COMMISSION STAFF WORKING DOCUMENT 2023 Country Report - Portugal Accompanying the document Recommendation for a COUNCIL RECOMMENDATION on the 2023 National Reform Programme of Portugal and delivering a Council opinion on the 2023 Stability Programme of Portugal
Date: 2023-05-24
Institutions: European Commission, Secretariat-General
Subjects: Portugal, circular economy, economic recovery, economic reform, energy policy, fiscal policy, social security, stability pact, stability programme, waste management

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 24.5.2023  SWD(2023) 622 final  COMMISSION STAFF WORKING DOCUMENT 2023 Country Report - Portugal Accompanying the document Recommendation for a COUNCIL RECOMMENDATION on the 2023 National Reform Programme of Portugal and delivering a Council opinion on the 2023 Stability Programme of Portugal {COM(2023) 622 final}  
 
 
 
 
 
 
 
 
 
 
 
ECONOMIC AND EMPLOYMENT SNAPSHOT 

Portugal stays on a strong 
recovery path 

significant 

Portugal’s 
post-pandemic 
economic  recovery  fuelled  by  a  strong 
rebound 
in  tourism  has  slowed.  GDP 
growth increased from 5.5% in 2021 to 6.7% 
in 2022. By the first quarter of 2022, Portugal 
had  already  fully  recovered  the  large  loss  in 
economic  activity  in  2020.  However,  after  a 
peak in the first quarter of 2022, growth rates 
slowed  down  in  the  following  quarters  as 
Russia’s  war  of  aggression  against  Ukraine 
further disrupted global supply chains.  

Growth  is  expected  to  moderate  to  2.4%  in 
2023 and 1.8% in 2024. The uncertain global 
environment  remains  a  main  risk  factor  for 
Portugal’s  economic  performance.  In  the  long 
term,  growth  is  also  constrained  by  structural 
weaknesses. 

Graph 1.1: Real GDP growth and selected 
labour market indicators 

Source: European Commission 

Macroeconomic  vulnerabilities  related  to 
high  private,  government  and  external 

debt are  receding  but  remain  present.  (1) 
After  a  temporary  interruption  due  to  the 
outbreak  of  the  pandemic,  private  sector  and 
government  debt  ratios  returned  to  declining 
paths  in  2021  and  are  expected  to  continue 
declining,  favoured  by  economic  growth  (see 
Annex  22).  External 
indebtedness  also 
improved.  Yet,  debt  ratios  remained  elevated 
overall.  The  main 
further 
narrowing  of  vulnerabilities  relate  to  the 
impact of the tightening of financial conditions 
and to an uncertain external environment, and 
their potential impact on economic growth. 

risks 

the 

to 

There  have  been  positive  labour  market 
developments,  but  youth  unemployment 
remains  high.  Following  their  favourable 
evolution  in  2021,  the  main  labour  market 
indicators strengthened further, in most cases 
improving  beyond  pre-pandemic 
In 
2022,  the  unemployment  rate  stood  at  6%, 
below the EU and euro area average. Similarly, 
the  employment  rate  (age  20-64)  was  at 
historically high levels (77.5%). 

levels. 

Less positive developments were recorded for 
youth  unemployment 
(age  15-24)  which, 
although  it  improved,  remained  high  (19%) 
and  above  pre-pandemic  levels  (see  Annex 
14). Additionally, young people in employment 
often face precarious job conditions. Reducing 
youth  unemployment  is  key  to  reaching  the 
national employment target by 2030.  

Overall,  the  labour  market  remains  relatively 
tight  and 
labour  shortages  have  been 
increasing in the last ten years, including in the 
construction,  industry  and  services  sectors. 
Unemployment rates are highest in the regions 
of Algarve and Madeira (see Annex 17). 

Regional  disparities  persist.  The  pandemic 
led Portugal to diverge from the rest of the EU 

(1) European Commission (2023), In-Depth Review for 
Portugal, Commission staff working document 
(COM(2023) 641 final). 

2 

-20-15-10-505101520-10-8-6-4-20246810201020112012201320142015201620172018201920202021202220232024GDP growthEmployment growthUnemploymenty-o-y growth, %% of active population 
 
  
                                                 
in  terms  of  GDP  per  capita,  interrupting  a 
(slow)  convergence  since  the  sovereign  debt 
crisis.  GDP  per  capita  as  a  percentage  of  the 
EU  average  declined  from  78.6%  in  2019  to 
75.1% in 2021. GDP per capita is below the EU 
average  in  all  regions  of  Portugal  with  the 
capital  region  recording  the  highest  figure. 
Regional  disparities  mirror  important  gaps  in 
labour  productivity,  innovation  performance 
and competitiveness.  

Portugal's  regions  have  been  converging  in 
their  GDP  per  capita  since  2010,  but  mostly 
driven  by  economic  contraction  in  the  capital 
region, from above 121% of the EU average in 
2006  to  96%  in  2021  (see  Annex 17).  In  this 
context,  EU  Cohesion  Policy  is  key  to  helping 
Portugal’s regions to resume convergence with 
the  EU,  promoting  their  competitiveness  and 
innovation  performance.  Portugal  benefits 
from  a  significant  volume  of  EU  cohesion 
funds (EUR 28.9 billion) (see Annex 4). 

Public finances improved, with 
persisting high inflation 

Portugal’s  public  finances  improved  in 
2022.  The  general  government  balance 
recorded  a  deficit  of  0.4%  of  GDP  in  2022, 
from  2.9%  of  GDP  in  2021.  Government 
revenues  benefited  from  the  strong  economic 
labour  market 
favourable 
rebound  and 
revenues  being 
tax 
developments,  with 
boosted  by  inflation.  At  the  same  time,  the 
wind-down  of  COVID-19-related  measures 
contributed  to  curb  expenditure.  The  general 
government  deficit  is  forecast  to  narrow  in 
2023  to  0.1%  of  GDP  and  remain  unchanged 
in 2024 (see Annex 20). The rebound in public 
investment  is  expected  to  continue,  propelled 
by  the  implementation  of  the  Portuguese 
recovery  and  resilience  plan  (RRP)  and  other 
EU-funded  programmes.  The  public  debt-to-
GDP ratio declined to 113.8% in 2022, already 
below  pre-pandemic  level,  and  it  is  projected 
to  further  decrease  in  2023  and  2024.  Pre-
pandemic  pressures  on  current  spending, 
notably on social benefits and the public wage 
bill, are expected to persist. A robust budgetary 
framework  and 
financial 
sustainability  of  state-owned  enterprises 

improving 

the 

remains key to strengthening the sustainability 
of Portugal’s public finances. 

Portugal faces high inflation. Inflation rose 
from  0.9%  in  2021  to  8.1%  in  2022  (Euro 
area  inflation  2.6%  in  2021  and  8.4%  in 
2022).  The  main  drivers  of  inflation  were  the 
steep rise in global energy and food prices, as 
well  as  the  severe  drought  in  Portugal  until 
September  2022.  In  response,  Portugal  has 
adopted measures to counteract the impact of 
the rise in energy prices (see Box 1). Inflation 
is projected to gradually diminish in 2023-24.  

Despite limited direct effects, the indirect 
effects  of  Russia’s  invasion  of  Ukraine 
are  significant.  Portugal’s  dependency  on 
Russian  energy  supply  is  very  small  but  it  is 
dependent  on  imported  fossil  fuels  and  is 
therefore  exposed  to  global  price  volatilities. 
The  overall  trade  volume  between  Portugal 
and both Russia and Ukraine is also small, but 
the  indirect  impact  via  global  supply  chain 
commodity  prices 
disruptions  and  high 
constrain growth. 

Sustainable Development Goals – 
a positive trend, but social and 
environmental challenges persist 

Portugal improved in relation to the UN’s 
Sustainable  Development  Goals  (SDGs), 
but still needs to catch up in some areas. 
Most  indicators  evolved  favourably  in  recent 
years (see Annex 1). The improvement is most 
marked  in  the  security,  justice,  institutional 
and  climate  mitigation  areas  (SDG  16  Peace, 
justice  and  strong  institutions  and  SDG  13 
Climate action).  

SDG  11  (Sustainable  cities  and  communities) 
and  SDG  12  (Responsible  consumption  and 
production)  improved  only  slightly  due  to  a 
mediocre performance in circular economy and 
waste management.  

Progress 
(Industry, 
is  visible  for  SDG  9 
Innovation  and  Infrastructure)  and  SDG  3 
(Good health and wellbeing) but indicators are 
still significantly below the EU average. Finally, 

3 

 
the indicators for marine waters (SDG 14) and 
for  inequalities  and  social  inclusion  (SDG  10) 
deteriorated, is the later also being reflected in 
the Social Scoreboard (see below).  

The  Social  Scoreboard  accompanying  the 
European  Pillar  of  Social  Rights  flags 
various  concerns.  While  Portugal  continues 
to  perform  better  than  average  in  disability 
and 
youth 
employment 
employment  is  still  highly  precarious,  and  the 
country  continues  to  face  a  structural  skills 
deficit in the adult population (see Annex 14).  

gender 

gaps, 

Portugal has a large share of people who have 
not  completed  more  than  lower  secondary 
education  (40%  in  2021),  alongside  skills 
mismatches,  whereby  the  technology  and 
innovation  intensive  sector,  because  of  its 
small  size,  absorbs  only  a  fraction  of  the 
available high-skilled workers (2). 

Furthermore,  social 
indicators  show  rising 
levels  of  poverty  in  2020  and  2021.  Income 
inequalities  also  rose  during  the  same  period. 
The  coverage  and  adequacy  of  social 
protection  is  concerning,  notably  because  of 
the complexity and relative inefficiency of the 
system.  The  share  of people  overburdened  by 
housing  costs  has  also  risen,  while  the 
provision  of  social  and  affordable  housing  is 
still lagging. 

Climate  change  is  causing  more  frequent 
and  intense  heat  waves,  droughts  and 
wildfires  in  Portugal.  These  particularly 
affect  agriculture  and  forestry,  biodiversity, 
energy,  buildings,  tourism  and  health  (see 
Annex  6).  And  they  create  challenges  for 
climate change adaptation, in particular forest 
and  water  management,  as  well  as 
environmental protection.  

More frequent droughts also risk impacting the 
supply  of  hydro-electric  power.  Further 
investment  in  the  electricity  grid,  storage  and 
solar  and  wind  installations  would  alleviate 
this problem in the future. 

(2)  OECD, Skills for jobs Database 

4 

 
 
                                                 
 
 
 
Box 1: 

Box on energy response in Portugal 

Portugal  adopted  various  support  measures  to  cushion  the  impact  of  energy  price  inflation  on 
households  and  businesses.  For  2023,  their  gross  budget  costs  are  projected  –  in  the 
Commission 2023 spring forecast – to amount to 0.8 % of GDP (3). Most measures remove the 
price signal as an incentive for consumers to use less energy  and are not targeted at the most 
vulnerable. The energy support measures are assumed to fully phase-out in 2024. 

Key energy measures in place in 2023 include lump-sum payments to low-income households, a 
reduction of the fuel tax, the suspension of the increase in the carbon tax and a reduction of the 
VAT  for electricity.  A  transitional  regime  to  stabilise  gas  prices  paid  by  firms  is  to  be  in  place, 
supported with an allocation of up to EUR 1 billion to the national gas system. Portugal has also 
implemented  a  cap  on  the  price  of  gas  used  for  electricity  generation,  known  as  the  ‘Iberian 
mechanism’, starting in May 2022 and set to expire by the end of 2023 (see Annex 7). 

Portugal applies a national measure (contribução de solidaridade temporária) (4) in application of 
Council Regulation (EU) 2022/1854 (5) for the fiscal years 2022 and 2023, with a defined rate of 
33%. The Portuguese national measure is levied on both the energy and food retail sectors (6). 

To  ensure  a  stable  and  uninterrupted  supply  of  gas to  all  consumers,  Portugal  set  a  minimum 
global  quantity  of  gas  security  reserves.  Portugal  also  adopted  a  set  of  measures  to  reduce 
energy  consumption  (electricity  and  gas)  in  the  sectors  of  public  administration,  industry, 
commerce, services and residential buildings. Measures to accelerate the green transition include 
the adoption of ‘Simplex Ambiental’ on faster permitting and the establishment of a centralised 
purchase system for biomethane and renewable hydrogen. 

(3)  For 2022, the gross budgetary costs of measures 
amounted to 2.0% of GDP. Some of the measures 
outlined in this box were already in place in 2022. 

(4)  Law No 24-B/2022 of 30 December 2022 that 

regulates temporary solidarity contributions on the 
energy and food distribution sectors. 

(5)   Council Regulation (EU) 2022/1854 of 6 October 2022 
on an emergency intervention to address high energy 
prices. 

(6)  Member States can keep national measures that are 
equivalent to the solidarity contribution regulated in 
Council Regulation (EU) 2022/1854, provided they are 
compatible with the objectives of the regulation and 
generate higher or comparable proceeds. These 
measures must also cover the extraordinary and 
unexpected profits of businesses active in the 
extraction of crude petroleum, natural gas, coal, and 
refining. 

5 

 
                                                 
 
THE RECOVERY AND RESILIENCE PLAN IS UNDERWAY 

Portugal’s  recovery  and  resilience  plan  (RRP) 
aims to address the key challenges related to 
social  services,  healthcare, 
financing  of 
businesses,  innovation,  education  and  skills, 
fiscal  sustainability  and  the  digital  and  green 
transitions.  It  consists  of  32  reforms  and  83 
investment strands that are supported by EUR 
13.9  billion  in  grants  and  EUR  2.7  in  loans, 
representing  7.9%  of  GDP  (see  Annex  3  for 
more details).  

The  following,  more  detailed  review  of 
measures  being  implemented  under  the 
RRP in no way implies formal Commission 
approval  or  rejection  of  any  payment 
requests.  

