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

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   EUROPEAN COMMISSION  Brussels, 23.5.2022  COM(2022) 623 final  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 {SWD(2022) 623 final} - {SWD(2022) 640 final}  
 
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 

THE COUNCIL OF THE EUROPEAN UNION, 

Having  regard  to  the  Treaty  on  the  Functioning  of  the  European  Union,  and  in  particular 
Articles 121(2) and 148(4) thereof, 

Having regard to Council Regulation (EC) No 1466/97 of 7 July 1997 on the strengthening of 
the  surveillance  of  budgetary  positions  and  the  surveillance  and  coordination  of  economic 
policies1, and in particular Article 5(2) thereof, 

Having  regard  to  Regulation  (EU)  No  1176/2011  of  the  European  Parliament  and  of  the 
Council  of  16  November  2011  on  the  prevention  and  correction  of  macroeconomic 
imbalances2, and in particular Article 6(1) thereof,  

Having regard to the recommendation of the European Commission, 

Having regard to the resolutions of the European Parliament, 

Having regard to the conclusions of the European Council, 

Having regard to the opinion of the Employment Committee, 

Having regard to the opinion of the Economic and Financial Committee, 

Having regard to the opinion of the Social Protection Committee, 

Having regard to the opinion of the Economic Policy Committee, 

Whereas: 

(1) 

Regulation  (EU)  2021/241  of  the  European  Parliament  and  of  the  Council3,  which 
established  the  Recovery  and  Resilience  Facility,  entered  into  force  on  19  February 
2021.  The  Recovery  and  Resilience  Facility  provides  financial  support  for  the 
implementation of reforms and investment, entailing a fiscal impulse financed by the 
Union.  It  contributes  to  the  economic  recovery  and  to  the  implementation  of 
sustainable and growth-enhancing reforms and investment, in particular to promote the 
green and digital transition, while strengthening the resilience and potential growth of 
the Member States’ economies. It also helps strengthen sustainable public finances and 
boost growth and job creation in the medium and long term. The maximum financial 
contribution  per  Member  State  under  the  Recovery  and  Resilience  Facility  [was] 
updated on [XX] June 2022, in line with Article 11(2) of Regulation (EU) 2021/241. 

(2) 

On  24  November  2021,  the  Commission  adopted  the  Annual  Sustainable  Growth 
Survey,  marking  the  start  of  the  2022  European  Semester  for  economic  policy 

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3 

OJ L 209, 2.8.1997, p. 1. 
OJ L 306, 23.11.2011, p. 25. 
Regulation  (EU)  2021/241  of  the  European  Parliament  and  of  the  Council  of  12  February  2021 
establishing the Recovery and Resilience Facility (OJ L 57, 18.2.2021, p. 17). 

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coordination.  It  took  due  account  of  the  reaffirmed  joint  commitment  of  the  Porto 
Social Summit of May 2021 to further implement the European Pillar of Social Rights 
proclaimed  by  the  European  Parliament,  the  Council  and  the  Commission  on  17 
November  2017.  The  European  Council  endorsed  the  priorities  of  the  2022  Annual 
Sustainable Growth Survey on 25 March 2022. On 24 November 2021, on the basis of 
Regulation  (EU)  No  1176/2011,  the  Commission  also  adopted  the  Alert  Mechanism 
Report, in which it identified Portugal  as one of the Member States for which an in-
depth  review4  would  be  needed.  On  the  same  date,  the  Commission  also  adopted  a 
recommendation  for  a  Council  recommendation  on  the  economic  policy  of  the  euro 
area, which was adopted on 5 April 2022 by the Council, as well as the proposal for 
the 2022 Joint Employment Report analysing the implementation of the Employment 
Guidelines  and  the  principles  of  the  European  Pillar  of  Social  Rights,  which  was 
adopted by the Council on 14 March 2022.  

Russia’s  invasion  of  Ukraine,  in  the  wake  of  the  global  pandemic,  has  significantly 
altered the geopolitical and economic context. The impact of the invasion on Member 
States’ economies has been felt for example through higher energy and food prices and 
weaker  growth  prospects.  The  higher  energy  prices  weigh  particularly  on  the  most 
vulnerable households experiencing or at risk of energy poverty. The EU is also seeing 
an unprecedented inflow of people fleeing Ukraine. In this context, on 4 March 2022, 
the  Temporary  Protection  Directive  was  triggered5  for  the  first  time,  granting 
displaced persons from Ukraine the right to legally stay in the EU, as well as access to 
education and training, labour market, healthcare, housing and social welfare. 

