. 

The  ratio  of  consolidated  private  debt  to 
GDP  increased  by  around  15  percentage 
points in 2020 but remained well below the 
historical  peak  of  211%  at  end-2012.  The 
ratio  moved  back  on  a  downward  path, 
reaching  160%  at  the  end  of  2021.  The 
outlook remains favourable  amid  a broadly 
stable  stock  of  credit.  Both  the  corporate 
and  household  sectors  are  expected  to 
contribute to the deleveraging process. 

NPLs  continued  to  decline  in  2021  even 
after  the  expiration  of  the  credit  moratoria 
in  September  2021  thus  reducing  the  risks 
related to the debt structure. 

Authorities updated the Strategy for Technological and 
Enterprise  Innovation  2018-2030  in  efforts  to  raise 
the country’s export potential. Ongoing investments in 
energy  savings  and  renewables  are  also  expected  to 
support  the  external  balance  by  reducing  imports  of 
energy.  Further  measures  to  boost  competitiveness 
remain  essential  to  achieve  a  more  significant 
improvement in the external balance. 

In  response  to  the  economic  shock  brought  by  the 
COVID-19  pandemic,  Portugal  has  enforced  debt 
moratoria from March 2020 until September 2021. To 
mitigate  risks  arising  from  the  phasing-out  of  the 
moratoria,  authorities  set  up  a  EUR  1.3  billion 
capitalisation  fund  to  provide  equity  and  quasi-equity 
support  to  vulnerable  but  viable  firms.  To  address 
banking risks related to the increased overvaluation in 
house 
central  bank  adopted  a 
macroprudential  recommendation  aimed  at  lowering 
the  average  maturity  for  mortgage-backed  loans  to 
30 years. 

prices, 

the 

is 

A  crucial  step  has  been  taken  towards  strengthening 
the  governance  and  efficiency  of  state-owned 
enterprises  with  the  entry  into  force  of  a  new 
management contract template in December 2021. Its 
implementation 
the 
expected 
performance,  responsibility  and  accountability  of 
public managers appointed to the respective Boards of 
Directors. However, policy gaps persist, notably related 
to  the  long-delayed  implementation  of  the  2015 
Budgetary  Framework  Law  and  to  the  financial 
sustainability  of  the  National  Health  Service.  Reforms 
in these areas are embedded in Portugal’s RRP. 

increase 

to 

Productivity  remains  impaired  by  low  investment 
levels,  skill  gaps,  rigidities  in  product  and  labour 
markets, and weaknesses in the business environment 
and  the  judiciary.  A  large  part  of  reforms  and 
investments envisaged in Portugal’s RRP are expected 
to  support  productivity,  notably  by  investments  in 
education.  In  2021,  a  new  legal  framework  entered 
into  force  to  support  links  between  higher  education 
and businesses. In  addition, contracts were  signed for 
digitalisation of schools. Furthermore, there is scope to 
simplify  the  tax  and  social  protections  systems,  in 
frameworks  and 
particular  by  simplifying  both 
enhancing 
respective 
of 
the 
administrations. 

efficiency 

the 

Public debt 

The  public  debt-to-GDP  ratio  reached  a 
peak  of  135%  at  the  end  of  2020,  and 
started to decrease again in 2021, when 
it reached 127% at the end of the year. 
The high public debt-to-GDP ratio makes 
Portugal  sensitive 
to  shocks,  which 
translate into fiscal sustainability risks in 
the medium term. 

The public debt-to-GDP ratio is projected to 
remain  on  a  steady  downward  path  over 
the  projection  horizon,  reaching  115%  at 
the  end  of  2023,  below  its  pre-pandemic 
level.  The  projected  decline  of  the  public 
debt-to-GDP  ratio  is  underpinned  by  an 
improving  budget  balance  and  favourable 
interest-growth differentials. 

