COMMISSION STAFF WORKING DOCUMENT In-depth review for Portugal in accordance with Article 5 of Regulation (EU) No. 2011/1176 on the prevention and correction of macroeconomic imbalances Accompanying the document COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN CENTRAL BANK, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE, THE COMMITTEE OF THE REGIONS AND THE EUROPEAN INVESTMENT BANK 2022 European Semester – Spring Package
Date: 2022-07-22
Institutions: European Commission, Secretariat-General
Subjects: European Semester, Portugal, economic policy, economic recovery, energy policy, international investment, macroeconomics, productivity, tourism

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 22.7.2022  SWD(2022) 637 final/2  CORRIGENDUM  This document corrects document SWD(2022) 637 final of 23.05.2022. Correction of figures in table 2.1.  The text shall read as follows:  COMMISSION STAFF WORKING DOCUMENT In-depth review for Portugal             in accordance with Article 5 of Regulation (EU) No. 2011/1176 on the prevention and correction of macroeconomic imbalances        Accompanying the document COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN CENTRAL BANK, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE, THE COMMITTEE OF THE REGIONS AND THE EUROPEAN INVESTMENT BANK 2022 European Semester – Spring Package {COM(2022) 600 final} - {SWD(2022) 628 final} - {SWD(2022) 629 final} - {SWD(2022) 630 final} - {SWD(2022) 631 final} - {SWD(2022) 632 final} - {SWD(2022) 633 final} - {SWD(2022) 634 final} - {SWD(2022) 635 final} - {SWD(2022) 636 final} - {SWD(2022) 638 final} - {SWD(2022) 639 final}  
 
 
On the basis of this in-depth review for Portugal undertaken under Regulation (EU) No 
1176/2011  on  the  prevention  and  correction  of  macroeconomic  imbalances,  the 
Commission has considered in its Communication “European Semester – 2022 Spring 
Package” (COM(2022)600 final) that: 

Portugal is experiencing imbalances. Vulnerabilities relate to high private, government and 
external  debt  in  a  context  of  low  productivity  growth.  Non-performing  loans  have  fallen 
considerably  from  high  levels.  After  a  temporary  reversal  in  2020  due  to  the  COVID-19 
crisis, those vulnerabilities resumed their downward trajectory in 2021. The current account 
balance turned negative in 2020 and 2021, mainly due to the pandemic-driven shock in the 
tourism  sector,  while  the  net  international  investment  position  improved  considerably 
already  in  2021,  even  beyond  its  pre-pandemic  level.  The  private  sector  and  government 
debt-to-GDP ratios resumed their downward trends in 2021 but remain above pre-pandemic 
levels and the former is still exceeding prudential levels. Going forward, private, government 
and external debts are expected to continue narrowing on the back of economic growth. The 
external  position  will  also  directly  benefit  from  the  RRF  funds.  Policy  progress  has  been 
made to address imbalances and a successful implementation of the RRP can help in further 
narrowing them, but policy challenges remain. 

1 

 
 
 
 
 
 
CONTENTS 

1.  Introduction 

2.  Assessment of macroeconomic imbalances 

3.  Thematic chapter: External Imbalances 

LIST OF TABLES 

Table b.1.1:   Selected exposures 

Table 2.1: 

Selected economic and financial indicators (Part 1), Portugal 

Table 2.2: 

Selected economic and financial indicators (Part 2), Portugal 

Table 3.1: 

Selected external indicators 

LIST OF GRAPHS 

Graph b.1.1:  Sectoral distribution of energy use and of energy imported from Russia 

Graph b.1.2:  Portugal goods and service trade balance – fossil trade contribution 

      Graph 3.1: 

Thematic Graphs: External imbalances 

Graph 3.2: 

NIIP projections 

Graph 3.3: 

Thematic Graphs: External Imbalances 

3 

4 

12 

9 

10 

11 

15 

8 

8 

16 

17 

17 

2 

 
 
 
 
 
 
1.  INTRODUCTION 

In  2021,  over  the  previous  annual  cycle  of  surveillance  under  the  Macroeconomic  Imbalances 
Procedure  (MIP),  the  Commission  identified  “macroeconomic  imbalances”  in  Portugal. (1)  These 
imbalances  were related to high external, private  and government debt in a context of  low productivity 
growth.  The  2022  Alert  Mechanism  Report  concluded  that  a  new  in-depth  review  (IDR)  should  be 
undertaken for Portugal with a view to assess the persistence or unwinding of imbalances. (2) 

Portugal has returned to steady growth. (3) After a pandemic-driven contraction of 8.4% in 2020, the 
Portuguese  economy  rebounded  by  4.9%  in  2021.  Growth  is  projected  to  accelerate  further  to  5.8%  in 
2022 before moderating to 2.7% in 2023. Nominal GDP in 2023 is forecast to be around 13.5% above its 
2019  level.  However,  there  are  downside  risks  related  to  uncertainties  in  global  supply  chains  and 
commodity  prices  in  the  context of the  Russian aggression against Ukraine.  Domestic demand is  set  to 
contribute substantially to growth in both 2022 and 2023, helped by the implementation of the Recovery 
and Resilience Plan (RRP). The current account balance is projected to remain negative over the forecast 
horizon, as the projected recovery in exports of services is outweighed by higher prices of energy imports 
in  2022.  All  labour  market  indicators,  with  the  exception  of  hours  worked,  recovered  to  pre-pandemic 
levels in the second half of 2021. Along  with the  economic recovery, inflation rose substantially  in the 
second  half  of  2021  paced  by  a  steep  increase  in  energy  prices.  In  year-average  terms,  inflation  is 
projected to rise from 0.9% in 2021 to 4.4% in 2022 and to moderate to 1.9% in 2023. 

This in-depth review presents the main findings of the assessment of imbalances. The assessment is 
backed by a thematic section on the external position. Spillovers and systemic cross-border implications 
of imbalances are also taken into account. In addition, assessments of structural issues made in previous 
IDRs  and  in  the  context  of  fiscal  assessments  are  also  considered,  to  the  extent  relevant.  The  MIP 
assessment matrix is published in the 2022 Country Report for Portugal. (4) 

(1)  European Commission (2021), European Semester Spring Package 2021, COM(2021) 500 final. 
(2)  European Commission (2021), Alert Mechanism Report 2022, COM (2021) 741 final. 
(3)  Forecast data are from European Commission (2022), European Economic Forecast: Spring 2022, Institutional Paper 172. 
(4)  European Commission (2022), Country Report Portugal 2022, SWD(2022)623 final. 

3 

 
 
 
                                                           
2.  ASSESSMENT OF MACROECONOMIC IMBALANCES 

Assessment of gravity, evolution and prospects of macroeconomic imbalances 

Portugal’s external position remains vulnerable but moved in a favourable direction in 2021. After 
a  temporary  deterioration  in  2020  driven  by  the  negative  impact  of  COVID-19,  the  net  international 
investment position (NIIP) resumed its positive trend in 2021. The NIIP amounted to  -95.9% of GDP at 
the end of 2021, improving by around  9 percentage points in one year and surpassing the pre-pandemic 
level of  -100% at the  end of  2019. A substantial part of the  improvement resulted from the rebound in 
GDP  and  favourable  valuation  changes,  while  the  impact  from  transaction  flows  was  rather  limited, 
against  the  background  of  a  muted  recovery  in  the  country’s  receipts  from  foreign  tourism.  Risks 
stemming  from  the  large  stock  of  external  liabilities  are  partly  offset  by  the  NIIP  structure,  as  non-
defaultable  instruments  account  for  around  60%  of  net  liabilities  and  are  composed  mostly  of  foreign 
direct investments (FDI).  