Taking  account  of  the  rapidly  changing  economic  and  geopolitical  situation,  the 
European Semester resumes its broad economic and employment policy coordination 
in 2022, while evolving in line with the implementation requirements of the Recovery 
and  Resilience  Facility,  as  outlined  in  the  2022  Annual  Sustainable  Growth  Survey. 
The  implementation  of  the  adopted  recovery  and  resilience  plans  is  essential  for  the 
delivery of the policy priorities under the European Semester, as the plans address all 
or a significant subset of the relevant country-specific recommendations issued in the 
2019  and  2020  Semester  cycles.  The  2019  and  2020  country-specific 
recommendations  remain  equally  relevant  also  for  recovery  and  resilience  plans 
revised, updated, or amended in accordance with Articles 14, 18 and 21 of Regulation 
(EU) 2021/241, in addition to any country-specific recommendations issued up to the 
date of submission of the modified plan.  
The General Escape Clause has been active since March 20206. In its Communication 
of  3  March  20217,  the  Commission  set  out  its  view  that  the  decision  on  the 
deactivation or continued application of the general escape clause should be taken as 
an overall assessment of the state of the economy, with the level of economic activity 
in the EU or euro area compared to pre-crisis levels (end-2019) as a key quantitative 
criterion. Heightened uncertainty and strong downside risks to  the economic outlook 

Regulation (EU) No 1176/2011 of the European Parliament and of the Council of 16 November 2011 
on the prevention and correction of macroeconomic imbalances, OJ L 306, 23.11.2011, p. 25. 
Council Implementing Decision (EU) 2022/382 of 4 March 2022 establishing the existence of a mass 
influx of displaced persons from Ukraine within the meaning of Article 5 of Directive 2001/55/EC, and 
having the effect of introducing temporary protection, OJ L 71, 4.3.2022, p. 1. 
Communication from the Commission to the Council on the activation of the general escape clause of 
the Stability and Growth Pact, Brussels, 20.3.2020, COM(2020) 123 final. 
Communication  from  the  Commission  to  the  Council  on  one  year  since  the  outbreak  of  COVID-19: 
fiscal policy response, Brussels, 3.3.2021, COM(2021) 105 final. 

(3) 

(4) 

(5) 

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(6) 

(7) 

in  the  context  of  war  in  Europe,  unprecedented  energy  price  hikes  and  continued 
supply  chain  disturbances  warrant  the  extension  of  the  general  escape  clause  of  the 
Stability and Growth Pact through 2023.  

Following the approach in the Council opinion of 18 June 2021 on the 2021 Stability 
Programme,  the  fiscal  stance  is  currently  best  measured  as  the  change  in  primary 
expenditure  (net  of  discretionary  revenue  measures),  excluding  COVID-19  crisis-
related  temporary  emergency  measures  but  including  expenditure  financed  by  non-
repayable  support  (grants)  from  the  Recovery  and  Resilience  Facility  and  other  EU 
funds,  relative  to  medium-term  potential  growth8.  Going  beyond  the  overall  fiscal 
stance, in order to assess whether national fiscal policy is prudent and its composition 
is conducive to a sustainable recovery consistent with the green and digital transitions, 
attention  is  also  paid  to  the  evolution  of  nationally-financed9  primary  current 
expenditure  (net  of  discretionary  revenue  measures  and  excluding  COVID-19  crisis-
related temporary emergency measures) and investment. 

On  2  March  2022,  the  Commission  adopted  a  Communication  providing  broad 
guidance  for  fiscal  policy  in  2023,  aiming  at  supporting  the  preparation  of  Member 
States’  Stability  and  Convergence  Programmes  and  thereby  strengthening  policy 
coordination10. The Commission noted that, based on the macroeconomic outlook of 
the  2022  winter  forecast,  transitioning  from  an  aggregate  supportive  fiscal  stance  in 
2020-2022  to  a  broadly  neutral  aggregate  fiscal  stance  would  appear  appropriate  in 
2023,  while  standing  ready  to  react  to  the  evolving  economic  situation.  The 
Commission announced that the fiscal recommendations for 2023 should continue to 
differentiate  across  Member  States  and  take  into  account  possible  cross-country 
spillovers. The Commission invited the Member States to reflect the guidance in their 
Stability  and  Convergence  Programmes.  The  Commission  committed  to  closely 
monitor  the  economic  developments  and  adjust  its  policy  guidance  as  needed  and  at 
the latest in its Semester spring package of late May 2022. 

(8)  With  respect  to  the  fiscal  guidance  provided  on  2  March  2022,  the  fiscal 
recommendations  for  2023  take  into  account  the  worsened  economic  outlook,  the 
heightened uncertainty and further downside risks, and the higher inflation compared 
to the winter forecast. Against these considerations, the fiscal response has to expand 
public investment for the green and digital transition and energy security, and sustain 
the purchasing power of the most vulnerable households so as to cushion the impact of 
the energy price hike and help limit inflationary pressures from second round effects 
via targeted and temporary measures; fiscal policy has to remain agile so as to adjust 
to the rapidly evolving circumstances, and be differentiated across countries depending 
on their fiscal and economic situation, including as regards the exposure to the crisis 
and the inflow of displaced persons from Ukraine. 

(9) 

On 22 April 2021, Portugal submitted its national recovery and resilience plan to the 
Commission, in accordance with Article 18(1) of Regulation (EU) 2021/241. Pursuant 
to  Article  19  of  Regulation  (EU)  2021/241,  the  Commission  assessed  the  relevance, 

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The  estimates  on  the  fiscal  stance  and  its  components  in  this  recommendation  are  Commission 
estimates  based  on  the  assumptions  underlying  the  Commission  2022  spring  forecast.  The 
Commission’s estimates of medium-term potential growth do not include the positive impact of reforms 
that are part of the Recovery and Resilience Plan and that can boost potential growth.  
Not financed by grants from the Recovery and Resilience Facility and other EU funds. 
Communication  from  the  Commission  to  the  Council:  Fiscal  policy  guidance  for  2023,  Brussels, 
2.3.2022, COM(2022) 85 final. 