Productivity 

growth 

productivity 

Low 
hinders 
competitiveness  and  potential  growth. 
This  limits  the  prospects  for  resuming 
private and public deleveraging from the 
debt  levels,  a  more  sustainable  and 
inclusive growth, and progress in income 
convergence. 

Labour  productivity  temporarily  dropped  in 
2020,  as  GDP contracted much faster than 
employment. However, it recovered partially 
in  2021.  Current  projections  point  to  a 
further  recovery  in  productivity  in  2022-
2023  as  GDP  is  forecast  to  grow  much 
faster 
In  addition, 
Portugal’s tax and social protection systems 
remain 
the  associated 
administrative burden is still significant. 

than  employment. 

complex  and 

Source: European Commission 

62 

 
 
 
 
 
 
ANNEX 18: TAXATION 
ANNEX 18: TAXATION 

This  Annex  provides  an 
indicator-based 
overview of Portugal’s tax system. It includes 
information  on  the  tax  structure,  i.e.  the  types  of 
tax  that  Portugal  derives  most  revenue  from,  the 
tax  burden  for  workers,  and  the  progressivity  and 
redistributive  effect  of  the  tax  system.  It  also 
provides 
tax  collection  and 
compliance,  and  on  the  risks  of  aggressive  tax 
planning activity. 

information  on 

Portugal’s  tax  revenue  is  relatively  low  in 
relation to the country’s GDP. Labour taxes are 
the tax type contributing the most in terms of tax 
revenue,  although 
labour  tax  revenue  as  a 
percentage  of  GDP  (and  also  as  a  percentage  of 
total  taxation)  was  below  the  EU-27  average  in 
from 
2020.  At 
consumption  taxes  as  a  percentage  of  GDP  was 
relatively high and environmental tax revenue was 
slightly above the EU-27 average, while capital tax 
revenue was low. Although revenue from property 
taxes was in line with the EU-27 average, revenue 
from  recurrent  property  taxes  –  which  are  in 
general  considered  to  be  less  detrimental  to 

the  same 

revenue 

time, 

growth – was lower than the EU-27 average. 

Portugal’s  tax  burden  on  labour  income  is 
relatively  low  for  various  wage  levels.  The 
labour  tax  wedge  in  Portugal  was  considerably 
lower than the EU-27 average in 2021 at various 
income levels (i.e. for single people at the average 
wage,  as  well  as  at  50%,  67%  and  167%  of  the 
average wage). At the same time, second-earners 
at  a  wage  level  of  67%  of  the  average  wage, 
whose  spouse  earns  the  average  wage,  faced  a 
slightly higher tax wedge than the EU-27 average, 
and  the  difference  between  their  tax  wedge  and 
that of single people at the same wage level was 
also  higher  than  the  EU-27  average.  Portugal’s 
system of tax benefits under personal income tax 
contributed to reducing inequality as measured by 
the GINI coefficient by slightly more than the EU-
27  average  in  2020.  Nevertheless,  the  country’s 
overall 
is  complex.  On 
corporate income tax, the average forward-looking 
effective tax rate was considerably above the EU-
27  average  in  2020,  compounded  by  State  and 
municipal  surcharges  that  add  to  statutory  rates 
and  lead  to  increased  complexity  for  taxpayers 

tax  benefit  system 

Table A18.1: Indicators on taxation 

(1) Forward-looking Effective Tax Rate (OECD).  
(*) EU-27 simple average as there is no aggregated EU-27 value. 
(2) For more data on tax revenues as well as the methodology applied see European Commission, Directorate-General for 
Taxation and Customs Union, ‘Taxation trends in the European Union: data for the EU Member States, Iceland, Norway and United 
Kingdom: 2021 edition’, Publications Office, 2021 (https://data.europa.eu/doi/10.2778/843047) and the ‘Data on Taxation’ 
webpage (data https://ec.europa.eu/taxation_customs/taxation-1/economic-analysis-taxation/data-taxation_en). For more details 
on the VAT gap see European Commission, Directorate-General for Taxation and Customs Union, ‘VAT gap in the EU : report 2021’, 
Publications Office, 2021 (https://data.europa.eu/doi/10.2778/30877).  
Source: European Commission and OECD 