Strengthening the resilience of 
labour market and social services 

of 

implementation 

The 
Portugal’s 
recovery and resilience plan is underway, 
however  with  risk  of  some  delays. 
Portugal  submitted  two  payment  requests, 
corresponding to 58 milestones and targets in 
in  an  overall 
resulting 
the  plan  and 
disbursement  of  EUR  2.98  billion.  The 
Portuguese  RRP  is  ambitious  and  complex  in 
nature.  Strong  governance  and  continuous 
monitoring  of  the  plan  are  essential  to 
minimise  the  risk  of  delays.  Milestones  and 
targets  related  to  large  investments  including 
in  health,  social  housing  and  sustainable 
mobility, will be assessed in the next payment 
requests.  Measures  adopted  since  December 
2021,  which  formed  part  of  the  second 
payment request, include reforms in the areas 
of  managing  public  hospitals  and  the  digital 
transition in the private and public sectors.  

The  Portuguese  plan  is  expected  to  be 
revised  with  new  measures,  including  a 
REPowerEU  chapter,  and  will  take  into 
account the increased maximum financial 
contribution (7). The revision is also expected 
to include changes to the existing plan that are 
necessary  due  to  objective  circumstances. 
Portugal 
the 
Commission its intention to request additional 
loan support.  

communicated 

has 

to 

(7)  The maximum financial contribution for Portugal was 
updated on 30 June 2022 to an amount of EUR 15.5 
billion in grants, in line with Article 11(2) of the RRF 
Regulation (Regulation (EU) 2021/241). 

6 

also 

The  RRP  addresses  challenges  in  the 
labour  market,  which 
helps 
implement  the  European  Pillar  of  Social 
Rights.  As  part  of  the  set  of  milestones  and 
targets  already  met,  Portugal  completed  a 
reform 
public-private 
incentivise 
collaborative  arrangements  in  education  and 
training,  to  ensure  that  labour  market  needs 
are considered.  

to 

The RRP comprises further measures, yet 
to  be  implemented,  to  address  labour 
market  challenges,  such  as  a  reform  to 
tackle  gender  imbalances.  To  help  young 
people 
labour  market, 
into  the 
currently  available 
employment 
focuses on workers under 35 years.  

integrate 

support 

A  law  regulating  platform  work  was 
approved  at  the  beginning  of  2023  to 
address  the  new  challenges  created  by 
atypical labour relations.  

Lastly,  to  boost  access  to  the  labour 
market,  the  RRP  includes  measures  to 
strengthen 
adult 
participation 
learning.  

in 

The  RRP  provides  clear  answers  to 
several  socio-economic  challenges. 
It 
includes  reforms  and  investment  to  supply 
more  targeted  social  services.  Portugal  is 
upgrading and expanding its infrastructure for 

 
 
                                                 
social care services, benefitting groups such as 
children, the elderly and those with disabilities.  

Improving education and skills 

It  also  combats  poverty  and  social 
to 
through  action 
exclusion 
specific needs in the most disadvantaged 
communities in the Metropolitan areas of 
Lisbon and Porto. 

linked 

The  RRP  includes  action  that  aims  to 
make  housing  more  affordable.  The 
proportion  of 
the  Portuguese  population 
overburdened  by  housing  costs  increased  in 
2021  and  the  provision  of  affordable  social 
housing remains low (see Annex 14).  

The  RRP  provides  EUR 2.73 billion  to 
increase  the  supply  of  permanent  and 
housing. 
temporary 
in 
Construction  work 
mainland  Portugal  and  in  the  Azores  and 
Madeira, to supply adequate housing solutions 
for the most vulnerable groups. 

is  underway,  both 

affordable 

The  RRP  also  aims  to  make  Portugal’s 
health  and  long-term  care  systems  more 
resilient.  Over  the  past  year,  as  part  of  the 
set  of  milestones  and  targets  it  has  already 
fulfilled, 
new 
management  contract  template  for  public 
managers  of  state-owned  enterprises  in  the 
health  system,  to  increase  accountability  and 
promote  performance-based  management 
practices.  

introduced 

Portugal 

a 

strengthens 

Portugal also approved the Mental Health 
decree-law,  which 
the 
response capacity of the National Health 
Service in the field of mental health and 
defines  the  principles  for  organising 
mental  healthcare  services  (see  Annex 
16).  

Finally,  as  part  of  the  Strategic  Plan  for 
the  Regional  Health  System  of  Madeira, 
Portugal  deployed  a  new  classification 
system  to  simplify  the  referral  process 
and to improve monitoring, with the goal 
regional 
of  strengthening  Madeira’s 
care 
model  of 
services.  

integrated  ongoing 

progress 

in  most 

The  RRP  is  expected  to  further  improve 
education  outcomes  for  all.  Portugal  is 
making 
education 
performance 
(see  Annex  15). 
However, the level of progress differs between 
the  regions,  and  socio-economic  background 
still  plays  a  significant 
in  pupils’ 
performance.  

indicators 

role 

The  RRP  includes  measures  to  help  the 
digital  transition  in  education.  As  part  of 
the  set  of  milestones  and  targets  that  have 
already been met, 600 000 laptops have been 
procured and are being distributed to teachers 
and  pupils  in  public  schools.  Online  courses 
and  digital  manuals  are  also  currently  being 
deployed in Azores and Madeira. 

is 

introducing 

Portugal 
ambitious 
measures to address the overall low skill 
level  of  its  adult  population.  Despite 
progress,  Portugal  still  has  a  significant  skills 
deficit  relative  to  the  EU  (see  Annex  14).  As 
part of the set of milestones and targets it has 
already  fulfilled,  Portugal  approved  a  law  on 
creating special competitions for admission to 
higher  education  after  completing  vocational 
secondary education.  

legal 

Moreover,  a  new 
framework 
governing  the  cooperation  of  higher 
public 
education 
administrations  and  businesses  was 
approved.  

institutions  with 

These  reforms  are  expected  to  adapt 
education  and  training  to  the  changing 
needs of the labour market and the green 
and digital transitions.  

As part of a comprehensive reform of its 
vocational education and training system, 
Portugal  also  reviewed  the  training 
content 
the  National 
Qualifications Catalogue.  

included 

in 

The RRP also includes targeted measures 
in  early  implementation  stage  to  tackle 

7 

 
the  digital  skills  gap  for  various  social 
and age groups, including civil servants.  

Boosting competitiveness and 
innovation 

The RRP also tackles shortcomings in the 
business  environment.  Heavy  business 
regulations  and  judicial  inefficiencies,  notably 
enforcement 
for 
proceedings,  have  been  major  obstacles  to 
investment (see Annex 13).  

insolvency 

civil 

and 

late 
relatively  high  share  of 
The 
payments,  although  on  a  declining  trend, 
also remains a concern.  

RRP  reforms  aim  at  upgrading  the 
insolvency  framework and  increasing the 
efficiency of courts. These reforms are due 
between  2023  and  2025  but  Portugal  has 
already  taken  initial  steps.  The  RRP  also 
includes  a 
the  self-regulated 
professions, which is currently under way. The 
main  objective  is  to  lower  restrictions  in  the 
access  and  exercise  of  these  professions, 
reduce the list of reserved activities and allow 
multidisciplinary  business  services  firms  to 
operate.  

reform  of 

The  RRP  also 
includes  measures  to 
contribute  to  structural  improvements 
late  payments  by  public 
related  to 
buyers,  and  the  removal  of  barriers  to 
licensing.  Access  to  equity  finance  and 
venture  capital  is  still  limited,  especially  for 
small  and  medium  firms.  To  promote  equity 
investment,  the  National  Promotional  Bank 
(Banco 
Fomento)  was 
recapitalised  with  EUR  250  million.  In  2022 it 
also set up two capitalisation funds to allocate 
EUR  1.43  billion  to  companies  in  equity  and 
quasi-equity. 

Português 

de 

long-standing issue, the RRP includes sizeable 
measures 
R&I 
projects.  

public-private 

promoting 

Among  them  is  the  creation  of  new 
collaborative  laboratories,  as  nine  new 
entities  were  awarded  with  this  title  in 
2021.  It  also  includes  the  expansion  of 
technology  centres  and  the  setting  up  of 
business-academia  consortia,  referred  to  as 
“mobilising 
recently 
selected 53 of these agendas (10 of which are 
supported by  the  RRP),  covering  a  wide  range 
of fields, for a total investment of over EUR 3 
billion.  

agendas”. 

Portugal 

Further RRP measures include the review 
of  the  2018-30 
Innovation  Strategy, 
concluded  in  2021,  as  well  as  reforms 
and  investment  to  be  implemented  in 
sectoral R&I systems such as agriculture, 
the bioeconomy and the blue economy. 

The  RRP  aims  to  accelerate  the  digital 
transition of the Portuguese economy and 
society.  Portugal  is  a  medium  performer  in 
the  digital  area,  with  above  average 
performance in fixed digital infrastructure and 
use of Artificial Intelligence by enterprises (see 
Annex  10).  Digitalisation  among  local  small 
and medium firms is low. As part of the set of 
milestones and targets it has already fulfilled, 
Portugal  implemented  measures  to  further 
digitalise  public  services  such  as  developing 
the  land  registry,  and  other  Justice  services, 
including 
mobile 
communications  for  civil  servants,  the  online 
pre-filling  of  tax  forms  and  the  selection  of 
Digital  Innovation  Hubs.  Portugal  also  started 
learning  and 
the  digitalisation  of  adult 
education, 
public 
administrations and businesses.  

institutions, 

cultural 

courts, 

secure 

Reinforcing fiscal sustainability 

Research  and  innovation  are  expected  to 
be  improved  by  the  implementation  of 
the  RRP.  Portugal  classifies  as  a  “moderate 
innovator” (see Annex 11), as its research and 
development intensity, albeit improving, is still 
well  below  the  EU  average.  To  address  this 

A  stronger  budgetary  framework  will 
underpin the recovery. As part of the set of 
milestones and targets it has already fulfilled, 
Portugal  implemented  an  online  pre-filling 
option  for  the  municipal  immovable  property 

8 

 
(‘Imposto  Municipal  sobre 
tax  declaration 
Imóveis’). The RRP also includes decisive steps 
towards  implementing  the  2015  Budgetary 
Framework Law. Some of these measures are 
currently underway, such as: 

  the  secondary  legislation  regulating  the 
specific  revenue  and  expenditure  items  to 
be  included  in  the  budget  of  the  State 
Accounting Entity; 

1.  the  adoption  of  a  model  to  monitor 

budgetary and financial execution; 

  the  adoption  of  new  procurement  models 
for the central public procurement system.  

In  addition,  the  RRP  includes  measures 
that  aim  to  upgrade  the  information 
systems for public financial management 
and  real  estate  taxation,  a  measure  yet 
to be implemented.  

to 

the 

financial 
improve 
Measures 
performance  of  state-owned  enterprises 
are being taken. The RRP includes measures 
to swiftly identify and correct deviations from 
increase 
budgets, 
the 
transparency  and  strengthen  monitoring  and 
governance.  

approved 

to 

incentives 

A new management contract, anchored in 
for 
performance-oriented 
public  managers,  was  adopted 
in 
December  2021,  alongside 
the  one 
adopted  in  June  2022  for  the  public 
management  of  state-owned  enterprises 
in  the  national  health  service.  Other 
measures are also being implemented, such as 
the adoption of a new model to report on and 
analyse the financial situation of state-owned 
enterprises.  

Supporting the green transition 

energy 

production 

Renewable 
is 
progressing. As part of the set of milestones 
and  targets  it  has  already  fulfilled,  Portugal 
introduced  important  legislative  amendments 
to  set  up  the  conditions  for  hydrogen  and 

other  renewable gases  to be  injected into  the 
grid,  to  promote  the  gradual  introduction  of 
renewable hydrogen.  

Portugal  also  launched  two  calls  for) 
supporting  private  projects  to  produce 
hydrogen  and  other  renewable  gases. 
Other measures in the Autonomous Regions of 
in 
the  Azores  and  Madeira  will 
renewables  and  storage  solutions  and  will 
revamp the electricity grid. 

invest 

Measures addressing the decarbonisation 
of  the  economy  are  in  their  first  stages. 
The  RRP  contributes 
to  climate  change 
objectives  through  various  measures  (38%  of 
the  total  allocation).  As  part  of  the  set  of 
milestones  and  targets  Portugal  has  already 
fulfilled,  Porto  Metro  signed  the  contract  for 
the  construction  of  a  Rapid  Bus  Transit  line, 
which  will  operate  zero-emission  buses  to 
promote sustainable public transport.  

Other  measures,  including  the  expansion 
of  the  metro  in  of  Lisbon  and  Porto  are 
currently  under  way,  with  the  related 
contracts having been signed.  

The  RRP  also 
includes  reforms  and 
investment  to  support  decarbonisation 
and  circular  economy 
industries. 
Tenders  to  support  at  least  300  projects  for 
the  decarbonisation  of  industrial  processes 
have been launched. Projects for improving the 
circular  economy  and  bioeconomy  in  textile, 
shoe and resin production have been selected.   

in 

Furthermore,  adaptation  measures  in the 
field  of  water  efficiency  and  landscape 
management  are  included  in  the  RRP,  to 
help Portugal better deal with the current 
and future impacts of climate change.  

supports 

also 
in 

sizeable 
The 
RRP 
investment 
the  energy-efficiency 
renovation of buildings. Financing contracts 
for the renovation of some care facilities have 
already been awarded.  