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effectiveness,  efficiency  and  coherence  of  the  recovery  and  resilience  plan,  in 
accordance with the assessment guidelines of Annex V to that Regulation. On 13 July, 
the Council adopted its Decision on the approval of the assessment of the recovery and 
resilience plan for Portugal11. The release of instalments  is  conditional on a decision 
by  the  Commission,  taken  in  accordance  with  Article  24(5)  of  Regulation  (EU) 
2021/241, that Portugal has satisfactorily fulfilled the relevant milestones and targets 
set out in the Council Implementing Decision. Satisfactory fulfilment presupposes that 
the achievement of preceding milestones and targets has not been reversed. 

(10)  On  29  April  2022,  Portugal  submitted  its  2022  National  Reform  Programme  and  its 
2022  Stability  Programme,  in  line  with  the  deadline  established  in  Article  4  of 
Regulation  (EC)  No  1466/97.  To  take  account  of  their  interlinkages,  the  two 
programmes have been assessed together. In accordance with Article 27 of Regulation 
(EU)  2021/241,  the  2022  National  Reform  Programme  also  reflects  Portugal’s  bi-
annual reporting on the progress made in achieving its recovery and resilience plan.  

in 

the 

relevant 

addressing 

(11)  The Commission published the 2022 country report for Portugal12 on 23 May 2022. It 
country-specific 
assessed  Portugal’s  progress 
recommendations adopted by the Council in 2019, 2020 and 2021, and took stock of 
Portugal’s  implementation  of  the  recovery  and  resilience  plan,  building  on  the 
Recovery  and  Resilience  Scoreboard.  Based  on  this  analysis,  the  country  report 
identified gaps with respect to those challenges that are not addressed or only partially 
addressed  by  the  recovery  and  resilience  plan,  as  well  as  new  and  emerging 
challenges,  including  those  emerging  from  Russia’s  invasion  of  Ukraine.  It  also 
assessed Portugal’s progress on implementing the European Pillar of Social Rights and 
on achieving the EU headline targets on employment, skills and poverty reduction, as 
well as progress in achieving the UN’s Sustainable Development Goals. 

(12)  The  Commission  carried  out  an  in-depth  review  under  Article  5  of  Regulation  (EU) 
No  1176/2011  for  Portugal  and  published  its  results  on  23  May  202213.  The 
Commission  concluded  that  Portugal  is  experiencing  macroeconomic  imbalances.  In 
particular,  vulnerabilities  relate  to  high  external,  private  and  government  debt  in  a 
context of low productivity growth. 

(13)  On  14  April  2022,  Portugal  submitted  a  new  Draft  Budgetary  Plan  for  2022.  A 
complete  assessment  of  that  Plan  is  to  be  presented  in  a  Commission  opinion  in 
accordance with Article 7 of Regulation (EU) No 473/2013. 

the  economy  and  support 

(14)  On  20  July  2020,  the  Council  recommended  Portugal  to  take  in  2020  and  2021  all 
necessary measures, in line with the general escape clause, to  effectively address the 
the  ensuing  recovery.  It  also 
pandemic,  sustain 
recommended  Portugal  to  pursue,  when  economic  conditions  allow,  fiscal  policies 
aimed  at  achieving  prudent  medium-term  fiscal  positions  and  ensuring  debt 
sustainability,  while  enhancing  investment.  In  2021,  based  on  data  validated  by 
Eurostat,  Portugal’s  general  government  deficit  fell  from  5.8%  of  GDP  in  2020  to 
2.8% in 2021. The fiscal policy response by Portugal supported the economic recovery 
in 2021, while temporary emergency support measures declined from 2.3% of GDP in 
2020 to 2.2% in 2021. The measures taken by Portugal in 2021 have been in line with 

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Council Implementing Decision of 13 July 2021 on the approval of the assessment of the recovery and 
resilience plan for Portugal (ST 10149/21+ADD 1 REV 1). 
SWD(2022)623 final. 
SWD(2022)637 final. 

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the Council Recommendation of 20 July 2020. The discretionary budgetary measures 
adopted by the government in 2020 and 2021 were  mostly temporary or matched by 
offsetting measures. At the same time, some of the discretionary measures adopted by 
the  government  over  the  period  2020  to  2021  were  not  temporary  or  matched  by 
offsetting measures, mainly consisting of health-related spending, including the hiring 
of additional health professionals by the National Health Service in order to strengthen 
its  response  capacity.  Based  on  data  validated  by  Eurostat,  general  government  debt 
stood at 127.4% of GDP in 2021. 