63 

2010201820192020202120102018201920202021Total taxes (including compulsory actual social contributions) (% of GDP)30.434.734.535.335.837.940.139.940.1Labour taxes (as % of GDP)12.614.614.816.220.020.720.721.5Consumption taxes (as % of GDP)11.412.812.812.210.811.111.110.8Capital taxes (as % of GDP)6.47.27.06.97.18.28.17.9Total property taxes (as % of GDP)1.72.22.22.31.92.22.22.3Recurrent taxes on immovable property (as % of GDP)0.60.80.80.81.11.21.21.2Environmental taxes as % of GDP2.42.62.52.42.42.42.42.2Tax wedge at 50% of Average Wage (Single person) (*)28.128.128.128.135.133.932.432.031.531.9Tax wedge at 100% of Average Wage (Single person) (*)37.140.941.441.541.841.040.240.139.939.7Corporate Income Tax - Effective Average Tax rates (1) (*)25.025.025.019.819.519.3Difference in GINI coefficient before and after taxes and cash social transfers (pensions excluded from social 8.38.88.38.58.47.97.48.3Outstanding tax arrears: Total year-end tax debt (including debt considered not collectable) / total revenue 36.837.131.931.8VAT Gap (% of VTTL)9.07.911.210.5Dividends, Interests and Royalties (paid and received) as a share of GDP (%)4.64.33.310.710.5FDI flows through SPEs (Special Purpose Entities), % of total FDI flows (in and out)6.05.44.147.846.236.7PortugalEU-27Tax structureProgressivity & fairnessTax administration & complianceFinancial Activity Risk 
 
 
 
  
 
Graph A18.1: Indicators on tax wedge 

(1) The second earner average tax wedge measures how much extra personal income tax (PIT) plus employee and employer social 
security contributions (SSCs) the family will have to pay as a result of the second earner entering employment, as a proportion of 
the second earner’s gross earnings plus the employer SSCs due on the second earner’s income. For a more detailed discussion see 
OECD (2016), ‘Taxing Wages 2016’, OECD Publishing, Paris (http://dx.doi.org/10.1787/tax_wages-2016-en).  
(*) EU-27 simple average as there is no aggregated EU-27 value.  
(2) The tax wedge is defined as the sum of personal income taxes and employee and employer social security contributions net of 
family allowances, expressed as a percentage of total labour costs (the sum of the gross wage and social security contributions 
paid by the employer). It is calculated for specific types of tax payers in terms of household composition and income level 
expressed as % of average wage. Data on tax wedges can be consulted in the ‘Tax and benefit database’ 
(https://europa.eu/economy_finance/db_indicators/tab/).  
Source: European Commission 

for 

the 

burden 
Moreover, 

tax 
and  an  additional 
administration (67). 
tax 
withholdings  are  often  too  high,  resulting  in 
sizeable  refund  claims  in  the  subsequent  year 
(structurally above 2% of GDP in the recent past), 
which  entails  additional  costs  for  both  taxpayers 
and the tax administration. 

direct 

tax 

revenue 

total  net 

There is scope to improve the performance of 
Portugal’s tax administration.  Outstanding tax 
arrears have increased by 0.3 percentage points to 
37.1%  of 
in  2019, 
significantly  above  the  EU-27  average  of  31.8%. 
On  the  one  hand,  the  recurrent  cost  of  tax 
incurred  by  the  tax  administration 
collection 
increased  to  1.1%  of  total  net  tax  revenue  in 
2019,  thus being  about  20%  higher than  the  EU-
27  average.  On 
tax 
administration’s  investment  in  ICT  was  just  5.7% 
of 
2019, 
corresponding  to  almost  half  the  EU-27  average. 
Therefore,  there  is  scope  available  to  make 

the  other  hand, 

expenditure 

operating 

the 

its 

in 

(67)  The forward-looking effective tax rate reflects the average 
tax contribution a firm makes on a prospective, hypothetical 
investment project earning above-zero economic profits. 