The current account balance turned negative from 0.4% of GDP in 2019 to -1.1% in 2020 and 2021. 
The  current  account  balance  was  slightly  more  than  1  percentage  point  below  the  estimated  current 
account  explained  by  fundamentals.  In  the  light  of  the  high  prices  of  energy  imports,  this  gap  is  set  to 
widen somewhat in 2022 and to start narrowing afterwards, also in cyclically adjusted terms. The current 
account is also expected to remain below the balance required to reach the NIIP benchmarks at sufficient 
pace.  

The  country’s  exposure  to  foreign  tourism  contributed  to  a  loss  in  the  export  market  share. 
Portugal’s  exports  of  goods  and  services  dropped  by  10.7  percentage  points  more  than  global  trade 
volumes  in  2020  after  persistent  growth  in  previous  years.  This  relative  decline  was,  however,  less 
pronounced in Portugal than in countries with similar exposure to foreign tourism such as Greece, Spain 
and Croatia. The export market share started to increase again in 2021 and is forecast to increase further 
in 2022.  

Going  forward,  the  NIIP  will  benefit  from  the  projected  substantial  increase  in  nominal  GDP, 
particularly  in  2022.  In  the  medium  term,  the  NIIP  could  come  close  to  the  estimated  prudential 
threshold, currently at -52% of GDP, while still remaining beyond the fundamentals-explained threshold 
of -12%. The projected positive net inflow through the country’s capital account is set to broadly balance 
the  projected  net  outflow  through  the  current  account  in  2022  while  the  outlook  for  2023  is  more 
favourable. The  projected  trade  flows  suggest  that  the  impact  of  the  pandemic  on  the  country’s  current 
account balance would not be fully unwound in 2022 and 2023 due to the expected continued weakness in 
international  travels  and  tourism  relative  to  the  pre-pandemic  trajectory,  as  well  as  the  high  prices  of 
energy imports. The balance of payments is, however, set to continue to benefit from the projected stream 
of RRP grants in 2021-2026, estimated at more than 6% of the country’s 2021 GDP. However, there are 
certain  downside  risks  on  the  external  side  in  light  of  high  commodity  prices  due  to  the  Russian 
aggression against Ukraine (see box 2.1). 

Labour productivity changes are difficult to interpret due to the impact of labour hoarding during 
the COVID-19 pandemic. Portugal’s economy was more severely affected by the COVID-19 pandemic 
than  many  other  EU  countries  The  country’s  productivity  measured  as  GDP  per  employee  declined 
relatively strongly, by 6.7% in 2020. In line with other countries, this figure is difficult to interpret as it is 
driven by labour hoarding due to the impact of the pandemic, and has a statistical effect of inducing an 
improvement once labour hoarding ends. In parallel, productivity in terms of hours worked improved by 
1%  in  2020,  in  part  indicating  the  effectiveness  of  employment  protection  measures  during  the  crisis. 
Labour  productivity  (GDP  per  employee)  started  to  increase  again,  by  2.8%  in  2021  and  is  forecast  to 
increase by 4.8% in 2022, reflecting the economic recovery and phasing out of short-term work schemes. 
A full recovery of productivity to the pre-pandemic level is expected to take place in 2022 

4 

 
2. Assessment of macroeconomic imbalances 

Total factor productivity growth outstripped labour productivity. Total factor productivity retained a 
relatively  stable  positive  contribution  to  potential  growth  during  the  pandemic.  Meanwhile,  potential 
growth is projected to exceed its pre-pandemic rate from 2021 onwards, helped by the projected positive 
impact of the RRP. 

Private indebtedness is declining again after a one-off increase in 2020. The economic contraction in 
2020 pushed up private debt via the GDP denominator from 149% of GDP at the end of 2019 to 164% of 
GDP  at  the  end  of  2020.  The  ratio  remained  well  below  the  peak  of  211%  of  GDP  in  2012  and  the 
economic rebound in 2021 allowed for a renewed decline. Helped mainly by nominal growth in GDP, the 
share of private debt to GDP fell to 160% at the end of 2021 and a further decrease is expected in 2022-
2023. Both corporates and households are estimated to have contributed to the decrease in the private debt 
ratio  in  2021,  after  a  one-off  increase  to  95%  of  GDP  and  69%  in  2020,  respectively.  Both  ratios 
remained  significantly  above  the  estimated  country-specific  prudential  and  fundamentals-based 
benchmarks (9). For corporates, these benchmarks were estimated at 63% and 60%, respectively, and for 
households  at  40%  and  32%.  Vulnerabilities  in  the  debt  structure,  particularly  in  the  corporate  sector, 
remain. Risks persist that the phase-out of state-support measures and potential second-round effects on 
economic  growth  from  Russia’s  unprovoked  invasion  of  Ukraine  could  lead  to  further  vulnerabilities 
associated to private  sector debt.  However,  households’ and corporates’ deposits increased in 2020 and 
2021, providing the private sector with a liquidity buffer.  

The banking sector remained stable throughout the downturn caused by the pandemic. Portuguese 
banks  maintained  a  strong  financial  position  throughout  2020-2021,  helped  by  debt  moratoria  and 
government  measures  in  support  of  businesses  and  households.  Most  support  measures  ended  in  early 
2021 and the credit moratoria expired at the end of September 2021. The sector made provisions to face 
future loan losses but initial data indicate that banks did not face a cliff-edge effect after the expiration of 
the  moratoria.  In  parallel,  NPLs  continued  to  decline  throughout  2020-2021,  mainly  through  sales  and 
write-offs, dropping to 3.9% in September 2021 and 3.5% at the end of 2021, down from 6.1% at end-
2019, just before the onset of the pandemic. The NPL coverage ratio rose to 55% as of September 2021 
from 51.5% before the pandemic. More  recently, the  strong post-COVID economic recovery is  helping 
most banks to generate positive profit margins. The return on equity (ROE) reached 5.4% in the first three 
quarters of 2021. In the aggregate, banks display healthy balance sheets that would be able to shoulder a 
possible delayed increase in NPLs.  

House price growth has regained momentum. The growth in real house prices moderated from 9.0% in 
2019  to  8.0%  in  2020.  The  growth  rate  declined  further  in  the  first  quarter  of  2021  but  the  economic 
recovery in 2021, along with low interest rates, brought new momentum to the market as the growth rate 
rose    afterwards,  leading  to  a  year-average  growth  of  8.1%  in  2021.  Accordingly,  the  valuation  gap, 
estimated  at  15.4%  in  2020,  widened  further  in  2021.  Loans  for  house  purchases  account  for  45%  of 
banks’ credit to the private sector as of September 2021, slightly above the euro area average of 44%. The 
increase in mortgage lending was moderate in 2021 and below the corresponding increases in GDP and 
household incomes, while household deposits continued growing at a solid pace.  