(15)  The  macroeconomic  scenario  underpinning  the  budgetary  projections  in  the  2022 
Stability  Programme  is  cautious  in  2022  and  realistic  thereafter.  14  The  government 
projects  real  GDP  to  grow  by  5.0%  in  2022  and  3.3%  in  2023.  By  comparison,  the 
Commission’s  2022  spring  forecast  projects  stronger  real  GDP  growth  of  5.8%  in 
2022 and lower real GDP growth of 2.7% in 2023. The difference is due to stronger 
growth in private consumption and net exports in the Commission’s forecast for 2022, 
and  lower  growth  in  investment  and  net  exports  for  2023.  In  its  2022  Stability 
Programme, the government expects that the headline deficit will decrease to 1.9% of 
GDP  in  2022  and  to  0.7%  in  2023.  The  decrease  in  2022  mainly  reflects  the  strong 
growth in economic activity and the unwinding of most pandemic-related emergency 
measures. According to the Programme, the general government debt-to-GDP ratio is 
expected to decrease to 120.8% in 2022, and to decline to 115.4% in 2023. Based on 
policy measures known at the cut-off date of the forecast, the Commission 2022 spring 
forecast projects a government deficit for 2022 and 2023 of 1.9% of GDP and 1.0%, 
respectively. This is in line with the deficit projected in the 2022 Stability Programme 
for  2022  and  slightly  higher  for  2023,  mainly  due  to  higher  current  spending  in  the 
Commission for the latter year. The Commission 2022 spring forecast projects a lower 
general  government  debt-to-GDP  ratio  of  119.9%  in  2022,  and  a  similar  general 
government debt-to-GDP ratio of 115.3% in 2023. The difference in 2022 is due to the 
Commission’s forecast of stronger nominal GDP growth in that year.  

Based  on  the  Commission  spring  2022  forecast,  the  medium-term  (10-year  average) 
potential output growth is estimated at 1.5%. However, this estimate does not include 
the  impact  of  the  reforms  that  are  part  of  the  Recovery  and  Resilience  Plan  and  can 
boost Portugal’s potential growth. 

(16) 

In 2022, the government phased out the majority of measures taken in response to the 
COVID-19 crisis, such that the temporary emergency support measures are projected 
to  decline  from  2.2%  of  GDP  in  2021  to  0.7%  in  2022.  The  government  deficit  in 
2022 is impacted by the measures adopted to counter the economic and social impact 
of  the  increase  in  energy  prices,  which  in  the  Commission  2022  spring  forecast  are 
estimated at 0.6% of GDP in 2022 and to be fully reversed by 2023.15 These measures 

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15 

The 2022 Stability Programme submitted to the Commission and the Council on 29 April 2022 had a 
cut-off  date  of  25  March  2022,  when  it  was  presented  to  the  national  parliament.  On  14  April  2022, 
Portugal  submitted  to  the  Commission  and  the  Eurogroup  the  2022  Draft  Budgetary  Plan,  which 
included a slightly updated macroeconomic scenario for 2022, compared to that in the Programme. In 
detail,  the  2022  Draft  Budgetary  Plan  contained  a  slightly  downward  revision  in  real  GDP  growth  to 
4.9%  in  2022  (from  5.0%  in  the  Programme),  and  an  upward  revision  in  consumer  price  inflation 
(HICP)  to  4.0%  in  the  same  year  (from  3.3%  in  the  Programme).  Despite  a  slightly  different 
composition  of  public  finances,  the  2022  Draft  Budgetary  Plan  maintained  the  general  government 
deficit target of 1.9% of GDP for 2022. 
The figures represent the level of annual budgetary costs of those measures taken since autumn 2021, 
including current revenue and expenditure as well as – where relevant – capital expenditure measures. 

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mainly consist of social transfers to poorer households, cuts to indirect taxes on energy 
consumption,  and  subsidies  to  energy  consumption.  These  measures  have  been 
announced as temporary. However, in case energy prices remain elevated also in 2023, 
some of these measures could be continued. Some of these measures are not targeted, 
notably the general reduction in fuel tax. The government deficit is also impacted by 
the costs to offer temporary protection to displaced persons from Ukraine, which in the 
Commission 2022 spring forecast are projected at 0.1% of GDP in 2022.16  

(17)  On  18  June  2021,  the  Council  recommended  that  in  2022  Portugal17  should  use  the 
Recovery  and  Resilience  Facility  to  finance  additional  investment  in  support  of  the 
recovery  while  pursuing  a  prudent  fiscal  policy.  Moreover,  it  should  preserve 
nationally financed investment.  The Council also  recommended  Portugal  to  limit  the 
growth  of  nationally  financed  current  expenditure.  It  also  recommended  Portugal  to 
pursue,  when  economic  conditions  allow,  a  fiscal  policy  aimed  at  achieving  prudent 
medium-term  fiscal  positions  and  ensuring  fiscal  sustainability  in  the  medium  term, 
and at the same time, to enhance investment to boost growth potential. 