Portugal’s  tax  administration  even  more  efficient. 
At  the  same  time,  there  is  no  indication  of 
significant  challenges  with  VAT  enforcement  and 
compliance  in  Portugal,  with  the  VAT  gap  (i.e.  the 
indicator used to assess them) having declined by 
1.1  percentage  points  to  7.9%,  below  the  EU-27 
average gap of 10.5% in 2019. Equally positive is 
the  fact  that  the  e-filing  of  personal  income  tax 
returns  has  shown  a  marked  improvement  in 
recent years, reaching 100% in 2017 (68). 

(68)  European Commission, Directorate-General for Taxation and 
Customs Union, ’Annual Report on Taxation 2021: review of 
taxation policies in the EU Member States’, Publications 
Office, 2021 (https://data.europa.eu/doi/10.2778/294944). 
For further details see section 2.1.4, ‘Improving tax 
administration’. 

64 

35.137.641.847.342.7At 50% of Average Wage (Single person)At 67% of Average Wage (Single person)At 100% of Average Wage (Singleperson)At 167% of Average Wage (Singleperson)For second earner at 67% of AverageWage (Two earner couple, 1st earner100% of AW) (1)Tax wedge 2021 (%)PTEU-27 (*) 
                                                 
                                                 
  
ANNEX 19: KEY ECONOMIC AND FINANCIAL INDICATORS 
ANNEX 19: KEY ECONOMIC AND FINANCIAL INDICATORS 

Table A19.1: Key economic and financial indicators 

(1) NIIP excluding direct investment and portfolio equity shares. 
(2) Domestic banking groups and stand-alone banks, EU and non-EU foreign-controlled subsidiaries and EU and non-EU foreign-
controlled branches. 
Source: Eurostat and ECB as of 2 May 2022, where available; European Commission for forecast figures (Spring forecast 2022) 