The public debt-to-GDP ratio decreased in 2021 supported by the economic rebound. Starting from 
a  public  debt-to-GDP  of  around  117%  in  2019,  it  surged  to  about  135%  in  2020,  before  dropping  to 
around 127% in 2021. It is projected to remain on a declining path, decreasing to 115% of GDP in 2023, 
i.e.  below  its  pre-pandemic  level.  At  the  same  time,  the  Commission’s  fiscal  sustainability  assessment 
shows that Portugal faces high fiscal sustainability risks over the medium term and medium risks in the 
long term (10). The analysis confirms the unfavourable effect of the projected increase in ageing costs in 
Portugal.  Country-specific  factors  mitigate  Portugal’s  fiscal  sustainability  challenges,  linked  to  its  cash 
buffer,  the  recent  lengthening  of  debt  maturity,  the  relatively  stable  financing  sources  and  favourable 

(9)  Fundamentals-based benchmarks are derived from regressions capturing the main determinants of credit growth and taking into 
account  a  given  initial  stock  of  debt.  Prudential  thresholds  represent  the  debt  threshold  beyond  which  the  probability  of  a 
banking crisis is relatively high, minimising the probability of missed crisis and that of false alerts. Methodologies are described 
in European Commission (2017) and updates to the methodology have been subsequently proposed in European Commission 
(2018). 

(10)  See  European  Commission  Country  Report  on  Portugal  for  the  latest  results  and  the    ‘Fiscal  Sustainability  Report  2021’, 

Institutional Paper 171, 25 April 2022 for methodological details. 

5 

                                                           
2. Assessment of macroeconomic imbalances 

financing  conditions,  as  well  as  the  currency  denomination  of  debt.  However,  the  size  of  public 
contingent liabilities adds certain risks. 

Assessment of MIP relevant policies 

Portugal  has  implemented  policies  in  all  areas  of  its  macroeconomic  imbalances  and  many  new 
measures are expected to be implemented in the medium term. With the outbreak of the COVID-19 
pandemic in early 2020, policy efforts were initially focused on temporary measures to address the impact 
of the pandemic, notably to safeguard the responsiveness of the National Health Service and to protect the 
labour market. The focus has gradually changed towards a wide range of policy commitments set in the 
country’s  RRP  covering  the  period  of  2021-2026.  A  large  part  of  these  commitments  are  expected  to 
address  directly  or  indirectly  the  existing  macroeconomic  imbalances  in  Portugal.  In  addition,  the 
authorities have taken measures to address vulnerabilities in the financial sector, including for the smooth 
phasing out of the debt moratoria and mitigating risks related to the increase in house prices. In the labour 
market,  measures have been implemented  for a smooth normalisation of  work in industries particularly 
affected by lockdowns. 

Policies  in  support  of  Portugal’s  export  base  and  energy  efficiency  are  expected  to  improve  the 
country’s external balance in the medium and long run. Portugal’s RRP contains policy measures and 
investments aimed at increasing the country’s export base and industrialisation. Specific actions include 
the promotion of R&D and innovative investment in enterprises as part of the update of the Strategy for 
Technological  and  Enterprise  Innovation  2018-2030.  The  document  was  adopted  in  December  2021. 
Investments in energy savings and the substitution of fossil fuels with green energy are also expected to 
support the external balance by reducing energy imports. In this area, the authorities have opened the first 
call  for  tender  for  industrial  decarbonisation  projects  with  priority  given  to  projects  with  the  highest 
decarbonisation efficiency. The authorities also launched the first tender for the selection of projects for 
the  production  of  renewable  hydrogen  and  renewable  gases.  Most  of  the  energy  saving  and  energy 
transition measures remain to be implemented until 2025. 

Efforts to boost productivity are also essential for balancing Portugal’s external position and debt 
ratios. Progress has been made over the past years with tackling rigidities in product and labour markets. 
However, a number of policy gaps still exist and are being addressed by measures in the country’s RRP, 
together  with  Cohesion  Policy  Funds,  particularly  those  related  the  education,  digital  skills,  as  well  as 
improving  the  functioning  of  the  judicial  system  and  business  regulations.  In  2021,  a  new  legal 
framework entered into force to support the cooperation of higher education institutions with the public 
administration  and  businesses.  The  framework  is  expected  to  address  skill  mismatches  on  the  labour 
market. In addition, contracts were signed for the purchase of digital equipment for schools as part of the 
efforts to increase digital skills.  

Capitalisation  measures  are  expected  to  reduce  risks  related  to  the  corporate  debt  structure.  The 
setup of the state-owned promotional bank Banco Português de Fomento (BPF) in 2020 was designed to 
address  the  undercapitalisation  of  the  corporate  sector,  particularly  for  vulnerable  but  viable  firms 
affected by the pandemic. The capacity of BPF to support such firms was significantly increased in late 
2021 with the setup of a EUR 1.3 billion capitalisation fund, financed by loan support under the RRP, and 
the adoption of the underlying investment policy. The measure is designed to provide equity and quasi-
equity support that would indirectly mitigate risks of a possible increase in NPLs with the expiration of 
debt  moratoria.  In  addition,  to  address  risks  in  the  banking  sector  related  to  the  overvaluation  in  house 
prices,  the  central  bank  adopted  a  macroprudential  recommendation  aimed  at  lowering  the  average 
maturity  for  mortgage-backed  loans  to  30  years.  The  act  came  on  top  of  existing  macroprudential 
measures that had been successful in bringing down the loan-to-value ratio of housing loans below 80%. 

Fiscal-structural  reforms  are  key  to  strengthening  Portugal’s  public  debt  sustainability  in  the 
medium  term.  Some  measures  were  taken  in  past  years  in  the  areas  of  tax  compliance,  expenditure 
control,  pensions,  healthcare,  state-owned  enterprises,  and  public  administration.  However,  policy  gaps 
persist,  notably  related  to  the  long-delayed  implementation  of  the  2015  Budgetary  Framework  Law, 
which  would be instrumental to improve  the  quality and composition of public finances, by prioritising 
growth-enhancing  expenditure,  strengthening  spending  efficiency  and  contributing  to  contain  structural 
upward  pressures  on  public  current  expenditure.  In  addition,  vulnerabilities  persist  in  the  financial 

6 

2. Assessment of macroeconomic imbalances 

sustainability of the National Health Service and in some state-owned enterprises. Reforms in these areas 
are  embedded  in  Portugal’s  RRP  and  are  expected  to  be  implemented  gradually  over  its  lifetime.  As  a 
crucial  step  towards  strengthening  the  governance  and  efficiency  of  state-owned  enterprises,  a  new 
management  contract  template  came  into  force  in  December  2021  to  increase  the  performance, 
responsibility and accountability of public managers appointed to the respective Boards of Directors. In 
addition,  Portugal’s  tax  and  social  protection  systems  remain  complex  and  there  is  scope  to  reduce  the 
associated  administrative  burden,  in  particular  by  simplifying  both  frameworks  and  enhancing  the 
efficiency of the respective administrations. 