(18) 

In  2022,  based  on  the  Commission’s  2022  spring  forecast  and  including  the 
information incorporated in Portugal’s 2022 Stability Programme, the fiscal stance is 
projected in the Commission 2022 spring forecast to be supportive at –2.0% of GDP.18 
Portugal  plans  to  provide  continued  support  to  the  recovery  by  making  use  of  the 
Recovery and Resilience Facility to finance additional investment as recommended by 
the Council. The positive contribution to economic activity of expenditure financed by 
Recovery and Resilience Facility grants and other EU funds is projected to increase by 
0.5  percentage  points  of  GDP  compared  to  2021.  Nationally  financed  investment  is 
projected to provide an expansionary contribution to the fiscal stance of 0.2 percentage 
points in 2022.19 Therefore, Portugal plans to preserve nationally financed investment, 
as  recommended  by  the  Council.  At  the  same  time,  growth  in  nationally  financed 
primary  current  expenditure  (net  of  new  revenue  measures)  in  2022  is  projected  to 
provide  an  expansionary  contribution  of  1.1  percentage  points  to  the  overall  fiscal 
stance. This significant expansionary contribution includes the additional impact of the 
measures to  address  the economic and social impact  of the increase in  energy prices 
(0.6 % of GDP), as well as the costs to offer temporary protection to displaced persons 
from  Ukraine  (0.1%  of  GDP),  while  an  increasing  public  sector  wage  bill,  ageing-
related  expenditure  and  intermediate  consumption  are  expected  to  continue  to  exert 
upward  pressure  on  current  spending.  In  particular,  the  higher  increase  in  consumer 
prices  compared  to  the  GDP  deflator  is  also  projected  to  affect  the  expansionary 
contribution  of  nationally  financed  primary  current  expenditure  to  the  overall  fiscal 

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19 

The total number of displaced persons from Ukraine to the EU is assumed to gradually reach 6 million 
by  the  end  of  2022,  and  their  geographical  distribution  is  estimated  based  on  the  size  of  the  existing 
diaspora, the relative population of the receiving Member State, and the actual distribution of displaced 
persons from Ukraine across  the EU as of March 2022. For budgetary costs per person, estimates are 
based on the Euromod microsimulation model of the Commission’s Joint Research Centre, taking into 
account both cash transfers people may be eligible for as well as in-kind benefits such as education and 
healthcare. 
Council  Recommendation  of  18  June  2021  delivering  a  Council  opinion  on  the  2021  Stability 
Programme of Portugal, OJ C 304, 29.7.2021, p. 102. 
A negative (positive) sign of the indicator corresponds to an excess (shortfall) of primary expenditure 
growth  compared  with  medium-term  economic  growth,  indicating  an  expansionary  (contractionary) 
fiscal policy. 
Other  nationally-financed  capital  expenditure  is  projected  to  provide  an  expansionary  contribution  of 
0.2 percentage points of GDP. 

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(19) 

stance  in  2022,  by  increasing  spending  on  government  consumption  of  goods  and 
services.  Portugal  is  expected  to  broadly  limit  the  growth  of  nationally  financed 
current expenditure in 2022, as the significant expansionary contribution of nationally 
financed  current  expenditure  in  2022  is  mainly  due  to  the  measures  to  address  the 
economic  and  social  impact  of  the  increase  in  energy  prices,  as  well  as  the  costs  to 
offer temporary protection to displaced persons from Ukraine. 

In 2023, the fiscal stance is projected in the Commission 2022 spring forecast at 0.0% 
of GDP  based on a no-policy change assumption.20 Portugal  is  projected to  continue 
using  the  grants  from  the  Recovery  and  Resilience  Facility  in  2023  to  finance 
additional  investment  in  support  of  the  recovery.  The  positive  contribution  to 
economic activity of expenditure financed by Recovery and Resilience Facility grants 
and other EU funds is projected to increase by 0.2 percentage points of GDP compared 
to  2022.  Nationally  financed  investment  is  projected  to  provide  an  expansionary 
contribution to the fiscal stance of 0.3 percentage points in 2023.21 At the same time, 
the  growth  in  nationally  financed  primary  current  expenditure  (net  of  new  revenue 
measures)  in  2023  is  projected  to  provide  a  contractionary  contribution  of  0.7 
percentage  points  to  the  overall  fiscal  stance.  This  includes  the  impact  from  the 
phasing-out of the measures addressing the increased energy prices (0.6 % of GDP). 
At  the  same  time,  the  higher  increase  in  consumer  prices  compared  to  the  GDP 
deflator in 2022 is projected to affect the contribution of nationally financed primary 
current  expenditure  to  the  overall  fiscal  stance  in  2023,  by  increasing  spending  on 
pensions and social benefits as a result of indexation. 

(20) 

In  the  2022  Stability  Programme,  the  general  government  deficit  is  expected  to 
gradually  decline  to  0.3%  of  GDP  in  2024  and  reach  balanced  position  in  2025. 
Therefore, the general government deficit is planned to remain below 3% of GDP over 
the Programme horizon. According to  the Programme, the  general  government debt-
to-GDP ratio is expected to decrease by 2025, specifically with a decrease to 109.8% 
in 2024, and a further decline to 105.9% in 2025. Based on the Commission’s analysis, 
debt sustainability risks appear high over the medium term. 