65 

2004-072008-122013-1820192020202120222023Real GDP (y-o-y)1.7-1.41.72.7-8.44.95.82.7Potential growth (y-o-y)0.9-0.40.61.61.11.62.02.0Private consumption (y-o-y)2.0-1.61.83.3-7.14.54.62.3Public consumption (y-o-y)1.4-1.10.02.10.44.11.21.3Gross fixed capital formation (y-o-y)0.6-7.73.85.4-2.76.46.55.2Exports of goods and services (y-o-y)5.61.55.84.1-18.613.112.34.1Imports of goods and services (y-o-y) 5.7-2.66.44.9-12.112.98.64.1Contribution to GDP growth:Domestic demand (y-o-y)1.8-2.81.73.4-5.04.94.52.8Inventories (y-o-y)0.3-0.10.1-0.3-0.60.20.00.0Net exports (y-o-y)-0.41.5-0.2-0.4-2.9-0.21.3-0.1Contribution to potential GDP growth:Total Labour (hours) (y-o-y)-0.3-1.10.30.50.40.60.80.7Capital accumulation (y-o-y)0.80.3-0.20.1-0.10.00.20.3Total factor productivity (y-o-y)0.40.50.51.00.81.01.01.0Output gap-0.3-1.1-1.03.5-6.3-3.30.30.9Unemployment rate8.912.612.16.77.06.65.75.5GDP deflator (y-o-y)3.00.61.71.71.90.72.93.1Harmonised index of consumer prices (HICP, y-o-y)2.51.90.70.3-0.10.94.41.9Nominal compensation per employee (y-o-y)3.30.41.54.82.03.84.22.6Labour productivity (real, hours worked, y-o-y)1.71.10.21.51.00.41.00.5Unit labour costs (ULC, whole economy, y-o-y)1.4-0.21.12.89.31.0-0.60.8Real unit labour costs (y-o-y)-1.5-0.8-0.61.17.20.3-3.3-2.2Real effective exchange rate (ULC, y-o-y)0.0-2.00.4-0.3....Real effective exchange rate (HICP, y-o-y)0.4-0.80.0-1.80.8-1.7..Net savings rate of households (net saving as percentage of net disposable income)1.81.5-1.2-2.23.31.3..Private credit flow, consolidated (% of GDP)13.84.4-1.42.64.44.9..Private sector debt, consolidated (% of GDP)173.6203.4176.4149.5164.1160.0..of which household debt, consolidated (% of GDP)81.590.675.563.569.568.1..of which non-financial corporate debt, consolidated (% of GDP)92.1112.8100.986.094.691.9..Gross non-performing debt (% of total debt instruments and total loans and advances) (2)1.24.111.54.93.9...Corporations, net lending (+) or net borrowing (-) (% of GDP)-4.5-1.72.8-0.9-0.5-0.9-0.10.0Corporations, gross operating surplus (% of GDP)19.820.922.021.118.919.219.620.5Households, net lending (+) or net borrowing (-) (% of GDP)1.33.02.51.86.24.42.32.6Deflated house price index (y-o-y)-1.6-2.94.29.08.0...Residential investment (% of GDP)5.73.72.73.23.43.7..Current account balance (% of GDP), balance of payments-9.4-8.00.80.4-1.1-1.1-1.7-0.6Trade balance (% of GDP), balance of payments-7.8-5.41.30.8-1.9-2.6..Terms of trade of goods and services (y-o-y)-0.10.01.00.81.1-1.5-2.52.1Capital account balance (% of GDP)1.41.51.20.91.11.8..Net international investment position (% of GDP)-77.1-107.8-115.0-100.0-104.8-95.9..NENDI - NIIP excluding non-defaultable instruments (% of GDP) (1)-44.3-71.3-67.7-46.7-46.9-36.6..IIP liabilities excluding non-defaultable instruments (% of GDP) (1)175.7213.4192.6170.2183.7172.6..Export performance vs. advanced countries (% change over 5 years)6.6-3.52.86.6-0.4...Export market share, goods and services (y-o-y)-2.4-3.72.50.9-9.82.87.3-0.2Net FDI flows (% of GDP)0.6-2.4-2.9-3.6-2.4-3.8..General government balance (% of GDP)-4.8-7.8-3.70.1-5.8-2.8-1.9-1.0Structural budget balance (% of GDP)..-2.0-1.2-1.8-1.3-1.9-1.5General government gross debt (% of GDP)71.4101.4129.1116.6135.2127.4119.9115.3forecast 
 
 
 
 
  
  
 
ANNEX 20: DEBT SUSTAINABILITY ANALYSIS 
ANNEX 20: DEBT SUSTAINABILITY ANALYSIS 

level.  In  the  ‘lower  SPB’  scenario,  the  SPB  is 
permanently  weaker  than  in  the  baseline.  The 
‘adverse interest-growth rate’ scenario assumes a 
less  favourable  snowball  effect  than 
in  the 
baseline.  In  the  ‘financial  stress’  scenario,  the 
country  temporarily  faces  higher  market  interest 
rates in 2022.  