Conclusion 

Portugal  is  facing  vulnerabilities  relating  to  high  external,  private  and  government  debt  in  a 
context  of  low  productivity  growth.  After  a  temporary  reversal  due  to  the  outbreak  of  COVID-19  in 
2020,  Portugal  saw  a  narrowing  of  those  vulnerabilities  in  2021.  High  levels  of  NPLs  have  fallen 
considerably. In 2021 the NIIP improved further beyond its pre-pandemic level, but remains significantly 
beyond  the  estimated  prudential  threshold.  The  current  account  balance  turned  negative  in  2020-2021, 
mainly  due  to  the  pandemic-driven  shock  in  the  tourism  sector.    The  ratios  of  private  and  government 
debt to GDP resumed their downward trajectory in 2021, but remained above their pre-pandemic levels. 
The  country’s large exposure to foreign tourism continues to  weigh on the external sector but the  RRP 
grants  are  expected  to  support  the  NIIP  in  the  medium  term.  Private,  government  and  external  debt-to-
GDP  ratios  are  expected  to  continue  their  downward  adjustment  this  year  and  next,  also  thanks  to  the 
projected  nominal  GDP  growth.  Nevertheless,  the  country’s  private  sector  debt  indicators  remain 
significantly beyond the estimated prudential and fundamentals-explained thresholds. Portugal’s exposure 
to Russia seems limited. Nonetheless, the energy crisis is likely to affect Portugal’s external position (see 
box 2.1). 

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 export capacity and investment potential, 
as  well  as  to  mitigate  structural  weaknesses  in  the  corporate  sector,  notably  through  the  creation  of  a 
EUR 1.3 billion (0.6% of GDP) capitalisation fund. 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 
taken  to  improve  the  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  is  foreseen  in  Portugal’s  RRP  and  is  expected  to  be  implemented  gradually  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  frameworks  and  enhancing  administrative 
efficiency. 

Based  on  the  findings  in  this  in-depth  review,  the  Communication  “European  Semester  –  2022 
Spring  Package” (11)  sets  out  the  Commission’s  assessment  as  to  the  existence  of  imbalances  or 
excessive imbalances in Portugal, in line with Regulation 1176/2011. 

(11)  European Commission (2022), European Semester Spring Package 2022, COM(2022)600 final. 

7 

 
                                                           
2. Assessment of macroeconomic imbalances 

Box 2.1: 

Exposures to the commodity price surge, and to Russia 

This  box  summarizes  risks  and  exposures  regarding  the  commodity  price  surge,  and  the 
importance of direct links with the Russian economy. The surge of commodity prices since 2021 
had been aggravated by the Russian military aggression against Ukraine. This box reviews  the risks 
for the macroeconomic vulnerabilities in Portugal. Available data suggests that exposures to energy 
prices  are  a  concern,  although  exposures  to  Russia  are  significantly  below  the  EU  average.  The 
sanctions  imposed  by  the  EU  and  its  partners  on  Russia  and  Belarus  will  have  side  effects for  the 
Portuguese economy, although they seem very limited. However, the energy  crisis is likely to affect 
Portugal more noticeably via the surge in energy prices. 

 Graph b.1.1: 

Sectoral distribution of energy use and of energy imported from Russia  

Notes: The left panel displays the distribution of primary energy usage in Portugal according to Eurostat energy balances. The horizontal axis displays the 
relative importance of energy-consuming sectors. The vertical axis displays the importance of energy importance from Russia in satisfying that need. Note 
that this dependence on Russia differs according to sector’s use of natural gas vs oil and coal. For comparison, the right hand panels displays the same 
concept for the EU aggregate. Russian imports include oil and petroleum products,natural gas and solid fossil fuels. 
Sources: Eurostat and European Commission services calculations. 
The distribution of energy usage by sector is roughly comparable to the EU average with the 
exception of the transport sector  (Graph b.1.1). Land transport is the main consumer of oil and 
petroleum products in the transport sector (96% in 2020). In 2020 oil and petroleum PRODUCTS 
represented 42% of the Portuguese energy mix.  

Despite  the  strong  reliance  on  gas  and  oil,  the  Portuguese  economy  depends  significantly 
less on imports from Russia than the EU average. In 2020, Portugal imports almost no crude oil 
from Russia, and imports only 10% of its gas from Russia, significantly lower than the EU average at 
44%. However, the net gas imports amount to 0.8% of GDP, slightly above the EU average (0.6%). 
In 2019, gas imports came mostly from Nigeria (54%), followed by the UAE (16%) and Algeria (9%) 
while  oil  imports  from  Brazil  (20%),  Spain  (14%),  Nigeria  (13%)  and  Angola  (8%).  Therefore,  the 
energy crisis has an impact mainly through price increases and not through potential energy supply 
disruptions. In addition, renewables represent a significant share of the Portuguese energy mix (31%) 
and they are projected to largely replace fossil fuels in the next years. This is expected to partly offset 
the direct impact of the energy price increase on household and companies in the medium term.  

The fuel price surge is likely to have a  strong  impact  on  the trade balance.  The commodity 
price increase is expected to depress the trade balance by around 2.7 pp. of GDP in 2022 (see Graph 
2). Nonetheless, the net lending/borrowing (current plus capital account) is expected to remain in a 
small surplus. 

8 

 
 
 
 
 
 
 
 
 
 
 
2. Assessment of macroeconomic imbalances 

Graph b.1.2: 

Portugal goods and service trade balance – fossil trade contribution  

Notes: The graph displays the trade balance as % of GDP, and highlights net trade of petroleum products, natural gas and solid fossil fuels (mainly coal), in 
2015 import prices. The ‘fossil price impact’ component details the impact of price changes on the (also changing) real trade balance. 2022 and 2023 figures 
reflect central assumptions of the Commission spring forecast, notably combining the forecasted fossil price evolution with broadly forecasted import 
quantities of fossil energy sources. 
Portugal’s financial links to  Russian entities are limited.  Table b.1.1  shows that  portfolio and 
other  investment  assets  held  in  and  towards  Russia  are  well  below  EU  average.  Also  the  tourism 
sector  can  be  affected  only  negligibly  as  the  share  of  Russian  tourists  was  relatively  low  and  well 
below the EU average.  

Table b.1.1:  

Selected exposures 

Notes: data source Eurostat for commodity exposures, European Commission Figaro for value-added exposures, BIS for consolidated banking exposures, 
European Commission FinFlows for other financial exposures. Energy gross inland consumption excludes net imports of electricity and derived heat. 