(21)  A  more  growth-friendly  composition  of  public  finances,  on  both  the  revenue  and 
expenditure  sides  of  the  public  budget,  would  support  Portugal’s  long-term  fiscal 
sustainability,  improve  the  business  environment  and  contribute  to  an  inclusive 
recovery.  As  regards  Portugal’s  tax  system,  there  is  evidence22  indicating  that  the 
country’s  tax  benefit  system  is  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 benefit from being 
consistently  monitored  and  assessed.  Furthermore,  the  rate  structure  of  the  corporate 
income tax is compounded by State and municipal surcharges, generating complexity 
for  taxpayers  and  an  additional  burden  for  the  tax  administration.  Direct  tax 
withholdings are often too high, resulting in sizeable refund claims in the subsequent 
year. The recurrent cost of tax collection is relatively high (in 2019, it was about 20% 

20 

21 

22 

A negative (positive) sign of the indicator corresponds to an excess (shortfall) of primary expenditure 
growth  compared  with  medium-term  economic  growth,  indicating  an  expansionary  (contractionary) 
fiscal policy. 
Other  nationally-financed  capital  expenditure  is  projected  to  provide  an  expansionary  contribution  of 
0.2 percentage points of GDP. 
‘Tax benefits in Portugal – concept, methodology and practice’, Working Group on Tax Benefits, May 
2019. 

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(22) 

higher than the EU-27 average) and the tax administration’s investment in information 
and communication technologies is low compared with the EU average (at 5.7% of the 
tax administration’s operating expenditure in 2019, it was close to half of the EU-27 
average). Against that background, making the revenue administrations more efficient 
would  help  reduce  the  time  to  pay  taxes  in  Portugal  and  the  elevated  size  of 
outstanding  tax  arrears  (at  37.1%  of  total  net  revenue  at  the  end  of  2019,  they  were 
among  the  highest  in  the  EU).  As  regards  Portugal’s  social  protection  system,  the 
effectiveness  of  social  transfers  in  reducing  poverty  and  inequality  is  below  the  EU 
average.  In  particular,  the  adequacy  of  the  minimum  income  is  low  at  37.5%  of  the 
poverty threshold (EU: 58.9%). At the same time, a multitude of social benefits appear 
to serve similar objectives, also leading to complexity. The ensuing fragmentation of 
the  social  protection  system  results  in  relatively  low  take-up  rates  and  a  lack  of 
effective  focus  on  those  most  in  need,  hampering  the  coverage  and  ultimately  the 
adequacy  of  social  benefits.  In  this  context,  the  implementation  of  the  National 
Strategy to Combat Poverty is particularly important.  

in  addition 

in  2019  and  2020, 

In accordance with Article 19(3), point (b), and Annex V, criterion 2.2, to Regulation 
(EU) 2021/241 the recovery and resilience plan includes an extensive set of mutually 
reinforcing reforms and investments to be implemented by 2026. These help address 
all  or  a  significant  subset  of  the  economic  and  social  challenges  outlined  in  the 
country-specific  recommendations  addressed  to  Portugal  by  the  Council  in  the 
European  Semester 
to  any  country-specific 
recommendations  issued  up  to  the  date  of  adoption  of  a  plan.  In  particular,  the  plan 
promotes  investment  for  the  green  and  digital  transition.  Improving  the  quality  of 
public finances and the financial sustainability of state-owned enterprises is central to 
the plan. The plan is ambitious in strengthening the resilience of the health system and 
improving access to quality health and long-term care. The plan aims to improve the 
population’s  overall  level  of  skills  including  digital  skills  for  various  population 
groups  and  strengthens  the  vocational  education  and  the  training  offer.  The  plan 
includes  significant  investments  to  improve  social  services,  including  by  increasing 
the supply of social and affordable housing. The plan introduces relevant measures to 
reduce  labour  market  segmentation,  and  to  support  quality  employment  and  the 
preservation  of  jobs.  The  plan  significantly  aims  to  support  the  use  of  digital 
technologies by citizens and businesses. Significantly, the plan introduces measures to 
promote access to finance, in particular for small and medium-sized enterprises, and to 
promote private and public investment for the country’s economic recovery. The plan 
sets  out  significant  reforms  and  investments  to  promote  investment  in  research  and 
innovation  and  to  make  these  more  efficient  and  effective.  The  plan  is  ambitious  in 
tackling  the  challenges  of  the  business  environment  and  improving  the  efficiency  of 
the justice system.  

(23)  The  implementation  of  the  recovery  and  resilience  plan  of  Portugal  is  expected  to 
contribute  to  making  further  progress  on  the  green  and  digital  transition.  Measures 
supporting  the  climate  objectives  in  Portugal  account  for  37.9%  of  the  plan’s  total 
allocation,  while  measures  supporting  digital  objectives  account  for  22.1%  of  the 
plan’s total allocation. The fully-fledged implementation of the recovery and resilience 
plan, in line with the relevant milestones and targets, will help Portugal swiftly recover 
from  the  fallout  of  the  COVID-19  crisis,  while  strengthening  its  resilience.  The 
systematic  involvement  of  social  partners  and  other  relevant  stakeholders  remains 
important  for  the  successful  implementation  of  the  recovery  and  resilience  plan,  as 
well  as  other  economic  and  employment  policies  going  beyond  the  plan,  to  ensure 
broad ownership of the overall policy agenda. 