9 

 
Box 2: 

Box on key deliverables in 2023-24 

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

 

 

Reform of the self-regulated professions 

Entry into force of the law regulating platform work 

  14 100 new or renovated vocational training stations 

 

 

Special lanes for zero emission buses in Porto and 145 zero emission buses 

Strengthening of the legal framework for developing the capital market 

  Capitalisation support for Portuguese businesses (EUR 1.3 billion) 

  12 000 small and medium firms supported by digital commerce accelerators 

  3 000 dwellings for social housing and 12 500 student accommodation places 

  Digitalisation measures in schools 

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

  830 000 m2 of energy-efficiency renovation for private residential buildings 

 

 

Entry into force of the revised legal framework for insolvency and recovery 

Telemedicine appointments in the Azores’ regional health service 

  Digital information platform for people with disabilities 

  5 200 electric vehicle recharging points 

  Modernisation and simplification of the national central public procurement system 

10 

 
 
 
 
Member States. This translates into increasing 
pension  expenditure  over  the  medium-term. 
Past  reforms  of  Portugal’s  pension  system 
helped  strengthen  its  sustainability  over  the 
long term. However, the current rules on early 
retirement,  which  have  been  consecutively 
broadened  since  2017,  and  the  recurrent 
discretionary 
in  pensions,  are 
expected  to  have  a lasting  negative  effect  on 
Portugal’s public finances.  

increases 

Graph 3.1: Population pyramids for Portugal in 
2022, 2037 and 2070 

FURTHER PRIORITIES AHEAD 

Beyond those tackled in the RRP, Portugal 
faces  additional  challenges.  Portugal’s 
public finances remain sensitive to shocks, and 
the  ageing  population  weighs  on  public 
spending. This also puts pressure on the social 
is  comparatively 
protection  system,  which 
inefficient  in  limiting  poverty.  The  tax  and 
social  protection  systems  are  complex  and 
impose  a  significant  administrative  burden. 
Strengthening  and  modernising  the  public 
administration is also a key priority.  

constrain 

Similarly,  the  dependency  on  fossil  fuels,  and 
the  limited  internal  electricity  grid  and  energy 
interconnections 
Portugal’s 
competitive  position  in  the  green  transition. 
Furthermore,  Portugal  is  still  lagging  on  the 
circular economy, a key aspect for sustainable 
growth.  Addressing  these  challenges  will  also 
help to make further progress in achieving the 
SDGs,  where  Portugal  currently  shows  room 
for further improvement, namely in areas such 
as innovation (SDG 9), sustainable cities (SDG 
11),  responsible  consumption  and  production 
(SDG 12) and inequalities (SDG 10). 

Ensuring the sustainability of 
public finances and the efficiency 
of the public sector as the 
population ages 

Demographic ageing poses a challenge to 
Portugal’s  public  finances.  Ageing-related 
expenditure  on  pensions  and  health  is  set  to 
become  a  decisive  factor  for  Portugal’s  fiscal 
sustainability  (see  Annex  21).  An  increasingly 
ageing  population,  low  fertility  rate,  shrinking 
net migration and working-age population (see 
Graph  3.1)  are  expected  to  nearly  double 
Portugal’s  old-age  dependency 
(the 
proportion  of  recipients  to  contributors  in  the 
pension  system)  by  2050.  Estimates  suggest 
this could reach 62.8%, the highest among EU 

ratio 

(1) Age group as a share of total population 
Source: Eurostat 

increase  further 

The  Portuguese  tax  system  is  complex 
and  not  sufficiently  transparent.  Tax 
expenditures  reached  6.4%  of  GDP  in  2022 
and  are  expected  to 
in 
2023 (8).  Their  economic  efficiency  would 
benefit  from  being  regularly  monitored  and 
assessed (9). For direct taxation, pre-payments 
are  often  above  taxpayers’  final  annual  tax 
obligation,  resulting  in  increasing  costs  for 
taxpayers.  The  structure  of  corporate  income 
tax,  compounded  by  state  and  municipal 

(8)  ‘Analysis of the Draft State Budget for 2023’, Public 

Finance Council, October 2022 

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

11 

0-45-910-1415-1920-2425-2930-3435-3940-4445-4950-5455-5960-6465-6970-7475-7980-8485-8990+543210123452022 (men)2022 (women)2037 (men)2037 (women)2070 (men)2070 (women) 
 
  
                                                 
surcharges,  creates  an  additional  burden  for 
the tax administration and businesses.  

ensuring  an  effective  wage  setting,  remain 
key.  

improvements, 

justice 
Despite  some 
the 
in  its 
system  still  experiences  challenges 
efficiency, especially in the number of pending 
administrative cases and disposition time.  

Ensuring adequate social 
protection 

The recent rise in poverty levels points to 
persisting limitations in the adequacy and 
coverage of the social protection system. 
The  share  of  people  at  risk  of  poverty  and 
social  exclusion  increased  to  22.4%  in  2021 
(see  Graph  3.2),  in  contrast  to  the  general 
in  the  EU.  This 
stability  of  this  metric 
challenges  Portugal’s  capacity  to  achieve  its 
2030 national poverty reduction target.  

The  capacity  of  social  transfers  (excluding 
pensions)  to  alleviate  poverty  is  limited  (see 
Annex  14).  Moreover,  future  higher  pension 
and  health  expenditure  caused  by  the  ageing 
population  is  putting  the  social  protection 
system under pressure.  

Inflation  and  the  rise  of  mortgage  interest 
rates  in  2022  put  an  additional  burden  on 
families and, at 35% of the poverty threshold, 
the adequacy of the minimum income remains 
low.  

The  social  protection  system  and  the  wide 
range  of  social  benefits  need  to  be  further 
simplified  and  optimised  to  improve  their 
effectiveness, adequacy, and coverage.  

While  the  law  regulating  platform  work  will 
help (see Section 2), gaps remain in access to 
social  protection  for  some  categories  of 
workers.  

Strengthening  the  efficiency  of  Portugal’s  tax 
administration  remains  key  to  encouraging 
voluntary compliance, while helping reduce tax 
evasion and fraud and improving the business 
environment.  

Portugal’s administrative cost of tax collection 
increased  in  recent  years  and  the  time  taken 
to pay taxes in Portugal appears longer than in 
its  EU  peers.  Outstanding  tax  arrears  have 
increased  (see  Annex  19)  and  are  well  above 
the EU average.  

First  steps  have  been  taken  to  address  some 
of  these  shortcomings  in  the  Portuguese  tax 
system (10).  

the 

performance 

and 
Improving 
attractiveness  of  public  administration 
remains  key.  The  number  of  public  sector 
workers has been steadily increasing in recent 
years, reaching a peak in Q4 2022. This in turn 
exerts  pressure  on  Portugal’s  public  finances. 
In this context, in view of an ageing population 
the  demand  for  administrative  public  services 
is expected to increase, notably in the areas of 
health  and  long-term  care.  Worker  shortages 
in  these  areas  are  already  apparent  (see 
Annex 16).  

in 

The  share  of  employees 
the  public 
administration  with  higher  education  remains 
well below the EU average. At the same time, 
Portugal’s public administration is ageing (see 
Annex  13),  challenging  the  sustainability  and 
accessibility 
to  public  services  such  as 
education  (Annex  15),  health  and  long-term 
care  (Annex  16).  Moreover,  staff  retention  in 
strategic  sectors  (notably  in  health  and  long-
term  care),  where  the  government  competes 
with private employers, remains difficult.  

Structural  measures  to  improve  the  efficiency 
of the Portuguese public administration, while 

(10)  On 29 September 2022, the government approved a 
draft Law aimed at reducing the number of tax 
benefits, but not including a regular review process. In 
addition, a new system for direct tax withholdings will 
apply as of July 2023 aimed at reducing the problem of 
often too high pre-payments. 

12 

 
                                                 
Graph 3.2: Poverty (AROP) and inequalities 
(GINI) 2011-21 (%) 

Source: Eurostat, EU-SILC 

of 

the 

effect 

energy 

positive 

Although 

The rise in energy prices affects the most 
vulnerable. 
poverty 
indicators have improved in recent years, they 
remain  among  the  highest  in  the  EU.  Despite 
the 
‘Iberian 
mechanism’ (11)  on  energy  prices,  over  one  in 
three  poor  households  experience  energy 
poverty and more than 16% of the population 
were  unable  to  keep  their  homes  adequately 
warm  in  2021  (Annex  8).  Energy-efficiency 
programmes  in  Portugal  are  still  not  targeted 
enough. The ‘Vale Eficiência’ programme in the 
RRP (12) has so far seen low take-up. 

Strengthening environmental 
sustainability and resilience 

Portugal  needs  to  improve  its  circular 
economy  and  waste  management.  The 
average  municipal  recycling  rate  increased  in 
2021 but remains low at only 30%, far below 
the  EU  average,  and  with  major  regional 
disparities. The percentage of municipal waste 

(11)  The implementation of the ‘Iberian mechanism’ (a cap 
on the price of gas used for electricity generation) has 
cut prices by around 20% in the first seven months of 
its application (see Annex 7). However, while helping to 
curtail the increase in wholesale electricity prices, this 
exception also reduced incentives to reduce gas 
consumption in the electricity generation sector. 

(12)  Energy efficiency voucher programme aiming to provide 
100 000 energy efficiency vouchers to vulnerable 
families. 

that  is  still  landfilled  is  more  than  double  of 
the  EU  average.  Furthermore,  the  circular 
material  use  rate  (proportion  of  material 
recycled and fed back into the economy) is one 
in  the  EU  and  has  not 
of  the 
significantly increased since 2015.  

lowest 

The  Portuguese 
industry  also  uses  more 
materials  for  its  production  than  the  EU 
average  with  a  resource  productivity  of  1.4 
purchasing power standard per kilogramme vs 
2.3  for  the  EU  in  2021  (Annex  9).  While  the 
RRP  as  well  as  Cohesion  policy  programmes 
include some relevant measures for industries 
(see  Section  2),  significant  improvements  in 
waste  management  and  the  circular  economy 
in  Portugal  are  necessary  (see  Annex  9).  The 
recently  adopted  national  waste  management 
plan, as well as the new water and wastewater 
strategic  plan 
to  be  adopted,  will  be 
instrumental in this regard 

Portugal  is  facing  more  frequent  and 
intense natural hazards. Heat waves, major 
rural  fires  and  unpredictable  extreme  local 
natural  phenomena  affect  agriculture  and 
forestry,  biodiversity, 
the  energy  sector, 
buildings, tourism and health.  

Between  1980  and  2020,  only  around  4%  of 
disaster  losses  were  insured  for  in  Portugal. 
The  rest  of  losses  covered  by  the  country’s 
own  economic  resources (13).  Going  forward, 
particularly 
these 
wildfires, 
to 
risk 
Portugal’s public finances (14). 

represent  a 

phenomena, 

relevant 

natural 

the  RRP 

and  Cohesion 

While 
policy 
programmes  include  some  investment  aimed 
at improving the prevention of and response to 
wildfires, the consequences of climate change, 
especially  wildfires,  threaten  human  life  and 
pose  a  risk  to  public  finances,  especially  if 
insurance  coverage  remains  low.  Emergency 
support linked to the provision of assistance to 

(13)  D. Radu (2022) ‘Disaster Risk Financing – Limiting the 
Fiscal Cost of Climate-Related Disasters’, European 
Commission, Discussion Paper 174, November 2022 

(14)  Based on the climate protection gap. Please note that 
the  indicator does not provide information on the split 
private/public cost of climate related disasters 
(European Insurance and Occupational Pensions 
Authority (EIOPA)) 

13 

25272931333515171921232520112012201320142015201620172018201920202021AROP - EUAROP - PTGINI- EU (right axis)GINI - PT (right axis) 
  
                                                 
                                                 
investment  to  ensure  the 
households  or 
replacement  of  damaged  infrastructure  result 
in additional public spending.  

Wildfires also hamper the ability of Portugal’s 
forests to act as a carbon sink (see Annex 6).  

Despite recent progress and some measures in 
the  RRP  to  increase  the  resilience  of  water 
resources  in  Algarve  and  Madeira,  challenges 
remain  in  water  management,  especially  in 
terms of governance, water body rehabilitation 
and water efficiency.  

Portugal  would  benefit  from  improved  water 
policies,  notably  wastewater  collection  and 
treatment,  reducing  leaks,  improving  water 
supply and monitoring and introducing nature-
based  water  management  solutions. 
In 
addition,  Portugal  has  potential  to  increase 
water reuse.  

Ensuring energy security 

Portugal  is  well  on  track  to  decarbonise 
its energy system but remains dependent 
on  imported  fossil  fuels.  The  REPowerEU 
Initiative  offers  Portugal  a  unique  opportunity 
to  scale  up  and  support  energy-related 
measures,  to  make  further  progress  on  its 
decarbonisation  objectives.  Portugal  has 
increased  its  share  of  renewable  energy  in 
recent  years.  Portugal  has  one  of  the  most 
in  the  EU, 
decarbonised  energy  systems 
getting  close  to  its  renewable  energy  target 
for 2030 (15).  

Imports  of  fossil  fuels  from  Russia  are 
negligible  and  Portugal’s  gas  needs  are 
covered by  liquified  natural  gas  from the  U.S. 
and  Nigeria.  Portugal  fulfilled  its  gas  storage 
obligations last winter, reaching 98%. Portugal 
also  reached  the  15%  target  of  gas  demand 
reduction 
(see  Annex  7)  and  continuous 
efforts, on the basis of structural measures to 

decrease gas demand, will help to prepare for 
next winter and stabilise energy prices.  

However, Portugal’s current energy mix is still 
mostly  based  on  imported  fossil  fuels.  Oil 
dependency  is  particularly  high  in  transport, 
despite  a  sharp  increase  in  zero-emission 
vehicles  and  recharging  stations.  The  reliance 
on  gas  in  the  electricity  sector  poses  risks  in 
terms  of  security  of  supply,  especially 
considering  the  more  frequent  droughts  in 
recent  years,  which  have  been  causing  a 
shortfall  of  hydro-electric  power  in  recent 
years.  

energy 

efficiency 

Further 
and 
decarbonisation  measures  would  reduce 
Portugal’s  reliance  on  fossil  fuels.  Energy 
consumption  in  the  residential  building  sector 
has  been  growing  in  the  last  10  years  (see 
Graph 3.3.), mainly due to poor heat-retention 
by  the  buildings,  inefficient  energy  systems 
and an overall lack of maintenance.  

include 

While  both  the  RRP  and  Cohesion  policy 
programmes 
renovation 
measures,  Portugal  would  need  to  invest 
EUR 4.95  billion  per  year  until  2050  to  fully 
transform its building stock (16).  

sizeable 

The  lack  of  financing  schemes  to  leverage 
private  investment  is  a  major  impediment  for 
energy  efficiency  renovations  and  leads  to  a 
significant  investment  gap.  The  lack  of  skilled 
workers  for  renovations  is  another  point  of 
concern (see below).  

The  shift  towards  the  decarbonisation  of 
transport  is  underway.  However,  prioritising 
public  transport  would  help  with  heavy  traffic 
in  major  metropolitan  areas.  Completing  the 
TEN-T  high-speed  core  would  also  reduce 
transport’s reliance on fossil fuels.  

(15)  Renewables in gross final energy consumption should 
reach 47% by 2030 under the current NECP, while the 
share of renewables in power generation should reach 
80%. Recently, Portugal has announced its ambition to 
bring the 80% target forward to 2026.  