9 

Trade & financial exposuresunitPTEUEnergy mixunitPTEUDomestic value added embodied in exports to Russia% of GDP0.1%0.4%Solids fossil fuels (incl. peat)% of Gross inland consumption 20202.7%10.8%Non-energy Russian import content in final demand% of GDP0.2%0.4%Oil and petroleum products% of Gross inland consumption 202042.1%32.7%Russian tourist nights spent% of total 20191.0%2.7%Natural gas% of Gross inland consumption 202024.4%24.4%FDI assets held in Russia% of 2020 GDP0.0%2.5%Renewables and waste% of Gross inland consumption 202030.8%19.0%Portfolio & other inv. assets held in Russia% of 2020 GDP0.0%0.9%Nuclear% of Gross inland consumption 20200.0%13.1%FDI liabilities towards Russia% of 2020 GDP0.1%1.2%Commodity exposuresunitPTEUPortfolio & other inv. liabilities towards Russia% of 2020 GDP0.1%1.1%Net petroleum imports from all countries% of GDP 20211.6%1.2%Consolidated banking exposures towards Russia% of 2021 GDP0.1%0.5%Crude oil imports from Russia '20% of oil imports0.0%25.7%Net gas imports from all countries% of GDP 20210.8%0.6%Gas imports from Russia '20% of gas imports9.7%43.6% 
 
 
 
 
 
 
 
 
 
 
 
 
Table 2.1: 

Selected economic and financial indicators (Part 1), Portugal 

2. Assessment of macroeconomic imbalances 

(e) estimate based on ECB quarterly data 
(1) Potential output is the highest level of production that an economy can reach without generating inflationary pressures. 
The methodology to compute the potential output is based on K. Havik, K. Mc Morrow, F. Orlandi, C. Planas, R. Raciborski, W. 
Roeger, A. Rossi, A. Thum-Thysen, V. Vandermeulen, The Production Function Methodology for Calculating Potential Growth 
Rates & Output Gaps, COM, European Economy, Economic Papers 535, November 2014. 
(2) Deviation of actual output from potential output as % of potential GDP. 
(3) Current accounts in line with fundamentals ("current account norms") are derived from reduced-form regressions 
capturing the main determinants of the saving-investment balance, including fundamental determinants, policy factors and 
global financial conditions. See L. Coutinho et al. (2018), "Methodologies for the assessment of current account benchmarks", 
European Economy, Discussion Paper 86/2018, for details.  
(4) This benchmark is defined as the average current account required to reach and stabilise the NIIP at -35% of GDP over the 
next 20 years. Calculations make use of Commission’s T+10 projections. 
(5) NENDI is a subset of the NIIP that abstracts from its pure equity-related components, i.e. foreign direct investment (FDI) 
equity and equity shares, and from intracompany cross-border FDI debt, and represents the NIIP excluding instruments that 
cannot be subject to default. 
(6) Fundamentals-based benchmarks are derived from regressions capturing the main determinants of credit growth and 
taking into account a given initial stock of debt. Prudential thresholds represent the debt threshold beyond which the 
probability of a banking crisis is relatively high, minimising the probability of missed crisis and that of false alerts. Methodology 
to compute the fundamentals-based and the prudential benchmarks based on Bricongne, J. C., Coutinho, L., Turrini, A., 
Zeugner, S. (2019), “Is Private Debt Excessive?”, Open Economies Review, 1- 42. 
Source: Eurostat and ECB as of 2022-05-02, where available; European Commission for forecast figures (Spring forecast 2022) 

10 

all variables y-o-y % change, unless otherwise stated2003-072008-122013-17201820192020202120222023Real GDP 1.1-1.41.42.82.7-8.44.95.82.7Potential growth  (1)1.0-0.40.41.61.61.11.62.02.0Contribution to GDP growth:Domestic demand 1.0-2.81.52.83.4-5.04.94.52.8Inventories 0.1-0.10.10.3-0.3-0.60.20.00.0Net exports -0.11.5-0.2-0.3-0.4-2.9-0.21.3-0.1Contribution to potential GDP growth (1):Total Labour (hours) -0.3-1.10.20.80.50.40.60.80.7Capital accumulation 0.90.3-0.20.00.1-0.10.00.20.3Total factor productivity 0.40.50.40.81.00.81.01.01.0Output gap (2)-0.6-1.1-1.62.43.5-6.3-3.30.30.9Unemployment rate8.612.613.17.26.77.06.65.75.5Harmonised index of consumer prices (HICP)2.71.90.61.20.3-0.10.94.41.9GDP deflator 3.00.61.61.81.71.90.72.93.1External positionCurrent account balance (% of GDP), balance of payments-8.8-8.00.90.60.4-1.1-1.1-1.7-0.6Trade balance (% of GDP), balance of payments-7.5-5.41.40.90.8-1.9-2.6..Primary income balance (% of GDP)-1.9-3.2-2.2-2.4-2.4-1.4-1.2..Secondary income balance (% of GDP)0.70.61.72.02.02.22.7..Current account explained by fundamentals (CA norm, % of GDP) (3)-1.2-0.50.10.30.30.40.30.40.5Required current account to stabilise NIIP above -35% of GDP over 20Y (% of GDP) (4)-0.50.8-0.7-1.1-1.1-1.1-1.8-1.7-1.4Capital account balance (% of GDP)1.51.51.21.00.91.11.8..Net international investment position (% of GDP)-73.7-107.8-116.8-106.4-100.0-104.8-95.9..NENDI - NIIP excluding non-defaultable instruments (% of GDP) (5)-41.3-71.3-70.2-55.3-46.7-46.9-36.6..Net FDI flows (% of GDP)0.3-2.4-2.9-2.6-3.6-2.4-3.8..CompetitivenessUnit labour costs (ULC, whole economy)1.4-0.20.63.42.89.31.0-0.60.8Nominal compensation per employee 3.30.41.13.94.82.03.84.22.6Labour productivity (real, hours worked)1.41.10.3-0.11.51.00.41.00.5Real effective exchange rate (ULC)0.0-2.00.02.5-0.3....Real effective exchange rate (HICP)0.4-0.8-0.21.0-1.80.8-1.7..Export performance vs. advanced countries (% change over 5 years)6.1-3.52.16.16.6-0.4...Private sector debtPrivate sector debt, consolidated (% of GDP)171.2203.4180.6155.1149.5164.1160.0..Household debt, consolidated (% of GDP)79.590.677.466.063.569.568.1..Household  debt, fundamental benchmark (% of GDP) (6)38.640.637.631.730.432.931.5..Household  debt, prudential threshold (% of GDP) (6)37.832.333.737.340.440.340.4..Non-financial corporate debt, consolidated (% of GDP)91.7112.8103.389.186.094.691.9..Corporate debt, fundamental benchmark (% of GDP) (6)57.462.865.960.258.663.862.0..Corporate debt, prudential threshold (% of GDP) (6)56.248.651.457.563.064.264.4..Private credit flow, consolidated (% of GDP) 12.64.4-1.90.82.64.44.9..Corporations, net lending (+) or net borrowing (-) (% of GDP)-4.0-1.73.4-0.2-0.9-0.5-0.9-0.10.0Households, net lending (+) or net borrowing (-) (% of GDP)1.63.02.71.81.86.24.42.32.6Net savings rate of households (% of net disposable income)2.61.5-0.9-2.5-2.23.31.3..forecast 
 
   
 
 
Table 2.2: 