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(24)  Portugal  submitted  the  Partnership  Agreement23  on  4  March  2022  while  the  other 
cohesion  policy  programming  documents  have  not  yet  been  submitted.  In  line  with 
Regulation (EU) 2021/1060 of the European Parliament and of the Council of 24 June 
2021, Portugal shall take into account the relevant country-specific recommendations 
in the programming of the 2021-2027 cohesion policy funds. This is a prerequisite for 
improving the effectiveness  and maximising the added value of the financial support 
to  be  received  from  cohesion  policy  funds,  while  promoting  the  coordination, 
complementarity and coherence between these funds and other Union instruments and 
funds.  The  successful  implementation  of  the  Recovery  and  Resilience  Facility  and 
cohesion policy programmes also depends on the removal of bottlenecks to investment 
to support the green and digital transitions and balanced territorial development. 

(25)  Beyond the economic and social challenges addressed by the recovery and resilience 
plan,  Portugal  faces  a  number  of  additional  challenges  related  to  circular  economy. 
Portugal  is  far  below  the  EU  average  on  circular  economy  and  waste  management 
indicators. The average municipal recycling rate is low and decreasing, with regional 
disparities.  Portugal  missed  the  EU  target  of  recycling  50%  of  municipal  waste  by 
2020. The overall recycling rate was of 29% in 2019 and 26.5% in 2020 (provisional 
data),  against an EU  average of 48%. Achieving  the EU targets  for the next  decade, 
including reaching 55% recycling of municipal waste by 2025, will require significant 
efforts.  Improvements  are  needed  to  increase  the  prevention,  minimisation,  sorting, 
reuse  and  recycling  of  waste,  thereby  diverting  waste  away  from  landfills  or 
incinerators,  and  to  modernise  waste  recycling  and  treatment  facilities.  Increasing 
landfill and incineration charges, introducing a residual waste tax and raising charges 
on municipalities failing to meet recycling targets are good examples of how to better 
achieve  these  objectives.  In  addition,  extending  the  separate  collection  of  waste  and 
the further development of 'pay-as-you-throw' systems could accelerate the process. 

(26) 

In  response  to  the  mandate  by  the  EU  Heads  of  State  or  Government  set  out  in  the 
Versailles Declaration, the REPowerEU plan aims to phase out the European Union’s 
dependence on fossil fuel imports from Russia as soon as possible. For this purpose, 
the most suitable projects, investments and reforms at national, regional and EU level 
are being identified in dialogue with the Member States. These measures aim to reduce 
overall reliance on fossil fuels, and to shift fossil fuel imports away from Russia. 

(27)  Portugal has a high share of renewables (one third of its energy mix) and is not highly 
dependent on Russian fossil fuels. However oil and gas (mostly liquefied natural gas 
(LNG))  still  represents  two  thirds  of  its  primary  energy  supply  at  42%  and  24% 
respectively, according to 2020 data. Coal was phased out for electricity production in 
2021,  but  gas  consumption  has  increased  rapidly  in  recent  years,  partly  because  of 
lower hydropower availability due to droughts. With 10% of gas imports coming from 
Russia, Portugal has a dependency ratio well below the EU average of 44%, due to its 
large  reliance  on  LNG,  and  it  does  not  import  any  oil  and  coal  from  Russia24. 
Nevertheless,  Portugal  imports 100% of its fossil  fuels.  Reducing this overall import 

23 

24 

Regulation (EU) 2021/1060 of the European Parliament and of the Council of 24 June 2021 laying down common 
provisions on the European Regional Development Fund, the European Social Fund Plus, the Cohesion Fund, the 
Just Transition Fund and the European Maritime, Fisheries and Aquaculture Fund and financial rules for those and 
for  the  Asylum,  Migration  and  Integration  Fund,  the  Internal  Security  Fund  and  the  Instrument  for  Financial 
Support for Border Management and Visa Policy. OJ L 231, 30.6.2021, p. 159. 

Eurostat (2020), share of Russian imports over total imports of natural  gas, crude oil and hard coal. 
For the EU27 average, the total imports are based on extra-EU27 imports. For Portugal, total imports 
include intra-EU trade. Crude oil does not include refined oil products. 