Graph 2 shows the outcome of the stochastic 
projections.  These  projections  show  the  impact 
on  debt  of  2  000  different  shocks  affecting  the 
government’s 
economic 
growth,  interest  rates  and  exchange  rates.  The 
cone covers 80% of all the simulated debt paths, 
therefore excluding tail events. 

budgetary 

position, 

Table  2  shows  the  S1  and  S2  fiscal 
sustainability 
indicators  and  their  main 
drivers.  S1  measures  the  consolidation  effort 
needed to bring debt to 60% of GDP in 15 years. 
S2  measures  the  consolidation  effort  required  to 
stabilise  debt  over  an  infinite  horizon.  The  initial 
budgetary position measures the effort required to 
cover  future  interest  payments,  the  ageing  costs 
component  accounts  for  the  need  to  absorb  the 

This  annex  assesses  fiscal  sustainability 
risks  for  Portugal  over  the  short,  medium 
and  long  term.  It  follows  the  same  multi-
the  2021  Fiscal 
dimensional  approach  as 
Sustainability  Report, updated  on the basis  of the 
Commission 2022 spring forecast. 

Table  1  presents 
the  baseline  debt 
projections.  It  shows  the  projected  government 
debt  and  its  breakdown  into  the  primary  balance, 
the  snowball  effect  (the  combined  impact  of 
interest payments and nominal GDP growth on the 
debt  dynamics)  and  the  stock-flow  adjustment. 
These projections assume that no new fiscal policy 
measures  are  taken  after  2023,  and  include  the 
expected  positive  impact  of  investments  under 
Next Generation EU.  

Graph  1  shows  four  alternative  scenarios 
around  the  baseline, to  illustrate the  impact 
of changes in assumptions. The ‘historical SPB’ 
scenario  assumes  that  the  structural  primary 
balance (SPB) gradually returns to its past average 

Table A20.1: Debt sustainability analysis for Portugal 

Source: European Commission 

66 

Table 1. Baseline debt projections20192020202120222023202420252026202720282029203020312032Gross debt ratio (% of GDP)116.6135.2127.4119.9115.3111.1106.9103.9103.2101.4100.5100.099.9100.0Change in debt-4.918.6-7.8-7.5-4.7-4.1-4.2-3.0-0.7-1.7-0.9-0.5-0.10.0of whichPrimary deficit-3.12.90.4-0.3-1.2-1.2-1.3-1.00.00.20.40.60.81.0Snowball effect-2.311.2-4.7-8.1-4.4-2.9-2.9-2.0-0.7-1.9-1.3-1.1-0.9-1.0Stock-flow adjustment0.44.4-3.40.90.90.00.00.00.00.00.00.00.00.0Gross financing needs (% of GDP)10.920.814.616.415.313.112.913.113.713.312.512.414.914.7S1S2Overall index (pps. of GDP)3.7-1.4of whichInitial budgetary position-1.7-0.4Debt requirement4.0Ageing costs1.4-1.1of whichPensions0.9-3.0Health care0.51.4Long-term care0.10.4Others-0.10.1                                                                       Table 2. Breakdown of the S1 and S2 sustainability gap indicators657585951051151251351452019202120232025202720292031BaselineHistorical SPB scenarioLower SPB scenarioFinancial stress scenarioAdverse 'r-g' scenarioGraph 1. Deterministic debt projections (% of GDP)p10-p20p20-p40p40-p60p60-p80p80-p906575859510511512513514520192020202120222023202420252026Graph 2. Stochastic debt projections(% of GDP)MedianBaseline 
 
 
 
 
  
 
Table A20.2: Heat map of fiscal sustainability risks for Portugal 

(1)  Debt level in 2032: green: below 60% of GDP, yellow: between 60% and 90%, red: above 90%. (2) The debt peak year 
indicates whether debt is projected to increase overall over the next decade. Green: debt peaks early; yellow: peak towards the 
middle of the projection period; red: late peak. (3) Fiscal consolidation space measures the share of past fiscal positions in the 
country that were more stringent than the one assumed in the baseline. Green: high value, i.e. the assumed fiscal position is 
plausible by historical standards and leaves room for corrective measures if needed; yellow: intermediate; red: low. (4) Probability 
of the debt ratio exceeding in 2026 its 2021 level: green: low probability, yellow: intermediate, red: high (also reflecting the initial 
debt level). (5) The difference between the 90th and 10th percentiles measures uncertainty, based on the debt distribution under 
2000 different shocks. Green, yellow and red cells indicate increasing uncertainty. 
Source:  European Commission (for further details on the Commission’s multi-dimensional approach, see the 2021 Fiscal 
Sustainability Report). 