Selected economic and financial indicators (Part 2), Portugal 

2. Assessment of macroeconomic imbalances 

(7) Unweighted average of price-to-income, price-to-rent and model valuation gaps. The model valuation gap is estimated 
in a cointegration framework using a system of five fundamental variables; total population, real housing stock, real 
disposable income per capita, real long-term interest rate and price deflator of final consumption expenditure, based on 
Philiponnet, N., Turrini, A. (2017), "Assessing House Price Developments in the EU," European Economy - Discussion Papers 2015 - 
048, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission. Price-to-income and price-to-
rent gaps are measured as the deviation to the long term average (from 1995 to the latest available year). 
(8) Price-to-income overvaluation gap measured as the deviation to the long term average (from 1995 to the latest available 
year). 
(9) 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 2022-05-02, where available; European Commission for forecast figures (Spring forecast 2022) 

11 

all variables y-o-y % change unless otherwise stated2003-072008-122013-17201820192020202120222023Housing marketHouse price index, nominal1.5-1.74.310.310.08.89.4..House price index, deflated-1.8-2.93.48.69.08.08.1..Overvaluation gap (%) (7)-0.3-2.9-10.92.08.015.422.0..Price-to-income overvaluation gap  (%) (8)-0.5-8.3-11.10.15.215.621.6..Residential investment (% of GDP)5.83.72.63.13.23.43.7..Government debtGeneral government balance (% of GDP)-5.0-7.8-4.4-0.30.1-5.8-2.8-1.9-1.0General government gross debt (% of GDP)69.9101.4130.6121.5116.6135.2127.4119.9115.3Banking sectorReturn on equity (%)13.80.3-6.1-0.92.0-1.7...Common Equity Tier 1 ratio6.78.111.913.414.715.5...Gross non-performing debt (% of total debt instruments and total loans and advances) (9)1.24.112.27.64.93.9...Gross non-performing loans (% of gross loans) (9)..16.19.46.14.94.0..Cost of borrowing for corporations (%)5.15.63.62.52.22.02.0..Cost of borrowing for households for house purchase (%)4.03.62.41.41.10.80.8..forecast 
   
 
 
3.  THEMATIC CHAPTER: EXTERNAL IMBALANCES 

Portugal’s  external  position  deteriorated  with  the  COVID-19  crisis,  also  in  part  because  of  the 
impact  of  the  crisis  on  tourism,  but  the  NIIP  improved  strongly  in  2021.  This  warrants  a  more 
detailed analysis this year. In 2020, the NIIP was at -105% of GDP, compared to its prudential benchmark 
of -52% and its fundamental benchmark of -12% of GDP. Its substantial improvement in 2021, to  -96% 
of GDP, was mainly driven by GDP growth and favourable valuation changes. Still, the NIIP remained 
one of the most negative in the EU. The NIIP excluding non-defaultable instruments (NENDI) improved 
from -47% of GDP in 2020, to -37% in 2021. As the rest of the NIIP is composed mostly of foreign direct 
investments  (FDI),  a  more  favourable  NENDI  partly  offsets  the  risks  of  outflows  related  to  potential 
abrupt changes in the external market environment (Graph 2.1.d). As for the sectoral composition of the 
NIIP,  the  government  net  position  improved  from  -64%  of  GDP  in  2020  to  -54%  in  2021,  while  other 
segments, smaller in net terms, remained fairly stable (Graph 2.1.f).  

The COVID-19 pandemic temporarily stopped the external adjustment trend 

Portugal’s net international investment position (NIIP) improved from its lowest level of  -124% at 
the end of 2014 to -100% of GDP as of the end of 2019. The adjustment in the NIIP was also supported 
by  a  substantial  correction  of  Portugal’s  current  account  balance  (Table  2.1).  Huge  current-account 
deficits  exceeding  10%  of  GDP  until  2010  had  started  to  decline  from  2011  onwards  and  moved  to  a 
small  surplus  in  2013,  which  was  maintained  until  2019.  This  adjustment  was  driven  by  a  sharp 
contraction  of  aggregate  demand,  including  through  gradual  improvements  in  government’s  and 
corporates’ net borrowing position (Graph 2.1.b). The strong growth in Portugal’s tourism sector played a 
key role in the external adjustment during that period. The service balance improved from 3.6% of GDP 
in  2009  to  8.4%  in  2019.  The  balance  of  goods  also  improved  during  the  same  period,  from  -10.4% 
to -7.6%. 

The  improving  NIIP  trajectory  from  before  the  COVID-19  pandemic  was  paused  in  2020  before 
recovering  in  2021(Graph  2.1.d). The  initial  decline  largely  reflected  a  denominator  effect  due  to  the 
decline in GDP. Relative to potential GDP, the NIIP even slightly improved in 2020. The net inflow of 
FDI dropped significantly in  2020, against the backdrop of unprecedented global  market upheavals and 
uncertainties,  but  recovered  in  2021.  The  NIIP  ratio  resumed  its  positive  trajectory  in  2021,  reaching  -
95.9% at the end of the year, and is set to improve further in 2022  and 2023. The NENDI improved to -
36.6% of GDP in 2021.  

The current account balance turned negative from 0.4% of GDP in 2019 to -1.1% in 2020 and 2021. 
This  deterioration  reflected  higher  government  net  borrowing  related  to  fiscal  support  measures,  which 
was  partly  cushioned  by  an  increased  savings  surplus  of  the  household  sector  in  2020  (Graph  2.1.b). 
Output dropped more sharply than demand (Graph 2.1.a) and the export market share declined by 9.8% in 
2020.  The  current  account  balance  was  slightly  more  than  1pp  below  the  estimated  current  account 
explained by fundamentals but the  gap to norm is projected to narrow going forward, also in cyclically 
adjusted  terms.  The  current  account  is  also  expected  to  remain  slightly  below  the  balance  required  to 
reach the NIIP benchmarks at sufficient pace (Table 2.1).  

Both exports and imports declined strongly in 2020 due to the crisis and have recovered unevenly.  
Imports have rebounded fast after the initial shock as domestic demand has gained momentum, while the 
recovery  of  exports  has  been  comparatively  limited,  leading  to  a  deterioration  of  the  current  account 
balance. The surplus in trade with services contracted from 8.4% of GDP in 2019 to 4.3% in 2020, mainly 
reflecting  the  huge  drop  in  travel  receipts  (Graph  2.1.c).  It  improved  only  slightly  in  2021,  to  4.5%  of 
GDP. The  deficit  in  trade  in  goods  narrowed,  from  -7.6%  in  2019  to  -6.3%  in  2020,  before  expanding 
again to -7.1% in 2021. The UK’s withdrawal from the EU also weighs on exports and investment, as the 
UK was the destination of around 6% of goods exports and the largest market for travel exports (around 
18% of total) in 2019. The contraction of exports to the UK was stronger than that of overall exports in 

12 

 
3. Thematic chapter: External Imbalances 

2020. (17)  The  primary  income  has  become  less  negative,  while  the  secondary  income  balance,  that 
includes current EU transfers, has remained positive and slightly increased with the COVID-19 pandemic. 
Overall, the current account remained stable in 2021. 

The current account balance is forecast to remain negative, at -1.7% of GDP in 2022 and -0.6 % in 
2023. The  projected  slow  recovery  in  the  current  account  reflects  expectations  that  the  foreign  tourism 
sector is facing scarring effects, both on the supply and demand side, and is not expected to reach its pre-
pandemic  level  before  2023.  Moreover,  going  forward  the  increase  in  energy  prices  may  weigh  on  the 
balance  of  goods  (Graph  2  in  Box  2.1).  The  country’s  external  position,  and  particularly  the  capital 
account, is expected to benefit from the grants under the Recovery and Resilience Facility in the period of 
2022-2026 that would help reduce the net stock of external liabilities.  