(16)  National Long-term Renovation Strategy (ELPRE), 

February 2021. 76% of the investment needs concern 
residential buildings. 

14 

 
                                                 
                                                 
Graph 3.3: Energy consumption in key sectors 
2012-21 (2012 = base year) 

The  number  of  self-consumption  projects  and 
communities 
renewable 
remains 
energy 
low (18)  and  there 
is  scope  to  facilitate 
licensing,  create  one-stop-shops  and  prioritise 
access  to  the  grid  for  such  projects.  In 
addition,  the  share  of  smart  meters  in  the 
country is relatively low (see Annex 7). 

While  the  development  of  renewable 
hydrogen  is  quite  advanced,  biomethane 
is  lagging.  Portugal  is  already  among  the 
EU’s  front-runners 
in  renewable  hydrogen 
to 
development,  which 
reaching  its  decarbonisation  goals,  and  plans 
to invest in renewable hydrogen infrastructure, 
notably 
renewable 
hydrogen.  However,  there  is  still  scope  to 
further  upscale  its  biomethane  production, 
given  its  potential.  Here  a  clear  funding  and 
incentives plan is needed (see Annex 7).  

to  export  and 

fundamental 

trade 

is 

The status of the electricity grid and low 
level of interconnections are still limiting 
factors  on  renewables  development.  The 
level  of  electricity  interconnection  between 
Portugal  and  Spain  in  2022  was  around 
10.9%. The national target for 2030 stands at 
15%.  

the 

additional 

increasing 

infrastructure 

interconnection 

The  REPowerEU  Communication (19)  stresses 
that 
level 
between Portugal and Spain is critical (20). The 
status of the electricity grid could be improved 
by 
investment, 
including  in  batteries,  pumped  hydropower 
storage  and  internal  grid  reinforcement  such 
as  the  Pedralva  and  Sobrado  ‘projects  of 
common interest’. This, in turn, would increase 
the  flexibility  of  the  electricity  system  and 
facilitate  the  integration  of  more  renewable 
energy  sources  into  the  grid.  The  Portuguese 
RRP  does  not  include  grid  investment  on  the 

(18)  According to the Ministry of Environment, there are only 
four operational renewable energy communities in 
Portugal, with 372 pending applications: Portugal ainda 
não chegou a uma mão-cheia de comunidades de 
energia renovável | Energia | PÚBLICO (publico.pt) 

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

(20)  In October 2022, the heads of state and government of 
France, Spain and Portugal proposed a Green Energy 
Corridor, which envisages the completion of future 
interconnections between the three countries and the 
development of energy storage projects. 

Source: Eurostat 

Strengthening Portugal’s 
competitive position in the green 
transition 

Portugal  set  itself  ambitious  goals  for 
deploying  renewable  energy.  Portugal  still 
has  under-exploited  potential  for  offshore 
wind  energy  and  solar  energy  (particularly 
decentralised  solutions  such  as 
rooftop 
installations).  Beyond  the  measures  already 
included  in  the  RRP  and  Cohesion  policy 
programmes,  Portugal  has  announced  the 
preparation  of  a  10  GW  auction  for  offshore 
wind  planned  for  2023  and  plans  to  have  9 
GW  of  installed  solar  capacity  by  2026, 
compared  to  the  2.6  GW  at  the  end  of  2022. 
Considering  its  goal,  Portugal  has  to  increase 
its  capacity  by  around  1.5  GW  per  year,  from 
the beginning of this year until 2026.  

processes 

taken  measures  aimed  at 
It  has  also 
streamlining 
for 
permitting 
renewable  energy  production (17).  However, 
obstacles  remain 
issuing 
production 
installing  and 
connecting  plants  to  the  electric  grid,  notably 
regarding  spatial  planning  and  digitalisation; 
and  the  number  of  permits  necessary  and 
bodies involved is large.  

in  Portugal  for 

licences  and 

(17)  As part of the ‘Simplex’ programme, Portugal modified 
its rules for developing hydrogen and renewable energy 
projects. 

15 

90951001051101151201251302012201320142015201620172018201920202021Industry sectorTransportCommercial and public servicesHouseholds 
  
                                                 
                                                 
mainland.  The  Cohesion  policy  programmes 
will support energy storage systems and their 
integration  into  the  transmission  network  but 
do  not  include  a  specific  target  for  cross-
border interconnections. 

Portugal  has  untapped  manufacturing 
potential in the cleantech industry.  

Portugal 
is  highly  dependent  on  non-EU 
countries  for  cleantech  that  is  key  to  the 
deployment  of  renewables  and  this  heavy 
reliance on foreign technology may undermine 
the  country’s  competitiveness  in  the  green 
in 
transition.  Despite  of 
manufacturing 
blades, 
equipment 
generators,  and  nacelles  for  wind  turbines, 
skilled  labour  shortages  and  a  low  level  of 
private  investment  in  electrical  equipment 
manufacturing  and  R&D 
inhibit  cleantech 
chain 
development  and 
bottlenecks  also  limit  production  potential, 
with  one 
third  of  electrical  equipment 
manufacturers currently reporting shortages.  

its  potential 
like 

rollout.  Supply 

In  the  context  of  the  green  transition, 
labour  shortages  in  key  sectors  have 
increased  in  recent  years.  Shortages  are 
linked  to  a lack  of  relevant  skills.  They  create 
bottlenecks  in  the  transition  to  a  net-zero 
economy.  In  2022,  labour  shortages  were 
reported  in  Portugal  for  22  occupations  that 
required  specific  skills  or  knowledge  for  the 
green transition, including building and related 
electricians, 
and 
fitters (21).  The  job  vacancy  rate  increased 
across key sectors, such as construction (from 
0.4% 
in  2021)  and 
to  1% 
manufacturing (from 0.5% in 2015 to 0.9% in 
2021),  with  both  sectors  standing  below  the 

electrical  mechanics 

in  2015 

(21)  Data on shortages is based on European Labour 

Authority (2023), EURES Report on labour shortages and 
surpluses 2022. National authorities report via a 
questionnaire, based on administrative data and other 
sources as submitted by the EURES National 
Coordination Offices (definitions of shortages differ, 
thus data is not comparable across countries and 
covers a wide variety of sectors).  
Skills and knowledge requirements are based on the 
ESCO (European Skills Competences and Occupations) 
taxonomy on skills for the green transition (for 
occupations at ISCO 4-digit level, of which there are 
436 in total). Examples are identified based on their 
ESCO “greenness” score and relevant sectors. 

16 

EU average of 3.6% and 1.9%, respectively, in 
2021 (22).  

In 2022, labour shortages were reported as a 
factor  constraining  production  in  industry  for 
11.5% of firms and construction for 31.4% of 
firms (23). Upskilling and reskilling for the green 
transition,  including  for  people  most  affected, 
and  promoting  inclusive  labour  markets,  are 
essential  policy 
levers  to  accelerate  the 
transition to net zero and ensure it is fair (see 
Annex 8). 

Improving productivity and the 
business environment  

its  business  environment 

Over 
the  past  decade,  productivity 
growth in Portugal has been low and the 
productivity  gap  to  the  EU  average  has 
been widening (24). Portugal faces challenges 
(see 
regarding 
chapter  2)  and  productivity.  R&D  business 
investment  remains  low  (see  Annex  11)  and 
varies greatly between regions (see Annex 17). 
Limited  access  to  finance  for  small  and 
medium firms, as well as long payment delays 
in  business-to-business  transactions,  are  a 
challenge  for  businesses,  especially  smaller 
ones.  

like  civil  engineers, 

Restrictions  remain  in  place  for  regulated 
professions 
lawyers, 
accountants, architects, and tourist guides (see 
Annex  12).  Administrative  and  regulatory 
burdens  for  businesses  remain  an  obstacle 
due  to  complex  licensing  requirements  and 
challenges  to  the  efficiency  of  the  justice 
system.  

Skills  gaps  and  shortages  of  skilled  workers 
in 
also  remain  a  barrier  to 
Portugal.  

investment 

(22)  Eurostat (JVS_A_RATE_R2) 

(23)  European Business and Consumer Survey 

(24)  Labour productivity (GDP per hour worked in PPP) 

regressed from 80% of the EU average in 2011 to 73% 
in 2021. 

 
                                                 
                                                 
As  Portugal  is  well  integrated  into  the  single 
market,  trade  with  other  EU  Member  States 
accounts for roughly 70% of all trade in goods 
and services and has continued rising over the 
past five years. However, opening up regulated 
in  public 
professions  and 
procurement  would  help  untap 
the  full 
potential of the single market.  

improvements 

17 

 
 
KEY FINDINGS 

Portugal’s  Recovery  and  Resilience  Plan 
includes measures to address a series of 
the country’s structural challenges by:  

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

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

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

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

  supporting 

the  green 

by 
developing  renewables,  making  energy-
efficiency  renovations  and  decarbonising 
industries; 

transition 

  improving 

the  business 

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

improving 

services, 

and 

Portugal should accelerate the implementation 
of  its  recovery  and  resilience  plan,  also  by 
ensuring  an  adequate  administrative  capacity, 
and  swiftly  finalise  the  REPowerEU  chapter, 
its 
view 
with  a 
implementation. 

starting 

rapidly 

to 

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

  simplifying  the  tax  system,  to  reduce  the 
associated  administrative  burden  and 
improve the business environment; 

  improve  the  effectiveness  of  the  social 
protection  system  with  a  particular  focus 
on  simplifying  the  framework,  making  the 
administration  more  efficient  and  reducing 
the administrative burden;  

  improving  productivity  and  the  business 
environment  through  increased  investment 
in  innovation  and  reduced  administrative 
and regulatory burden; 

  improving  the  efficiency  and  performance 

of the public sector workforce; 

  improved  water  management 

and 
environmental  protection,  to  strengthen 
resilience  against  the  effects  of  climate 
change;  

  improved  waste  management,  to  support 

the transition to a circular economy; 

  further  reduce  dependency  on  fossil  fuels 
and  reduce  energy  consumption  in  the 
transport,  buildings  and  industry  sectors  – 
in  energy 
by  stimulating 
efficiency and clean energy sector; 

investment 

including 

  further  deployment  of  wind  and  solar 
and 
energy, 
decentralised production, and strengthening 
electricity  interconnections  and  the  electric 
grid; 

offshore 

upskilling 

  improved  level  of  green  skills  through 
targeted 
reskilling 
programmes,  to  ease  the  deployment  of 
renewable  energy  and  energy-efficiency 
measures. 

or 

18 

 
 
ANNEXES 

 
 
 
 
LIST OF ANNEXES 

Cross-cutting indicators 

A1.  Sustainable Development Goals 

A2.  Progress in the implementation of country-specific recommendations 

A3.  Recovery and resilience plan - overview 

A4.  Other EU instruments for recovery and growth 

A5.  Resilience 

Environmental sustainability 

A6.  European Green Deal 

A7.  Energy security and affordability 

A8.  Fair transition to climate neutrality 

Productivity 

A9.  Resource productivity, efficiency and circularity 

A10.  Digital transformation 

A11.  Innovation 

A12.  Industry and single market 

A13.  Public administration 

Fairness 

A14.  Employment, skills and social policy challenges in light of the European Pillar of Social Rights 

A15.  Education and training 

A16.  Health and health systems 

A17.  Economic and social performance at regional level 

Macroeconomic stability 

A18.  Key financial sector developments 

A19.  Taxation 

A20.  Table with economic and financial indicators 

A21.  Debt sustainability analysis 

A22.  Macroeconomic imbalance procedure assessment matrix 

21 

24 

24 

26 

29 

31 

33 

34 

34 

39 

44 

47 

47 

49 

51 

53 

56 

58 

58 

60 

62 

64 

66 

66 

68 

70 

71 

74 

 
 
 
LIST OF TABLES 

A2.1. 
Summary table on 2019-2022 CSRs 
A3.1. 
Key elements of the Portuguese RRP 
A5.1. 
Resilience indices summarising the situation across RDB dimensions and areas 
A6.1. 
Indicators tracking progress on the European Green Deal from a macroeconomic perspective 
A7.1. 
Key Energy Indicators 
A8.1. 
Key indicators for a fair transition in Portugal 
A9.1. 
Overall and systemic indicators on circularity 
A10.1.  Key Digital Decade targets monitored by DESI indicators 
A11.1.  Key innovation indicators 
A12.1. 
Industry and the Single Market 
A13.1.  Public administration indicators 
A14.1.  Social Scoreboard for Portugal 
A14.2.  Situation of Portugal on 2030 employment, skills and poverty reduction targets 
A15.1.  EU-level targets and other contextual indicators under the European Education Area strategic framework 
A16.1.  Key health indicators 
A17.1.  Selected indicators at regional level 
A18.1.  Financial soundness indicators 
A19.1.  Taxation indicators 
A20.1.  Key economic and financial indicators 
A21.1.  Debt sustainability analysis - Portugal 
A21.2.  Heat map of fiscal sustainability risks - Portugal 
A22.1.  Assessment of macroeconomic imbalances matrix 

LIST OF GRAPHS 

Progress towards the SDGs in Portugal in the last 5 years 
Portugal’s progress on the 2019-2022 CSRs (2023 European Semester) 
Disbursements per pillar 
Total grants disbursed under the RRF 
Total loans disbursed under the RRF 
Fulfilment status of milestones and targets 
Cohesion policy funds 2021-2027 in Portugal: budget by fund 
Synergies between Cohesion policy funds and RRF pillars in Portugal 
Cohesion policy funds contribution to the SDGs in 2014-2020 and 2021-2027 in Portugal 
Thematic – greenhouse gas emissions from the effort sharing sectors in Mt CO2eq, 2005-2021 
Energy mix (top) and Electricity mix (bottom), 2021 
Thematic – environmental investment needs and current investment, p.a. 2014-2020 
Underground storage levels in Portugal 
Share of gas Consumption per sector, 2021 
Portugal´s energy retail energy prices for industry (top) and households (bottom) 
Private R&I investment in Energy Union R&I priorities - Portugal 
Fair transition challenges in Portugal 
Distributional impacts of energy prices due to rising energy expenditure (2021-2023) 
Trend in material use 
Treatment of municipal waste 