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dependency,  through  increased  EU  climate  ambition  focussing  on  more  affordable, 
secure and sustainable energy, will require further exploitation of the Portuguese solar 
and  wind  potential,  including  offshore,  in  particular  by  streamlining  permitting 
procedures,  and  strengthening  administrative  capacity.  Upgrading  the  electricity 
transmission and distribution grids, including with direct current technologies, as well 
as enabling investments in electricity storage would make it possible to supply flexible 
and  fast  responding  energy,  crucial  for  managing  a  system  with  a  high  share  of 
renewables.  The  low  level  of  electricity  interconnection  with  Spain  (and  ultimately 
with France) also represents a challenge for the resilience of the electricity system of 
Portugal  and  the  EU.  Additional  cross-border  interconnections  could  support  greater 
integration of renewable capacity of the Iberian Peninsula in the single energy market. 
To  improve  the  energy  efficiency  of  buildings,  appropriate  financing  schemes, 
awareness  raising  campaigns  and  the  development  of  green  skills  would  increase 
significantly  the  efficacy  of  the  investment  efforts.  In  addition,  there  is  a  need  to 
further decarbonise the transport sector, including by speeding-up the deployment of 
e-charging  infrastructure  and  advancing  key  railway,  cycling  and  public  transport 
projects.  Further  increase  in  ambition  for  reducing  greenhouse  gas  emission  and 
increasing renewables and energy efficiency targets will be needed for Portugal to be 
in line with the ‘Fit for 55’ objectives’. 

(28)  While  the  acceleration  of  the  transition  towards  climate  neutrality  and  away  from 
fossil  fuels  will  create  significant  restructuring  costs  in  several  sectors,  Portugal  can 
make  use  of  the  Just  Transition  Mechanism  in  the  context  of  cohesion  policy  to 
alleviate the socio-economic impact  of the transition  in  the most  affected  regions.  In 
addition,  Portugal  can  make  use  of  the  European  Social  Fund  Plus  to  improve 
employment opportunities and strengthen social cohesion.  

(29) 

(30) 

(31) 

In  the  light  of  the  Commission´s  assessment,  the  Council  has  examined  the  2022 
Stability Programme and its opinion25 is reflected in recommendation (1) below.  

In view of the close interlinkages between the economies of euro area Member States 
and  their  collective  contribution  to  the  functioning  of  the  Economic  and  Monetary 
Union,  the  Council  recommended  that  the  euro  area  Member  States  take  action, 
including 
the 
recommendation on the economic policy of the euro area. For Portugal this is reflected 
in particular in recommendations (1) and (2) below.  

resilience  plans, 

recovery  and 

implement 

through 

their 

to 

In the light of the Commission’s in-depth review and this assessment, the Council has 
examined  the  2022  National  Reform  Programme  and  the  2022  Stability  Programme. 
Its recommendations under Article 6 of Regulation (EU) No 1176/2011  are reflected 
in  recommendations  (1),  (2)  and  (4)  below.  The  recommendations  (1)  and  (2)  also 
contribute  to  the  implementation  of  the  Recommendation  for  the  euro  area,  in 
particular the first and fourth euro area recommendations. Fiscal policies referred to in 
recommendation (1) help inter alia address imbalances linked to high government debt 
in  a  context  of  low  productivity  growth.  Policies  referred  to  in  recommendation  (2) 
help 
the  full 
implementation  of  the  recovery  and  resilience  plan  will  support  growth  while 
strengthening  the  resilience  of  the  economy.  Policies  referred  to  in  recommendation 
(4)  help  inter  alia  address  vulnerabilities  linked  to  high  external  debt  in  the  longer 
term. 

inter  alia  reduce  government,  private,  and  external  debt,  as 

25 

Under Article 5(2) of Council Regulation (EC) No 1466/97. 

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HEREBY RECOMMENDS that Portugal take action in 2022 and 2023 to:  

1. 

2. 

3. 

4. 

In  2023,  ensure  prudent  fiscal  policy,  in  particular  by  limiting  the  growth  of 
nationally-financed current expenditure below medium-term potential output growth, 
taking  into  account  continued  temporary  and  targeted  support  to  households  and 
firms  most  vulnerable  to  energy  price  hikes  and  to  people  fleeing  Ukraine.  Stand 
ready to adjust current spending to the evolving situation. Expand public investment 
for the green and digital transition and for energy security, including by making use 
of the RRF, RePowerEU and other EU funds. For the period beyond 2023, pursue a 
fiscal policy aimed at achieving prudent medium-term fiscal positions and ensuring 
credible  and  gradual  debt  reduction  and  fiscal  sustainability  in  the  medium  term 
through gradual consolidation, investment and reforms. Improve the effectiveness of 
the tax and social protection systems, in particular by simplifying both frameworks, 
strengthening  the  efficiency  of  their  respective  administrations,  and  reducing  the 
associated administrative burden. 

Proceed with the implementation of its recovery and resilience plan, in line with the 
milestones  and  targets  included  in  the  Council  Implementing  Decision  of  13  July 
2021. Submit the 2021-2027 cohesion policy programming documents with a view to 
finalising  their  negotiations  with  the  Commission  and  subsequently  starting  their 
implementation. 

Enhance the conditions for a transition towards a circular economy, in particular by 
increasing waste prevention, recycling and reuse to divert waste away from landfills 
and incinerators 

Reduce overall reliance on fossil fuels, including in the transport sector. Accelerate 
the deployment of renewables by upgrading electricity transmission and distribution 
grids,  enabling  investments  in  electricity  storage  and  streamlining  permitting 
procedures to allow for further development of wind, particularly offshore, and solar 
electricity  production.  Strengthen  the  incentives  framework  for  energy  efficiency 
investments in buildings. Increase electricity interconnections. 

Done at Brussels, 

For the Council 
The President 

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