During  the  COVID-19  pandemic  competitiveness  indicators  temporarily  worsened,  but  started  to 
recover since 2021, so that the implications for external balances appear to be limited. The export 
market share declined by 9.8% in 2020, partly reflecting the importance of the tourism sector. However, it 
increased by 2.8% in 2021 and is forecast to increase by 7.3% in 2022. Unit labour cost growth increased 
sharply,  by  9.3%  in  2020,  due  to  labour  hoarding  associated  to  the  COVID-19  crisis,  similar  to  other 
countries. This is a statistical effect that makes unit labour costs difficult to assess in 2020. Unit labour 
costs increased further by 1.0% in 2021, but are forecast to decline by 1.4% in 2022. Nominal wages per 
worker increased by 2.0 in 2020 and 3.8% in 2021 and are forecast to increase by 4.2% in 2022. Labour 
shortages in some sectors may result in additional wage pressure, also because some workers may have 
changed their profession during the pandemic. This may weigh on cost-competitiveness going forward.  

Medium-term NIIP projections show that Portugal could substantially improve its NIIP position by 
2031 (Graph 3.2), if it maintains its trade balance at current levels. Under the baseline scenario the NIIP 
would improve to around -55% of GDP by 2031. Under a more adverse illustrative scenario describing a 
hypothetical slower tourism recovery than in the baseline (see the footnote to Graph 3.2 below), the NIIP 
would still come close to -66% of GDP by 2031. A more optimistic illustrative scenario (see the footnote 
to Graph 3.2) would result in an NIIP of -44% in 2031.  

A  sustained  reduction  in  the  NIIP  ratio,  without  a  significant  increase  in  the  current  account 
balance,  requires  sustainable  growth.  The  adjustment  to  a  stronger  external  position  in  the  medium-
term  will  require  continuous  moderate  current  account  surpluses  and  sustained  nominal  output  growth. 
This requires productive investments, as included in the Portugal’s RRP. It contains policy measures and 
investments aimed at increasing the country’s export base and industrialisation, including the promotion 
of  R&D  and  innovative  investment  in  enterprises.  In  this  context,  the  update  of  the  Strategy  for 
Technological  and  Enterprise  Innovation  2018-2030  was  adopted  in  December  2021.  Ongoing 
investments in energy savings and renewable energy are also expected to support the external balance by 
reducing imports of energy, particularly in the current context of high energy prices. This process may be 
accelerated by the energy security of supply concerns that emerged in context of the war in Ukraine. The 
capital account will also continue to be supported by capital transfers under the Recovery and Resilience 
Facility. Grants under the Recovery and Resilience Facility over 2021-2026 are estimated to exceed 6% 
of the 2021 GDP. 

Portugal’s tourism sector started to recover recently, but vulnerabilities remain 

Portugal’s exposure to tourism played a key role in the external adjustment prior to the COVID-19 
crisis.  The  sector  of  accommodation  and  food  service  activities  amounted  to  6.1%  of  total  gross  value 
added (GVA) in 2019, compared to 2.9% on average in the EU. The strong growth in Portugal’s tourism 
sector played a key role in the external adjustment before the COVID-19 crisis,  with the travel balance 
expanding from 2.4% of GDP in 2009 to 6.1% in 2019. It has a strong international character, with cross-
border tourists accounting for roughly 65% of nights spent in tourist accommodation establishments and 
with exports of travel (tourism) services at 37% of total exports in 2019. This helped the current account 
balance improve from -10.3% of GDP in 2009 to 0.4% in 2019. Net of travel receipts, the current account 
adjustment would have been much weaker from -12.7% of GDP to -5.7% for the same period. 

(17)  OECD (2021), OECD Economic Surveys: Portugal 2021, OECD Publishing, Paris, https://doi.org/10.1787/13b842d6-en. 

13 

                                                           
3. Thematic chapter: External Imbalances 

Portugal’s large tourism sector was heavily affected at the onset of the COVID-19 pandemic. After 
the outbreak of the pandemic, tourism collapsed quickly, reaching its trough in April 2020, with almost 
no nights spent in touristic establishments (Graph 2.1.g). The travel balance declined to 2.5% of GDP in 
2020, reflecting the strict containment measures during the first wave of the COVID-19 pandemic. The 
GVA share of the accommodation and food sector dropped by almost half, to 3.6% in 2020. Employment 
in  the  accommodation  sector  held  up  closer  to  pre-pandemic  levels,  helped  by  government  support 
measures,  especially  short-term  work  schemes.  However,  it  fell  to  75%  of  its  2019  level  in  Q3  2021, 
compared to 90% in the EU as a whole.  

The tourism sector started to recover recently, but is still lagging behind its pre-pandemic level. The 
travel  balance  increased  in  the  third  quarter  of  2021,  to  5.6%  of  GDP.  Nights  spent  in  tourism 
establishments recovered from 38% of their 2019 level in October 2020 to 88% in October 2021. Tourism 
activity recovered more dynamically in the second half of 2021 and the recovery of domestic tourism was 
swifter and stronger than of foreign tourism.   

The  pandemic  has  had  some  scarring  effects  on  the  tourism  sector,  which  may  also  affect  the 
performance of the sector going forward. Bankruptcies in the accommodation and food sector remain 
elevated,  whereas  new  business  registrations  continue  to  remain  below  2019  levels  (Graph  2.1.i).  The 
NPL  ratio  in  the  tourism  sector  remained  relatively  stable  during  the  loan  moratoria  introduced  in 
response to the COVID-19 crisis, effective until the end of September 2021. However, the NPL ratio in 
the sector increased to 8.6% in Q3 2021, compared to 6.6% in Q3 2019 (Graph 2.1.h). A large share of 
Portuguese  firms  in  the  sector  are  small,  undercapitalised,  and  therefore  vulnerable  to  economic 
shocks. (18)  

While many tourism establishments resumed business quickly once demand picked up, investment 
activity  may  remain  subdued  and  the  sector  may  find  it  more  difficult  to  adjust  to  changing 
consumption patterns. This would also affect the external balance of Portugal going forward. While the 
RRP  does  not  envisage  specific  measures  targeted  exclusively  on  tourism  services,  companies  in  the 
sector  can  be  expected  to  benefit  from  the  EUR  1.3  billion  capitalisation  fund  set  up  in  2021.  The 
measure  is  designed  to  provide  equity  and  quasi-equity  support  to  vulnerable  but  viable  firms  and  it  is 
estimated that a large share of these firms are in the tourism sector. In addition, the sector could benefit 
from measures designed to support digital skills, education and training. 

(18)  OECD (2021), OECD Economic Surveys: Portugal 2021, OECD Publishing, Paris, https://doi.org/10.1787/13b842d6-en. 