A1.1. 
A2.1. 
A3.2. 
A3.1. 
A3.3. 
A3.4. 
A4.1. 
A4.2. 
A4.3. 
A6.1. 
A6.2. 
A6.3. 
A7.1. 
A7.2. 
A7.3. 
A7.4. 
A8.1. 
A8.2. 
A9.1. 
A9.2. 
A11.1.  R&D intensity in 2021 
A12.1.  Labour productivity per person employed and hour worked in PPS (EU = 100) 
A12.2.  Business environment and productivity drivers 
A12.3.  Employment in technology and knowledge-intensive sectors 
A13.1.  Portugal. a) Regulatory impact assessment, b) Stakeholder engagement and c) Ex post evaluation of legislation 
A15.1.  Underachievers in reading, maths and science (combined) by socio-economic status 
A16.1.  Life expectancy at birth, years 
A16.2.  Projected increase in public expenditure on healthcare over 2019-2070 
A17.1.  GDP per capita (2010) and GDP growth (2011-2020) - Portugal 
A17.2.  Labour productivity (real GVA per worker), EU-27 and Portugal, 2000-2020 
A18.1.  Banks' NPL ratio 

22 

27 
29 
33 
34 
39 
44 
48 
50 
51 
53 
57 
58 
59 
60 
62 
64 
66 
68 
70 
73 
73 
74 

25 
26 
29 
29 
30 
30 
31 
31 
32 
34 
35 
36 
39 
40 
41 
42 
44 
45 
47 
48 
51 
53 
53 
54 
57 
60 
62 
62 
64 
64 
66 

 
 
A19.1.  Tax revenues from different tax types as % of total taxation 
A19.2.  Tax wedge for single and second earners as a % of total labour costs, 2022 

69 
69 

23 

 
CROSS-CUTTING INDICATORS 
ANNEX 1: SUSTAINABLE DEVELOPMENT GOALS 

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

related 

Portugal  is  improving  overall  on  the  SDG 
environmental 
indicators 
sustainability.  It  performs  well  on  SDG  7 
(Affordable  and  clean  energy)  but  needs  to 
catch  up  with  the  EU  average  on  maritime 

to 

waters  (SDG  14)  and  sustainable  cities  (SDG 
11).  Portugal  increased  the  share  of  renewable 
energy  in  gross  final  energy  consumption  from 
30.9%  in  2016  to  34%  in  2021  (same  as  2020), 
which is high compared to the EU average (21.8% 
in 2021). The environmental impact of agriculture 
is  lower  than  the  EU  average  but  the  level  of 
nitrate  in  ground  water  is  increasing  (from  17.4 
mg  NO3  per  litre  in  2015  to  19.3  mg  in  2020). 
Eutrophication is also increasing in marine waters 
and Portugal protects less than 5% of its marime 
areas  (EU:  12%).  Circular  economy  indicators  are 
well below EU average with a low rate of recycling 
of municipal waste, which stood at 30.5% in 2021 
(against 49.6% for the EU) and a circular material 
use  rate  representing  only  one  fifth  of  the  EU 
average. The share of public transport (buses and 
trains) in total passenger transport and the use of 
rail  and  inland  waterways  in  freight  transport  are 
well below the EU average. Noise pollution is also 
an issue for 25.1% of the population (17.6% in the 
EU).  Climate  change  is  a  challenge  for  Portugal 

Graph A1.1: Progress towards the SDGs in Portugal in the last 5 years 

For detailed datasets on the various SDGs, see the annual Eurostat report ‘Sustainable development in the European Union’; for 
details on extensive country-specific data on the short-term progress of Member States: Key findings - Sustainable development 
indicators - Eurostat (europa.eu). The status of each SDG in a country is the aggregation of all the indicators for the specific goal 
compared to the EU average. A high status does not mean that a country is close to reaching a specific SDG, but signals that it is 
doing better than the EU on average. The progress score is an absolute measure based on the indicator trends over the past 5 
years. The calculation does not take into account any target values as most EU policy targets are only valid for the aggregate EU 
level. Depending on data availability for each goal, not all 17 SDGs are shown for each country. 
Source: Eurostat, latest update of early April 2023, except for the EU Labour Force Survey (LFS) indicators released on 27 April 
2023. Data mainly refer to 2016-2021 or 2017-2022. 

24 

 
 
 
 
 
 
includes  household  support  for  energy  efficiency 
renovation. 

in 

labour  market 

Portugal  is  improving  on  SDG  indicators 
related  to  productivity  but  still  needs  to 
catch  up  with  the  EU  average  regarding 
innovation  and  industry  (SDG  9).  Basic  digital 
skills  among  the  adult  population  are  progressing 
(55.3%  in  2021)  and  are  on  par  with  the  EU 
average.  The  Portuguese 
is 
performing  relatively  well  compared  with  the  EU 
average,  with  a  high  employment  rate  (77.5%  in 
long-term 
2022)  and  a  sharp  decrease 
unemployment  falling  to  2.7%  in  2022.  However, 
despite improving, the area of R&D and innovation 
remains  a  concern.  Only  1.69%  of  GDP  was 
allocated  to  R&D  in  2021  (EU:  2.26%).  Despite 
increasing  in  recent  years,  the  number  of  patent 
applications  submitted  to  the  European  Patent 
Office  (EPO)  per  million  inhabitants  remains  very 
low:  30  in  2022  (EU:  151).  Nevertheless,  the 
ambitious RRP measures to improve the business-
reform 
academia 
link, 
vocational  education  and 
the 
potential  to  transform  the  Portuguese  business 
sector and the R&I system. The RRP also includes 
the  lifting  of  some  restrictions  on  self-regulated 
professions. 

increase  R&D,  and 

training  have 

Portugal  is  improving  on  SDG  indicators 
related  to  macroeconomic  stability  (8,  16, 
17).  It  is  closing  its  gap  with  the  EU  in  terms  of 
the investment share of GDP with 20.3% in 2022 
(EU:  23.2%).  The  expenditure  on  law  courts  from 
central  government  is  advancing  in  line  with  the 
rest  of  the  EU.  The  share  of  the  population 
reporting  crime,  violence  or  vandalism  dropped to 
6.6%  in  2020  (EU:  10.7%).  However,  the  official 
development  assistance  reaches  only  0.18%  of 
GNI, while the public debt remains high: 113.9% of 
GDP  in  2022.  The  RRP  includes  measures  to 
modernise administrative and tax courts.  

As the SDGs form an overarching framework, any 
links  to  relevant  SDGs  are  either  explained  or 
depicted with icons in the other Annexes. 

with  a  high  water  exploitation  index,  which  stood 
at  11.4%  of  renewable  water  resources  in  2019 
(EU:  3.6%)  and  high  climate-related  economic 
losses  at  more  than  EUR 40.6  per  inhabitant  in 
2020  (EU:  33.9).  Various  measures  in  Portugal’s 
recovery and resilience plan (RRP), such as energy 
efficiency  renovations,  the  extension  of  metro 
lines, increased use of bioproducts in industry, and 
the  decarbonisation  of  industry,  aim  to  further 
contribute  to  general  greenhouse  gas  emission 
savings. 

While  Portugal  is  improving  on  most  SDG 
indicators  assessing  the  fairness  of  society 
and  the  economy,  it  is  moving  away  from 
SDG  10  on  reduced  inequalities,  and  also 
needs  to  catch  up  with  the  EU  average  on 
health  and  well-being  (SDG  3).  While  poverty 
indicators  improved  consistently  until  2020,  the 
poverty  rate  (people  at  risk  of  poverty  or  social 
exclusion) is again above the EU average in 2021 
(22.4% against 21.7% for the EU), including after 
social transfers (18.4% against 16.8% for the EU) 
or for people with a job (in-work at risk of poverty: 
11.2%  against  8.9%  for  the  EU).  The  difference 
between  cities  and  rural  areas  (urban-rural  gap) 
increased  very  significantly  and  remains  way 
above  the  EU  average.  This  is  also  the  same  for 
energy  poverty  with  16.4%  of  the  Portuguese 
population unable to keep their homes adequately 
warm  in  2021  against  6.4%  for  the  EU.  Since 
2016,  the  citizenship  gap  (difference  between  EU 
and  non-EU  nationals)  narrowed  for  the  poverty 
rate  but  increased  for  employment  and  training. 
Despite  some  improvements,  most  of  the  health 
and well-being indicators are still far from the EU 
average,  in  particular,  those  on  noise  pollution, 
road  deaths,  the  obesity  rate  and  healthy  life 
years  at  birth  (59.7  years  in  2020  against  64 
years for the EU). Education and training indicators 
are now better than the EU average. In 2021, the 
tertiary  education  attainment  rate  (population 
aged 25-34)  in Portugal increased from 34.0% in 
2017 to 44.4%, while the participation of adults in 
learning  now  stands  at  13.8%.  While  Portugal 
performs  generally  better  than  the  EU  on  gender 
equality,  particularly  on  employment,  the  gender 
pay  gap  is  still  above  10%  and  the  share  of 
women  in  government  and  parliament  has  not 
progressed  in  the  last  few  years.  The  Portuguese 
RRP  includes  far-reaching  measures  to  progress 
towards a more equal and healthy society, such as 
a reform of primary care services and investments 
in community-based social services, social housing 
and  student  accommodation.  The  RRP  also 

25 

 
 
ANNEX 2: PROGRESS IN THE IMPLEMENTATION OF COUNTRY-SPECIFIC 
RECOMMENDATIONS 

Graph A2.1: Portugal’s progress on the 2019-2022 
CSRs (2023 European Semester) 

Source: European Commission. 

The Commission has assessed the 2019-2022 
country-specific  recommendations  (CSRs) (25) 
addressed  to  Portugal  as  part  of  the 
European  Semester.  These  recommendations 
concern  a  wide  range  of  policy  areas  that  are 
related to  14  of  the  17  Sustainable Development 
Goals  (see  Annexes  1  and  3). The  assessment 
considers  the  policy  action  taken  by  Portugal  to 
date (26) and the commitments in its recovery and 
resilience  plan  (RRP) (27).  At  this  stage  of  RRP 
implementation,  68%  of  the  CSRs  focusing  on 
structural  issues  from  2019-2022  have  recorded 
at  least  ‘some  progress’,  while  32%  recorded 
‘limited  progress’  (see  Graph A2.1).  As  the  RRP  is 
implemented  further,  considerable  progress  in 
addressing structural CSRs is expected in the years 
to come. 

(25)  2022 CSRs: EUR-Lex - 32022H0901(22) - EN - EUR-Lex 

(europa.eu) 

      2021 CSRs: EUR-Lex - 32021H0729(22) - EN - EUR-Lex 

(europa.eu) 
2020 CSRs: EUR-Lex - 32020H0826(22) - EN - EUR-Lex 
(europa.eu) 
2019 CSRs: EUR-Lex - 32019H0905(22) - EN - EUR-Lex 
(europa.eu) 

(26)  Including policy action reported in the national reform 

programme and in Recovery and Resilience Facility (RRF) 
reporting (twice a year reporting on progress in implementing 
milestones and targets and resulting from the payment 
requests assessment). 

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

significant subset of the relevant country-specific 
recommendations issued by the Council in 2019 and 2020 in 
their RRPs. The CSR assessment presented here considers the 
degree of implementation of the measures included in the 
RRP and of those carried out outside of the RRP at the time 
of assessment. Measures laid down in the Annex of the 
adopted Council Implementing Decision on approving the 
assessment of the RRP, which are not yet adopted or 
implemented but considered credibly announced, in line with 
the CSR assessment methodology, warrant ‘limited progress’. 
Once implemented, these measures can lead to 
‘some/substantial progress or full implementation’, 
depending on their relevance. 

26 

Limited progress32%Some progress61%Substantial progress7% 
 
                                                 
               
 
 
 
 
Table A2.1: Summary table on 2019-2022 CSRs 

(Continued on the next page) 