change 

in  ageing-related 

projected 
public 
expenditure  such  as  pensions,  health  care  and 
long-term  care,  and 
requirement 
measures  the  additional  adjustment  needed  to 
reach the 60% of GDP debt target. 

the  debt 

Finally,  the  heat  map  presents  the  overall 
fiscal  sustainability  risk  classification  (Table 
A20.2).  The  short-term  risk  category  is  based  on 
the  S0  indicator,  an  early-detection  indicator  of 
fiscal  stress  in  the  upcoming  year.  The  medium-
term  risk  category  is  derived  from  the  debt 
sustainability  analysis  (DSA)  and  the  S1  indicator. 
The DSA assesses risks to sustainability based on 
several  criteria:  the  projected  debt  level  in  10 
years’  time,  the  debt  trajectory  (‘peak  year’),  the 
plausibility  of  fiscal  assumptions  and  room  for 
tighter  positions  if  needed  (‘fiscal  consolidation 
space’),  the  probability  of  debt  not  stabilising  in 
the  next  5  years  and  the  size  of  uncertainty.  The 
long-term  risk  category  is  based  on  the  S2 
indicator and the DSA.  

macroeconomic  and 
financial  variables,  as 
illustrated  by  alternative  scenarios  and  stochastic 
simulations  (Graphs  1  and  2).  Moreover,  the 
sustainability  gap  indicator  S1  signals  that  a 
significant consolidation effort  of 3.7 pps. of GDP 
would be needed to reduce debt to 60% of GDP in 
15 years’ time (Table 2). Overall,  the medium risk 
reflects  the  high  debt,  the  projected  increase  in 
public  pension  and  health  care  expenditure,  and 
vulnerability to adverse shocks. 

Long-term  risks  to  fiscal  sustainability  are 
medium. The sustainability  gap indicator S2 (at  -
1.4)  points  to  low  risks,  but  the  DSA  points  to 
substantial  vulnerabilities,  leading  to  the  overall 
medium 
indicator 
risk  assessment.  The  S2 
suggests  that  no  consolidation  effort  would  be 
needed  to  stabilise  debt  over  the  long  term, 
especially  given  the  projected  decrease  in  public 
pension  expenditure  despite 
the  budgetary 
pressure coming from health care (Table 2).   

short-term 

Overall, 
fiscal 
sustainability are low. The Commission’s early-
detection  indicator  (S0)  does  not  signal  major 
short-term fiscal risks (Table A20.2).  

risks 

to 

Medium-term  risks  to  fiscal  sustainability 
are  high.  The  two  elements  of  the  Commission’s 
medium-term  analysis  lead  to  this  conclusion. 
First,  the  debt  sustainability  analysis  (DSA)  shows 
that government debt is projected to decline from 
about  120%  of  GDP  in  2022  to  about  100%  of 
GDP  in  2032  in  the  baseline  (Table 1).  This  debt 
path  is  also  sensitive  to  possible  shocks  to  fiscal, 

67 

BaselineHistorical SPBLower SPBAdverse 'r-g'Financial stressOverallHIGHHIGHHIGHHIGHHIGHMEDIUMDebt level (2032), % GDP100104101108102Debt peak year20212021202120212021Fiscal consolidation space41%50%44%41%41%Probability of debt ratio exceeding in 2026 its 2021 level16%Difference between 90th and 10th percentiles (pps. GDP)54LOWMEDIUMDeterministic scenariosStochastic projectionsLOWHIGHHIGHHIGHShort termMedium termLong termOverall                               (S0)Overall     (S1+DSA)S1Debt sustainability analysis (DSA)S2Overall     (S2+DSA)Overall