14 

 
 
 
 
 
 
 
 
                                                           
Table 3.1: 

Selected external indicators 

3. Thematic chapter: External Imbalances 

(1) Abbreviations: NA=National Accounts, BoP=Balance of Payments, CA=Current Account, NENDI= NIIP excluding non-
defaultable instruments, VA= Value Added, TB= Trade Balance.  
(1) Flow data refer to national account concept, unless indicated otherwise. 
(2) Cyclically adjusted CA is the CA adjusted for the domestic and foreign output gaps, taking into account trade openness.  
 (3) The average CA needed in order to stabilise the NIIP is based on European Commission”T+10”medium-term projections.  
(4) The CA explained by fundamentals refers to the expected CA given the level of its fundamentals with respect to world 
average.  
(5) The CA or TB needed either to halve the distance to fund. NIIP benchmark, or to reach the prud. NIIP benchmark in 10Y, 
whichever is higher. Based on European Commission “T+10” medium-term projections. 
(6) In case private-sector FDI is not available, total economy FDI is displayed.  
(7) VA imports as % of aggregate demand describes the % of aggregate demand that  is sourced from foreign value added.  
(8) More information on benchmark indicators methodology can be found on B1 intranet. 
Source: (a) Eurostat, (b) Ameco, (c) European Commission calculations, (d) WIOD database. 

15 

2003-072008-122013-1720182019202020212022f2023fFlows (1)Source:CA balance as % of GDP, NA(b)-8.9-7.80.50.30.1-1.2-1.1-1.7-0.7CA balance as % of GDP, BoP(a)-8.8-8.00.90.60.4-1.1-1.1-1.7-0.6Cyclically adj. CA balance as % of GDP (2)(c)-9.7-7.60.51.21.5-1.8-2.1-0.90.0CA req. to stabilize NIIP above -35% (3)(c)-0.50.8-0.7-1.1-1.1-1.1-1.8-1.7-1.4CA explained by fundamentals (CA norm) (4),(8)(c)-1.2-0.50.10.30.30.40.30.40.5Required CA for specific NIIP target (5)(c)0.62.52.00.90.90.90.30.50.8Trade bal. G&S, % of GDP, NA(b)-7.7-5.80.80.50.5-2.1-3.0-2.8-1.8Required TB for specific NIIP target (5)(c)1.43.51.2-0.2-0.5-0.6-1.1-0.9-0.7StocksNENDI as % of GDP(a)-41-71-70-55-47-47-37of which: net portfolio debt(a)-4-18-90125of which: net mutual fund shares(a)45910131518of which: net other investment(a)-47-65-79-76-70-75-74NIIP as % of GDP(a)-74-108-117-106-100-105-96-89-86Prudential NIIP/NENDI benchmark (8)(c)-53-52-51-53-54-52-52-53-53Fundamentally expl. NIIP benchmark (NIIP norm) (8)(c)-11-13-14-12-12-12-10-10-9Gen. Government NIIP(a)-42-57-77-59-58-64-54Private Sector NIIP(a)-14-20-36-44-47-52-56of which: Net FDI (6)(a)-10-16-28-32-34-38-40MFI (excl CB) NIIP(a)-43-31-8-9-7-21Oth. financials NIIP(a)15367131618Central bank NIIP(a)10-3-2-20-2-6of which: Reserves(a)581011101214of which: Target2(a)-26-36-40-36-40-38Value-added trade and capital accountVA imports % of agg. demand (7)(d)292930Capital account bal. as % of GDP, NA(b)211111222Indicators in % of potential GDP0.00.00.00.00.0CA balance as % of potential GDP, NA(b,c)-8.8-7.80.50.30.1-1.2-1.0-1.7-0.7CA balance as % of potential GDP, BoP(a,c)-8.8-8.00.90.60.5-1.0-1.1-1.7-0.6Cyclically adj. CA balance as % of potential GDP (c)-9.7-7.50.51.21.5-1.7-2.0-0.90.0Trade bal. G&S, as % of potential GDP, NA(b,c)-7.6-5.70.80.50.5-2.0-2.9-2.8-1.8NENDI as % of potential GDP(a,c)-41.1-70.5-68.9-56.6-48.4-43.9-35.4NIIP as % of potential GDP(a,c)-73.4-106.5-114.8-108.9-103.5-98.2-92.7-89.7-86.4Capital account bal. as % of potential GDP, NA(b,c)1.51.41.21.00.91.01.72.02.2 
 
 
 
 
 
 
 
   
 
Graph 3.1: 

Thematic Graphs: External imbalances 

3. Thematic chapter: External Imbalances 

Source: European Commission services 

16 

160170180190200210220070809101112131415161718192021*22*23*Constant 2015 million of nat. currencya) Demand, output and trade balanceTrade balanceAgg. demandOutput (GDP)source: Ameco,Commission services-15-10-505100506070809101112131415161718192021*22*23*% of GDPb) Net lending/borrowing by sectorHouseholds and NPISHGeneral governmentCorporationsTotal economysource: Ameco,Commission Services-160-140-120-100-80-60-40-2002040040506070809101112131415161718192021*% of GDPd) NIIP, by instrumentReserve assetsNet portfolio investment, equity and investment fund shares/unitsNet portfolio investment, debt securitiesOther investment (net)Net direct investmentNet financial derivatives and employee stock optionsNet Int'l investment position (NIIP)NENDI (NIIP excluding non-defaultable instruments)source:Eurostat, Commission services-140-120-100-80-60-40-2002015Q316Q317Q318Q319Q320Q321Q3% of GDPf) Decomposition of NIIP by sectorGeneral governmentPrivate sector incl MFIPrivate sectorMFI (excl central bank)Central bank (incl reserves)Net int'l investment position (NIIP)source:Eurostat, Commission services-25-20-15-10-505101512Q413Q414Q415Q416Q417Q418Q419Q420Q421Q4Change in pp. of GDP (y-o-y)e) Decomposition of rate of change of NIIPValuation changesNet transaction effect (rest FA bal.)Investment income effectNominal growth effectChange in NIIP (y-o-y)source: Eurostat,Commission services-15-10-50510141516171819202121*22*23*% of GDPc) External position, current and capital accountsGoods, fcastServices, fcastGoods excl energyEnergy balanceServices excl travelTravel balancePrimary inc. bal.Second. inc. bal.Current accountNet lending/borrowingsource:Eurostat, Commission services,ComextNote: Moving average over four quarters    
 
Graph 3.2:  NIIP projections 

3. Thematic chapter: External Imbalances 

Scenario 1 (optimistic): assumes slightly higher GDP growth (+0.3 pp) and trade balance (+1 pp), e.g. as driven by stronger 
tourism performance than in the baseline. Scenario 2 (pessimistic): same as Scenario 1 but with an opposite sign. 
Source: Commission services calculations 

Graph 3.3: 

Thematic Graphs: External Imbalances 

Source: European Commission services 

17 

-120-100-80-60-40-20021222324*25*26*27*28*29*30*31*% of GDPBaselineScenario 1Scenario 2050100150200250300Index, 100 = 2019Q1(b) Business bankruptcies and registrationsBankruptciesNew business registrationssource: Eurostat020406080100120140202020212022% of same month in 2019(a) Nights spent at tourist accommodationstotalforeigndomesticsource: Eurostat, Commissionservices