27 

PortugalAssessment in May 2023*RRP coverage of CSRs until 2026**Revelant SDGs2019 CSR 1Some ProgressAchieve the medium-term budgetary objective in 2020, taking into account the allowance linked to unusual events for which a temporary deviation is granted. Use windfall gains to accelerate the reduction of the general government debt ratio.Not relevant anymoreNot applicableSDG 8, 16Improvethequalityofpublicfinancesbyprioritisinggrowth-enhancingspendingwhilestrengtheningoverallexpenditurecontrol,costefficiencyandadequatebudgeting,withafocusinparticularona durable reduction of arrears in hospitals.Limited ProgressRelevant RRP measures implemented as of 2022 and being planned as of 2022, 2023 and 2025SDG 3, 8, 16Improve the financial sustainability of State-owned enterprises, while ensuring more timely, transparent and comprehensive monitoring.Some ProgressRelevant RRP measures being implemented as of 2021 and 2022SDG 92019 CSR 2Some ProgressAdopt measures to address labour market segmentation.Some ProgressRelevant RRP measures being implemented as of 2023SDG 8Improve the skills level of the population, in particular their digital literacy, including by making adult learning more relevant to the needs of the labour market.Some ProgressRelevant RRP measures being implemented as of 2021 and 2022, and planned as of 2022,2023 and 2025SDG 4Increase the number of higher education graduates, particularly in science and information technology.Some ProgressRelevant RRP measures being implemented as of 2021 and planned as of 2022 and 2025SDG 4Improve the effectiveness and adequacy of the social safety net.Some ProgressRelevant RRP measures being implemented as of 2021and 2022 and planned for 2022, 2023 and 2024SDG 1, 2, 102019 CSR 3Some ProgressFocus investment-related economic policy on research and innovation,Some ProgressRelevant RRP measures being implemented as of 2021 and 2022 and planned for 2022SDG 9, 10, 11railway transport and port infrastructure,Limited ProgressRelevant RRP measures being planned as of 2022 and 2025SDG 10, 11low carbon and energy transition and extending energy interconnections, taking into account regional disparities.Limited ProgressRelevant RRP measures being implemented as of 2021 and planned as of 2022, 2023 and 2024SDG 7, 9, 10, 11, 132019 CSR 4Some ProgressAllow for a swifter recovery of the collateral tied to non-performing loans by increasing the efficiency of insolvency and recovery proceedings.Some ProgressRelevant RRP measures being planned as of 2023SDG 8Reducetheadministrativeandregulatoryburdenonbusinesses,mainly by reducing sector-specific barriers to licensing.Limited ProgressRelevant RRP measures being implemented as of 2021 and planned as of 2023SDG 8, 9Developaroadmaptoreducerestrictionsinhighlyregulatedprofessions.Limited ProgressRelevant RRP measures being planned as of 2022SDG 9Increasetheefficiencyofadministrativeandtaxcourts,inparticularby decreasing the length of proceedings.Some ProgressRelevant RRP measures being planned as of 2023SDG 8, 162020 CSR 1Some ProgressInlinewiththegeneralescapeclause,takeallnecessarymeasurestoeffectivelyaddressthepandemic,sustaintheeconomyandsupporttheensuingrecovery.Wheneconomicconditionsallow,pursuefiscalpoliciesaimedatachievingprudentmedium-termfiscalpositionsandensuringdebtsustainability,whileenhancinginvestment. Not relevant anymoreNot applicableSDG 8, 16Strengthen the resilience of the health system Some ProgressRelevant RRP measures being implemented as of 2021 and planned as of 2022 and 2025SDG 3and ensure equal access to quality health and long-term care. Limited ProgressRelevant RRP measures being implemented as of 2021 and planned as of 2022 and 2025SDG 3, 8, 102020 CSR 2Some ProgressSupport employment and prioritise measures to preserve jobs. Some ProgressRelevant RRP measures being planned as of  2023 SDG 8Guaranteesufficientandeffectivesocialprotectionandincomesupport. Some ProgressRelevant RRP measures being implemented as of 2021and 2022 and planned for 2022, 2023 and 2024SDG 1, 2, 10Support the use of digital technologies to ensure equal access to quality education and training Some ProgressRelevant RRP measures being implemented as of 2021 and 2022, and planned as of 2022,2023 and 2025SDG 4, 8, 10and to boost firms’ competitivenessSome ProgressRelevant RRP measures being implemented as of 2021 and 2022 and planned as of 2023 and 2025SDG 8, 9 2020 CSR 3Some ProgressImplementthetemporarymeasuresaimedatsecuringaccesstoliquidity for firms, in particular small and medium-sized enterprises. Substantial ProgressRelevant RRP measures being implemented as of 2021SDG 8, 9Front-load mature public investment projects and Some ProgressRelevant RRP measures being implemented as of 2021SDG 8, 16promote private investment to foster the economic recovery. Some ProgressRelevant RRP measures being implemented as of 2021 and planned as of 2023SDG 8, 9Focus investment on the green and digital transition, in particular on clean and and efficient production and use of energy, Some ProgressRelevant RRP measures being implemented as of 2021 and 2022 and planned as of 2023 and  2024 SDG 7, 9, 13rail infrastructure Limited ProgressRelevant RRP measures being implemented as of 2021SDG 11and innovation.Some ProgressRelevant RRP measures being implemented as of 2021 and planned as of 2022 SDG 92020 CSR 4Some ProgressIncrease the efficiency of administrative and tax courtsSome ProgressRelevant RRP measures being planned as of 2023SDG 8, 16 
 
 
  
 
Table (continued) 

Note: 
* See footnote (26). 
** RRP measures included in this table contribute to the implementation of CSRs. Nevertheless, additional measures outside the 
RRP are necessary to fully implement CSRs and address their underlying challenges. Measures indicated as ‘being implemented’ 
are only those included in the RRF payment requests assessed by the European Commission.  
Source: European Commission. 

28 

2021 CSR 1Some ProgressIn2022,usetheRecoveryandResilienceFacilitytofinanceadditionalinvestmentinsupportoftherecoverywhilepursuingaprudentfiscalpolicy.Preservenationallyfinancedinvestment.Limitthe growth of nationally financed current expenditure.Some ProgressNot applicableSDG 8, 16Wheneconomicconditionsallow,pursueafiscalpolicyaimedatachievingprudentmedium-termfiscalpositionsandensuringfiscalsustainability in the medium term.Substantial ProgressNot applicableSDG 8, 16Atthesametime,enhanceinvestmenttoboostgrowthpotential.Payparticularattentiontothecompositionofpublicfinances,bothontherevenueandexpendituresidesofthebudget,andtothequalityofbudgetarymeasures,toensureasustainableandinclusiverecovery.Prioritisesustainableandgrowth-enhancinginvestment,notably supporting the green and digital transition.Some ProgressNot applicableSDG 8, 16Giveprioritytofiscal-structuralreformsthatwillhelpprovidefinancingforpublicpolicyprioritiesandcontributetothelong-termsustainabilityofpublicfinances,includingbystrengtheningthecoverage,adequacy,andsustainabilityofhealthandsocialprotection systems for all.Some ProgressNot applicableSDG 8, 162022 CSR 1Some ProgressIn2023,ensureprudentfiscalpolicy,inparticularbylimitingthegrowthofnationallyfinancedprimarycurrentexpenditurebelowmedium-termpotentialoutputgrowth,takingintoaccountcontinuedtemporaryandtargetedsupporttohouseholdsandfirmsmostvulnerabletoenergypricehikesandtopeoplefleeingUkraine.Stand ready to adjust current spending to the evolving situation.Limited ProgressNot applicableSDG 8, 16Expandpublicinvestmentforthegreenanddigitaltransitions,andforenergysecuritytakingintoaccounttheREPowerEUinitiative,includingbymakinguseoftheRecoveryandResilienceFacilityandother Union funds.Some ProgressNot applicableSDG 8, 16Fortheperiodbeyond2023,pursueafiscalpolicyaimedatachievingprudentmedium-termfiscalpositionsandensuringcredibleandgradualdebtreductionandfiscalsustainabilityinthemediumtermthroughgradualconsolidation,investmentandreforms.Substantial ProgressNot applicableSDG 8, 16Improvetheeffectivenessofthetaxandsocialprotectionsystems,inparticularbysimplifyingbothframeworks,strengtheningtheefficiencyoftheirrespectiveadministrations,andreducingtheassociated administrative burden.Limited ProgressRelevant RRP measures being implemented as of 2022 and being planned for 2025SDG 1, 2, 8, 10, 12, 162022 CSR 2Proceedwiththeimplementationofitsrecoveryandresilienceplan,inlinewiththemilestonesandtargetsincludedintheCouncilImplementing Decision of 13 July 2021.SwiftlyfinalisethenegotiationswiththeCommissiononthe2021-2027cohesionpolicyprogrammingdocumentswithaviewtostarting their implementation.2022 CSR 3Limited ProgressEnhancetheconditionsforatransitiontowardsacirculareconomy,inparticularbyincreasingwasteprevention,recyclingandreusetodivert waste away from landfills and incinerators.Limited ProgressRelevant RRP measures being implemented as of 2021SDG 6, 12, 152022 CSR 4Some ProgressReduce overall reliance on fossil fuels,Some ProgressRelevant RRP measures being implemented as of 2021, 2022 and are being planned for 2023SDG 7, 9, 13including in the transport sector.Some ProgressRelevant RRP measures being implemented as of 2022 and are being planned for 2023SDG 11Acceleratethedeploymentofrenewablesbyupgradingelectricitytransmissionanddistributiongrids,enablinginvestmentsinelectricity storageLimited ProgressRelevant RRP measures are being planned for 2023SDG 7, 9, 13andstreamliningpermittingprocedurestoallowforfurtherdevelopmentofwind,particularlyoffshore,andsolarelectricityproduction, as well as renewable hydrogen production.Some ProgressRelevant RRP measures being implemented as of 2021SDG 7, 8, 9, 13Strengthentheincentivesframeworkforenergyefficiencyinvestments in buildings.Limited ProgressRelevant RRP measures are being planned for 2024 and 2025SDG 7Increase energy interconnections.Limited ProgressSDG 7, 9, 13RRP implementation is monitored by assessing RRP payment requests and analysing reports published twice a year on the achievement of the milestones and targets. These are to be reflected in the country reports.Progress on the cohesion policy programming documents is monitored under the EU cohesion policy. 
 
 
 
  
 
ANNEX 3: RECOVERY AND RESILIENCE PLAN - OVERVIEW 

The  Recovery  and  Resilience  Facility  (RRF)  is 
the centrepiece of the EU’s efforts to help it 
recover  from  the  COVID-19  pandemic,  speed 
up  the  twin  transition  and  strengthen 
resilience  against  future  shocks.  The  RRF 
also  contributes  to  implementation  of  the 
SDGs  and  helps  to  address  the  Country 
Specific  Recommendations  (see  Annex 2). 
its  current  recovery  and 
Portugal  submitted 
(RRP)  on  22 April 2021.  The 
resilience  plan 
on 
Commission’s 
positive 
16 June 2021 
on 
and 
Council’s 
the  way  for  disbursing 
13 July 2021  paved 
EUR 13.9  billion  in  grants  (and  EUR  2.7  bilion  in 
loans) under the RRF over the 2021-2026 period.   

assessment 

approval 

into  force  of  the  RRF 
Since  the  entry 
Regulation  and  the  assessment  of  the 
national  recovery  and  resilience  plans, 
geopolitical  and  economic  developments 
have caused major disruptions across the EU. 
In  order  to  effectively  address  these  disruptions, 
the  (adjusted)  RRF  Regulation  allows  Member 
States to amend their recovery and resilience plan 
for  a  variety  of  reasons.  In  line  with  article  11(2) 
of the RRF, the maximum financial contribution for 
Portugal was moreover updated on 30 June 2022 
to  an  amount  of  EUR  15.5  billion  in  grants.  No 
revision  was  submitted  at  the  time  of  publication 
of this country report yet. 

Portugal’s  progress  in  implementing  its  plan 
is  published  in  the  Recovery  and  Resilience 
Scoreboard (28).  The  Scoreboard  also  gives  an 
overview  of  the  progress  made  in  implementing 
the RRF as a whole, in a transparent manner. The 
graphs  below  show  the  current  state  of  play  as 
reflected on the Scoreboard. 

EUR 5.14 billion has so far been disbursed to 
Portugal  under  the  RRF.  The  Commission 
disbursed  EUR 2.1  billion  to  Portugal  in  pre-
financing on 3 August 2021, equivalent to 13% of 
the  financial  allocation.  Portugal’s  first  payment 
request  was 
the 
Commission, taking into account the opinion of the 
Economic and Financial Committee, leading to EUR 
1.2 billion being disbursed in financial support (net 
of  pre-financing)  on  9 May 2022.  The  related  20 
milestones  and 
reforms  and 
investments in the areas of health, social housing, 

positively  assessed  by 

targets  cover 

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

resilience-scoreboard/country_overview.html 

29 

innovation, 
social 
services, 
the  blue 
qualifications  and  skills, 
economy, 
gases 
bio-economy, 
(including  hydrogen),  public  finances  and  public 
administration 

investment  and 
forestry, 
renewable 

Table A3.1: Key elements of the Portuguese RRP 

Source: RRF Scoreboard 

Graph A3.1: Total grants disbursed under the RRF 

Note: This graph displays the amount of grants disbursed so 
far under the RRF. Grants are non-repayable financial 
contributions. The total amount of grants given to each 
Member State is determined by an allocation key and the 
total estimated cost of the respective RRP. 
Source: RRF Scoreboard 

Portugal’s  second  payment  request  was 
positively  assessed  by  the  Commission, 
taking 
into  account  the  opinion  of  the 
Economic  and  Financial  Committee,  leading 
to EUR 1.8 billion being disbursed in financial 
support 
on 
8 February 2023. The related 38 milestones and 
targets  cover  reforms  in  the  management  of 

pre-financing) 

(net 

of 

Current RRPScope Initial planCID adoption date (date of submission) 13 July 2021Total allocation EUR 13.9 billion in grants  and EUR 2.7 billion in loans (7.9% of 2021 GDP)Investments and reforms 83 investments and 32 reforms Total number of milestones and targets341€ 4.07billion 
 
                                                 
 
 
     
 
 
     
 
 
Graph A3.2: Disbursements per pillar 

Note: Each disbursement reflects progress in the implementation of the RRF, across the six policy pillars. This graph displays how 
disbursements under the RRF (excluding pre-financing) relate to the pillars. The amounts were calculated by linking the milestones 
and targets covered by a given disbursement to the pillar tagging (primary and secondary) of their respective measures. 
Source: RRF Scoreboard 

public  hospitals  and  the  digital  transition  in  the 
private  and  public  sectors,  as  well  as  major 
investments in the areas of health, forestry, water 
management, 
innovation, 
sustainable  mobility,  digital  skills,  culture,  public 
finances and public administration. 

protection, 

social 

Graph A3.4: Fulfilment status of milestones and 
targets 

Graph A3.3: Total loans disbursed under the RRF 

This graph displays the share of satisfactorily fulfilled 
milestones and targets. A milestone or target is satisfactorily 
fulfilled once a Member State has provided evidence to the 
Commission that it has reached the milestone or target and 
the Commission has assessed it positively in an implementing 
decision. 
Source: RRF Scoreboard  

Source: RRF Scoreboard 

30 

€ 1.07billionSatisfactorily fulfilledNot fulfilled0.00 bn0.30 bn0.60 bn0.90 bnGreen transitionDigitaltransformationSmart,sustainable andinclusive growthSocial andterritorialcohesionHealth, andeconomic, socialand institutionalresiliencePolicies for thenext generation 
     
 
 
      
 
 
 
 
   
ANNEX 4: OTHER EU INSTRUMENTS FOR RECOVERY AND GROWTH 

The  EU  budget  of  over  EUR  1.2  trillion  for 
2021-2027  is  geared  towards  implementing 
the  EU’s  main  priorities.  Cohesion  policy 
investment amounts to EUR 392 billion across the 
EU and represents almost a third of the overall EU 
budget, including around EUR 48 billion invested in 
line with REPowerEU objectives. 

Graph A4.1: Cohesion policy funds 2021-2027 in 
Portugal: budget by fund 

to 

its 

fulfil 

commitment 

up-  and  reskilling  of  workers.  This  will  help 
reduce 
Portugal 
greenhouse  gas  emissions  by  2030  and  achieve 
climate  neutrality  by  2050.  Under  the  European 
Social Fund Plus (ESF+), Portugal allocates EUR 3.1 
billion to skills, education and training. Benefits of 
this  funding  will  include  reducing  the  structural 
skills deficit and reducing the high share of adults 
that  have  not  completed  more  than 
lower 
secondary education. 

in 

invested 

Of  the  investments  mentioned  above,  EUR  2 
line  with 
billion  will  be 
REPowerEU objectives. This is on top of the EUR 
1 billion dedicated to REPowerEU under the 2014-
2020  budget.  EUR  1.5  billion  (2021-2027)  and 
EUR  0.8  billion  (2014-2020)  is  for  improving 
energy efficiency; and EUR 0.5 billion (2021-2027) 
and EUR 0.2 billion (2014-2020)  is for renewable 
energy and low-carbon R&I. 

(1) million EUR in current prices, % of total; (total amount 
including EU and national co-financing) 
Source: European Commission, Cohesion Open Data 

Graph A4.2: Synergies between Cohesion policy 
funds and RRF pillars in Portugal 

(ERDF) will  strengthen 

In  2021-2027,  in  Portugal,  cohesion  policy 
funds (29) will  invest  EUR  11.2  billion  in  the 
green  transition  and  EUR  755  million  in  the 
digital  transformation  as  part  of  the 
country’s total allocation of EUR 30.9 billion. 
In  particular,  the  European  Regional  Development 
Fund 
the  R&D  and 
innovation  capacity  of  the  private  sector  and 
foster  digitalisation  by  supporting  more  than 
16 000 companies. SMEs lie at the heart of ERDF 
support  to  companies,  and  smart  specialisation  is 
expected  to  continue  to  play  a  major  role  in 
regional development and cohesion. Investment in 
energy efficiency is expected to reduce energy use 
in public buildings, businesses and homes by 13.8 
million  MWh/year.  Particular  attention  should  be 
paid  to  monitoring  the  reduction  of  energy  use, 
which is a priority for Portugal in 2021-2027. The 
Just Transition Fund will provide further economic 
diversification  and  foster  job  creation  in  three 
territories  affected  by  the  energy  transition, 
following the closure of coal-fired power plants in 
Sines (Alentejo Litoral) and Pego (Médio Tejo), and 
in  Matosinhos 
the 
(Metropolitan Area of Porto), and also promote the 

closure  of  a 

refinery 

(29)  European Regional Development Fund (ERDF), Cohesion Fund 
(CF), European Social Fund+ (ESF+), Just Transition Fund 
(JTF), excluding Interreg programmes. The total amount 
includes national and EU contributions. Data source: 
Cohesion Open Data.   

31 

(1) million EUR in current prices (total amount, including EU 
and national co-financing)   
Source: European Commission  

In  2014-2020,  cohesion  policy  funds  made 
EUR 23.5 billion available to Portugal (30), with 
an  absorption  of  88% (31). 
Including  national 
financing,  the  total  investment  amounts  to  EUR 
29.8 billion - around 2.2% of GDP for 2014-2020.  

flexibility 

Portugal  continues  to  benefit  from  cohesion 
support  economic 
to 
policy 
recovery,  step  up  convergence  and  provide 
vital support to regions following the COVID-
19  pandemic.  The  Recovery  Assistance  for 

(30)  Cohesion policy funds include the ERDF, CF, ESF and the 
Youth Employment Initiative (YEI). ETC programmes are 
excluded here. According to the ‘N+3 rule’, the funds 
committed for 2014-2020 must be spent by 2023. REACT-
EU is included in all figures. The total amount includes EU 
and national co-financing. Data source: Cohesion Open Data. 

(31)  2014-2020 Cohesion policy EU payments by MS is updated 

daily on Cohesion Open Data.   

3,65312%17,57357%9,37330%2951%CFERDFESF+JTF5,11235010,1401,57072982311,2447557,765655290364020004000600080001000012000Green transitionDigitaltransformationSmart, sustainableand inclusivegrowthSocial and territorialcohesionHealth, economic,social andinstitutionalresiliencePolicies for the nextgeneration EU CP 2014-2020 (million EUR) EU CP 2021-2027 (million EUR) 
 
   
                                                 
   
                                                 
 
 
for 

the  digital 

Cohesion and the Territories of Europe instrument 
(REACT-EU) (32)  under  NextGenerationEU  provides 
EUR 2.1 billion on top of the 2014-2020 cohesion 
policy  allocation  for  Portugal.  REACT-EU  helped 
support  more  than  76 000  SMEs  in  sectors  most 
affected  by  the  COVID-19.  Funding  was  also 
provided 
transformation  of 
companies,  healthcare,  employment  activation 
measures, training and skills development, and for 
boosting  investment  in  the  climate  transition.  In 
addition, nearly EUR 81.4 million was provisionally 
allocated 
the  Brexit 
Adjustment  Reserve  (BAR).  With  SAFE  (Supporting 
Affordable  Energy),  the  2014-2020  cohesion 
policy  funds  may  also  be  mobilised  to  support 
vulnerable  households, 
jobs  and  companies 
particularly affected by high energy prices. 

to  Portugal 

through 

Graph A4.3: Cohesion policy funds contribution to 
the SDGs in 2014-2020 and 2021-2027 in 
Portugal 

(1) 5 largest contributions to SDGs in million (EUR) current 
prices 
Source: European Commission  

policy 

cohesion 

In  both  the  2014-2020  and  2021-2027 
periods, 
have 
contributed  substantially  to  the  Sustainable 
funds 
Development  Goals 
support  11  of  the  17  SDGs,  notably  SDG  9 
‘Industry, innovation and infrastructure’ and SDG 8 
‘Decent work and economic growth’ (33). 

(SDGs).  These 

funds 

Other  EU  funds  make  significant  resources 
available for Portugal. The common agricultural 
policy  (CAP)  made  EUR  11.8  billion  available  in 
2014-2022  and  will  continue  to  support  Portugal 
with  EUR  6.1  billion  in  2023-2027.  The  two  CAP 

(32)  REACT-EU allocation on Cohesion Open Data. 

(33)  Other EU funds contribute to the implementation of the 
SDGs. In 2014-2022, this includes both the European 
Agricultural Fund for Rural Development (EARDF) and the 
European Maritime and Fisheries Fund (EMFF). 

32 

for 

Fund 

Agricultural 

Funds  (European  Agricultural  Guarantee  Fund  and 
Rural 
European 
Development),  contribute  to  the  European  Green 
Deal while ensuring long-term food security. They 
promote  social,  environmental  and  economic 
sustainability  and  innovation  in  agriculture  and 
rural  areas,  in  coordination  with  other  EU  Funds. 
The  European  Maritime  and  Fisheries  Fund  made 
EUR  392  million  available  to  Portugal  in  2014-
2020  and  the  European  Maritime,  Fisheries  and 
Aquaculture  Fund  allocates  EUR  379  million  in 
2021-2027. 

Portugal  also  benefits  from  other  EU 
programmes,  notably  the  Connecting  Europe 
Facility,  which  under  CEF  2  (2021-2027)  has  so 
far  allocated  EU  funding  of  EUR  30.75  million  to 
six  specific  projects  on  strategic 
transport 
networks.  Similarly,  Horizon  Europe  has  so  far 
allocated  nearly  EUR  267  million  to  Portuguese 
R&I actors on top of the EUR 1.2 billion earmarked 
under  the  previous  programme  (Horizon  2020). 
The  Public  Sector  Loan  Facility  set  up  under  the 
Just  Transition  Mechanism  makes  EUR  17  million 
of  grant  support  from  the  Commission  available 
for  projects  located  in  Portugal  for  2021-2027, 
which  will  be  combined  with  EIB  loans  to  support 
investments  by  public  sector  entities 
just 
transition regions. 

in 

received 

support  under 

Portugal 
the 
European  instrument  for  temporary  support 
to  mitigate  unemployment  risks 
in  an 
emergency  (SURE)  to  finance  short-time  work 
schemes,  similar  measures  and  as  an  ancillary, 
health-related  measure  to  mitigate  the  impact  of 
COVID-19. 
financial 
Council 
assistance  to  Portugal  of  EUR  6.2  billion  in  loans, 
which supported around 24% of workers and 27% 
of firms in 2020, and around 16% of workers and 
20% of firms in 2021. 

granted 

The 

Instrument 
designing 

(TSI) 
The  Technical  Support 
and 
in 
Portugal 
supports 
implementing  growth-enhancing 
reforms, 
including  those  set  out  in  its  recovery  and 
resilience  plan  (RRP).  Portugal  has  received 
significant  support  since  2017.  Examples  include 
support for using artificial intelligence to audit the 
use of EU funds, for the pilot of the national plan 
for  integrated  wildland  fire  management  and  for 
reconfiguring its public hospital networks (34). 

(34)  Country factsheets on reform support are available here. 

4,8657,8558897536448,8284,4962,7961,00391301,0002,0003,0004,0005,0006,0007,0008,0009,00010,000SDG 9 Industry,innovation,infrastructureSDG 8 Decentwork andeconomic growthSDG 7 Affordableand clean energySDG 6 Cleanwater andsanitationSDG 13 ClimateactionEU CP 2014-2020 (millions EUR)EU CP 2021-2027 (millions EUR) 
   
                                                 
                                                 
the  social  and  economic,  green  and  geopolitical 
dimensions.  Portugal  shows  stronger  capacities 
than the EU average in the area 'digital for public 
space'.  There  is  room  for  improving  capacities 
compared to the EU in all areas of the social and 
'financial  globalisation', 
economic  dimension, 
'digital  for  industry',  'climate  change  mitigation 
and  adaptation’  as  well  as  'sustainable  use  of 
resources'. 

Table A5.1: Resilience indices summarising the 
situation across RDB dimensions and areas 

(1) Data are for 2021, and EU-27 refers to the value for the 
EU as a whole. Data underlying EU-27 vulnerabilities in the 
area ‘value chains and trade’ are not available as they 
comprise partner concentration measures that are not 
comparable with Member States’ level values. 
Source: JRC Resilience Dashboards - European Commission 

ANNEX 5: RESILIENCE 

This  Annex  illustrates  Portugal’s  relative 
resilience capacities and vulnerabilities using 
the  Commission’s 
resilience  dashboards 
(RDB) (35).  Comprising  a  set  of  124  quantitative 
indicators,  the  RDB  provide  broad  indications  of 
Member  States’  ability  to  make  progress  across 
four interrelated dimensions: social and economic, 
green, digital, and geopolitical. The indicators show 
vulnerabilities (36)  and  capacities (37)  that  can 
become  increasingly  relevant,  both  to  navigate 
ongoing  transitions  and  to  cope  with  potential 
future shocks. To this end, the RDB help to identify 
areas  that  need  further  efforts  to  build  stronger 
and  more  resilient  economies  and  societies.  They 
in  Table  A5.1  as  synthetic 
are  summarised 
resilience 
illustrate  the  overall 
relative  situation  for  each  of  the  four  dimensions 
and  their  underlying  areas  for  Portugal  and  the 
EU-27 (38). 

indices,  which 

According  to  the  set  of  resilience  indicators 
under the RDB, Portugal generally displays a 
similar  level  of  vulnerabilities  compared  to 
the  EU  average.  Portugal  shows  medium-low 
vulnerabilities in the geopolitical dimension of the 
RDB  and  medium  vulnerabilities  in  the  social  and 
economic,  green  and  digital  dimensions.  It  has 
clearly  higher  vulnerabilities  than  the  EU  average 
in  the  areas  ‘economic  and  financial  stability  and 
sustainability’, 
‘sustainable  use  of  resources’, 
'financial  globalisation’  and  the  ’digital  for  public 
space’. Portugal has relatively low vulnerabilities in 
relation to ‘health, education and work’, ‘digital for 
industry  and  personal  space’,  ’cybersecurity’,  'raw 
material  and  energy  supply'  and  'security  and 
demography'. 

Compared to the EU average, Portugal shows 
an overall lower level of capacities across all 
RDB indicators. It has medium-high capacities in 
the  digital  dimension,  and  medium  capacities  in 

(35)  For details see https://ec.europa.eu/info/strategy/strategic-
planning/strategic-foresight/2020-strategic-foresight-
report/resilience-dashboards_en; see also 2020 Strategic 
Foresight Report (COM(2020) 493). 

(36)  Vulnerabilities describe features that can exacerbate the 

negative impact of crises and transitions, or obstacles that 
may hinder the achievement of long-term strategic goals. 

(37)  Capacities refer to enablers or abilities to cope with crises 
and structural changes and to manage the transitions.  

(38)  This Annex is linked to Annex 1 on SDGs, Annex 6 on the 
green deal, Annex 8 on the fair transition to climate 
neutrality, Annex 9 on resource productivity, efficiency and 
circularity, Annex 10 on the digital transition and Annex 14 
on the European pillar of social rights. 

33 

PTEU-27PTEU-27Vulnerabilities IndexHighMedium-highMediumMedium-lowLowNot availableCapacities IndexHighMedium-highMediumMedium-lowLowNot availableDimension/AreaVulnerabilitiesCapacitiesSocial and economicHealth, education and workInequalities and social impact of the transitionsGreenEconomic & financial stability and sustainabilitySustainable use of resourcesClimate change mitigation & adaptationDigitalEcosystems, biodiversity, sustainable agricultureDigital for industryDigital for personal spaceCybersecurityDigital for public spaceRaw material and energy supplyGeopoliticalValue chains and tradeFinancial globalisationSecurity and demography 
 
                                                 
 
  
 
 
 
ENVIRONMENTAL SUSTAINABILITY 
ANNEX 6: EUROPEAN GREEN DEAL 

green 

transition 

Portugal’s 
requires 
continued action on several aspects including 
energy  decarbonisation,  sustainable  water 
management, and its carbon sinks in the land 
use  sector.  Implementation  of  the  European 
Green  Deal  is  underway  in  Portugal;  this  Annex 
provides a snapshot of the key areas involved (39). 

less 

Portugal  is  projected  to  meet  its  2030 
climate target for the effort sharing sectors 
by  a  comfortable  margin (40). 
In  2021, 
Portugal’s  greenhouse  gas  emissions  in  these 
to  show 
sectors  are  expected 
the  country 
generated 
its  annual  emission 
than 
allocations (41).  Current  policies  in  Portugal  are 
projected  to  reduce  these  emissions  by  39% 
relative  to  2005  levels  in  2030,  more  than 
sufficient  to  reach  both  the  effort  sharing  target 
set  before  the  EU  raised  its  aim  to  a  55% 
reduction and the new target to reduce emissions 
by  28.7%.  The  additional  measures  tabled  would 
bring  the  emission  reductions  to  42% (42).  In  its 
resilience  plan,  Portugal  has 
recovery  and 
attributed  37.9 %  of  its  Recovery  and  Resilience 
Facility allocation to key reforms and investments 

(39)  The overview in this Annex is complemented by the 

information provided in Annex 7 on energy security and 
affordability, Annex 8 on the fair transition to climate 
neutrality and environmental sustainability, Annex 9 on 
resource productivity, efficiency and circularity, Annex 11 on 
innovation, and Annex 19 on taxation. 

(40)  Member States’ greenhouse gas emission targets for 2030 
(‘effort sharing targets’) were increased by Regulation (EU) 
2023/857 (the Effort Sharing Regulation) amending 
Regulation (EU) 2018/842, aligning the action in the 
concerned sectors with the objective to reach EU-level, 
economy-wide greenhouse gas emission reductions of at 
least 55% relative to 1990 levels. The Regulation sets 
national targets for sectors outside the current EU Emissions 
Trading System, notably: buildings (heating and cooling), road 
transport, agriculture, waste, and small industry. Emissions 
covered by the EU ETS and the Effort Sharing Regulation are 
complemented by net removals in the land use sector, 
regulated by Regulation (EU) 2018/841 (the Land Use, Land 
Use Change and Forestry (LULUCF) Regulation) amended by 
Regulation (EU) 2023/839. 

(41)  In terms of global warming potential of the IPCC’s 4th 
assessment report (AR4), Portugal’s annual emission 
allocations for 2021 were some 42.3 Mt CO2eq, and its 
approximated 2021 emissions were 40.5 Mt (see European 
Commission, Accelerating the transition to climate neutrality 
for Europe’s security and prosperity: EU Climate Action 
Progress Report 2022, SWD(2022)343). 

(42)  See the information on the distance to the 2030 climate 

policy target in Table A6.1. Existing and additional measures 
as of 15 March 2021. 

to  attain  the  climate  objectives (43).  As  laid  out  in 
its roadmap for carbon neutrality 2050, Portugal is 
committed to reaching climate neutrality by 2050. 
It  has  set  the  intermediary  target  to  reduce 
emissions  by  45  to  55%  by  2030  (compared  to 
2005)  and  by  65  to  75%  by  2040 (44).  It  will 
review  the  2050  net  neutrality  target  and  the 
intermediary  targets  in  light  of  the  EU’s  higher 
ambition set under the Fit for 55 and RePowerEU 
initiatives. 

Graph A6.1: Thematic – greenhouse gas emissions 
from the effort sharing sectors in Mt CO2eq, 
2005-2021 

Source: European Environmental Agency. 

Portugal  is  on  track  to  meet  its  2030  net 
carbon  removals  value  for  its  land  use 
sector.  Portugal’s  forests  achieve  a  major  share 
of net carbon removals and seem to recover since 
2018 from the decrease of the natural sink during 
the  period  2009-2017  due  to  severe  forest  fires 
and 
removals  were 
6021 kt CO2eq  in  2021.  For  2030,  Portugal’s 
target  for  net  removals  from  the  land  use,  land 
use  change  and  forestry  (LULUCF)  sector  implies 
to remove 1 358 ktCO2eq (see Table A6.1) (45)). 

causes.  Net 

other 

Portugal  is  well  on  track  to  transform  its 
energy  system  and  speed  up  the  roll-out  of 
renewable energy. In 2021, with a 32% share of 
renewable  energy  in  its  energy  mix  and  65%  of 
renewable  electricity  in  its  power  mix,  Portugal’s 

(43)  For example, the accelerated roll-out of renewables and 

investments in the production of green hydrogen and other 
renewable gases will result in 2030 targets for renewable 
energy in general and solar photovoltaics in particular to be 
met early.  

(44)  According to Portugal’s national energy and climate plan 

(NECP). An update of the plan, mandated by Regulation (EU) 
2018/1999 (the Governance Regulation), is underway. 

(45)  This value is indicative and will be updated in 2025 (as 

mandated by Regulation (EU) 2023/839). 

34 

0510152025303540455020052021Domestic transport (excl. aviation)Buildings (under ESR)AgricultureSmall industryWaste 
 
 
                                                 
      
                                                 
 
 
energy  system  is  one  of  the  most  decarbonised 
systems  in  the  EU.  In  2022,  Portugal  completely 
phase-out  coal  from  its  energy  mix.  Portugal  has 
announced  that 
it  aims  to  meet  the  80% 
renewable  electricity  target  ahead  of  schedule  in 
2026 rather than in 2030. 

Graph A6.2: Energy mix (top) and Electricity mix 
(bottom), 2021 

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

the 

Portugal  continues  to  take  actions  to 
accelerate  the  roll-out  of  renewable  energy, 
in  particular  photovoltaic  energy.  Portugal 
now  has  the  goal  to  reach  9GW  of  solar capacity 
by  2026.  To  help  achieve 
roll-out  of 
decentralised solar photovoltaics, the recovery and 
resilience  plan  allocates  support  for  funding 
programmes  for  residential  rooftop  installations. 
Portugal’s target of 47% of share of energy from 
final  energy 
renewable 
consumption  by  2030  included  in  the  NECP  was 
considered  sufficiently  ambitious.  Portugal  will 
need to increase its renewable energy target in the 
updated  NECP  to  reflect  the  more  ambitious  EU 

in  gross 

sources 

climate  and  energy  targets  in  the  Fit  for  55 
Package  and  in  the  REPowerEU  Plan  as  well  as 
match  its  ambitions  on  hydrogen.  Portugal  also 
funds renewable energy roll-out in the Azores and 
Madeira  archipelagos  and  supports  action  to 
decarbonise  industry,  including  measures  to  ramp 
up the uptake of renewable energy. 

The 
is 

Though  Portugal  has  put  in  place  several 
incentive schemes to bridge investment gaps 
on energy efficiency, improving the design of 
financing schemes would yield higher energy 
savings. Portugal´s NECP targets for primary and 
final  energy  consumption  (PEC  and  FEC)  were 
considered  of  modest  ambition  in  the  2020 
Commission  assessment.  Based  on  the  energy 
consumption trajectory for 2018-2021, Portugal is 
expected  to  be  on  track  to  meet  its  2030  target 
for  PEC  and  for  FEC,  as  these  were  notified in  its 
NECP (46). 
‘Edificios  Mais 
programme 
in  high  demand,  given  the 
Sustentáveis’ 
contribution  of  85%  (up  to  EUR 2 500)  to  install 
solar panels. By contrast, there is low demand for 
the 
(an  energy 
efficiency  voucher  programme)  that  aims  to 
provide  100 000  vouchers  worth  EUR 1 300  to 
vulnerable  families.  The  programme  has  design 
issues  that  reduce  its  potential  to  yield  energy 
to 
efficiency 
structurally  address  technical  and  administrative 
bottlenecks and energy efficiency in buildings have 
the  potential  to  speed  up  energy  savings.  They 
could  include  the  creation  and  development  of 
one-stop-shops  in  critical  areas  or  sectors,  the 
development  of  targeted  financing  schemes  and 
to  stimulate  demand.  Banco  de 
campaigns 
Fomento  could  play  a  useful  role 
in  these 
measures. 

savings.  Additional  measures 

‘Vale  Eficiência’  programme 

transport 
remain 

to  sustainable 
problems 
but 

is 
The  shift 
underway 
in 
metropolitan  areas.  Both  the  share  of  zero-
emission  vehicles  in  new  registrations  and  the 
recharging  stations  have 
number  of  public 
increased  considerably 
recent  years.  The 
electrification of the railway network is above the 
EU  average.  However, 
transport 
exacerbates  seasonal  problems  with  air  pollution 
and  traffic  congestion  in  the  major  metropolitan 
areas, generating both health issues and economic 

individual 

in 

(46)  After the conclusion of the negotiations for a recast EED, the 
ambition of both the EU and national targets as well as of 
the national measures for energy efficiency to meet these 
targets is expected to increase 

35 

2%31%2%65%Solid fossil fuels, peatand oil shaleGasOilRenewables1%24%43%32%Solid fossil fuels, peatand oil shaleGasOilRenewables 
  
                                                 
costs.  Portugal  also  needs 
measures to comply with the Noise Directive. 

to 

take  further 

Graph A6.3: Thematic – environmental investment 
needs and current investment, p.a. 2014-2020 

Source: European Commission. 

Portugal  would  benefit  from  investing  more 
in environmental protection and in measures 
biodiversity  and  addressing 
protecting 
pollution.  Between  2014  and  2020, 
the 
needs (47)  were 
environmental 
investment 
estimated  to  be  at  least  EUR 4.3  billion  while 
investment was at about EUR 2.5 billion, leaving a 
gap of at least EUR 1.8 billion per year (see Graph 
A6.3) (48). 20.6% of land in Portugal is part of the 
EU  Natura  2000  network (49).  However,  additional 
designations are warranted, particularly to protect 
marine  sites.  Portugal  also  needs  to  adopt 
sites, 
for 
management  plans 
identifying 
the  conservation  objectives  and 
measures  and  providing  sufficient  resources. 
Portugal also has potential to make greater use of 
environmental  taxes  to  further  apply  the  polluter 
pays  principle  (see  annex  19).  Following  up  on  a 
tax  reform  that  took  up  the  recommendations 
issued  by  an  expert  commission  on  green  tax 

the  Natura 

(47)  Environmental objectives include pollution prevention and 

control, water management and industries, circular economy 
and waste, biodiversity and ecosystems (European 
Commission, 2022, Environmental Implementation Review, 
country report Portugal). 

reform  in  2015,  the  authorities  are  currently 
assessing how to extend environmental taxation. 

levels  and  more 

Climate  change  is  affecting  many  sectors  in 
Portugal,  including  water  management  in 
particular (50).  Portugal  is  one  of  the  countries 
that  is  most  affected  by  drought  in  Europe (51)). 
Lower 
variable  annual 
precipitation  variability  are  projected  to  reduce 
river  flows,  affect  the  recharge  of  aquifers,  and 
increase  the  vulnerability  to  flooding.  The  new 
temperature  and  precipitation  trends  also  mean 
more, longer, and more intense heat waves, major 
rural  fires,  and  unpredictable  extreme 
local 
phenomena  such  as  torrential  rain,  hail,  cyclones, 
and tornados. Agriculture and forestry, biodiversity, 
the  energy  sector,  buildings,  tourism,  and  health 
are  all  affected.  Portugal  has  a  high  climate 
protection gap for wildfire, which could pose a risk 
to public finances if the insurance penetration rate 
remains  low.  Portugal’s  recovery  and  resilience 
plan  has  measures  on  forest  fire  and  water 
management.  Despite  recent  progress,  challenges 
remain in water management, notably in terms of 
governance,  water  body  rehabilitation  and  water 
efficiency.  Policies  related  to  the  water  cycle  are 
not  yet  updated  to  respond  to  future  climate 
impacts across the range of plausible scenarios in 
all  sectors  concerned.  There  is  furthermore  scope 
to  improve  water  management  including  through 
better  wastewater  collection  and 
treatment, 
improving  water  supply  and 
reducing 
monitoring,  and  through  nature-based  solutions. 
Portugal also has further potential for water reuse. 

leaks, 

Portugal  provides  fossil  fuel  and  other 
environmentally harmful subsidies that could 
be  considered  for  reform,  while  ensuring 
food  and  energy  security  and  mitigating 
social  effects.  Fossil  fuel  subsidies  in  Portugal 
amounted  to  EUR  825  million  in  2020,  a  24% 
increase  since  2015.  Environmentally  harmful 
subsidies  have  been  identified,  via  an  initial 
in  the  agriculture,  forestry  and 
assessment, 
fishing, electricity, gas, steam and air conditioning, 
transportation and storage, manufacturing, mining 
sectors.  The 
and  quarrying  and 
in  2014  a 
Portuguese  government  set  up 

services 

(48)  When also accounting for needs estimated at EU level only 

(50)  European Environmental Agency, Advancing towards climate 

(e.g. water protection, higher circularity, biodiversity strategy). 

resilience in Europe, forthcoming. 

(49)  In 2021, Portugal had 22.4% terrestrial protected areas 

(Natura 2000 and nationally designated areas), against the 
EU average of 26.4% (European Environment Agency, 2023, 
Natura 2000 Barometer). 

(51)  European Environmental Agency Dashboard Drought impact 
on ecosystems in Europe, 2000-2020. Portugal has the 4th 
highest average drought impact area as a percentage of the 
country in the EU 4th in the EU across all ecosystems. 

36 

2109024495893117271,2358381,1033660.0200.0400.0600.0800.01000.01200.01400.0Pollutionprevention andcontrolWater (industries,excl. protection)Circular economy(incl. waste)Biodiversity andecosystemsR&I&D and otherEUR million (at current prices)Current investmentTotal need 
        
                                                 
                                                 
Commission for Green Tax Reform that worked on 
environmental  taxation  reform  and  a  strategy  for 
fiscal  neutrality  in  2015.  The  Commission  worked 
on  identifying  exemptions  and  rebates  to  energy 
taxes  and  developed  proposals  for  reforms  of 
those  exemptions.  Examples  of  such  subsidies 
include  the  reduced  VAT  rate  for  fertilisers  and 
pesticides,  the  energy  tax  relief  for  companies  in 
agriculture  and 
the 
reimbursement  of  excise  duty  on  diesel  used  in 
freight  and  other  categories  of  passenger 
transport  or  the  refund  scheme  for  energy-
intensive  industry  under  conditions (52).  Portugal 
could build on this mapping to prioritise candidates 
for reform. 

for  gas  oil, 

forestry 

(52)  Fossil fuel figures in EUR of 2021 from the 2022 State of 

the Energy Union report. Initial assessment of 
environmentally harmful subsidies done by the Commission 
in the 2022 toolbox for reforming environmentally harmful 
subsidies in Europe, using OECD definitions, and based on the 
following datasets: OECD Agriculture Policy Monitoring and 
Evaluations; OECD Policy Instruments for the Environment 
(PINE) Database; OECD Statistical Database for Fossil Fuels 
Support; IMF country-level energy subsidy estimates. Annex 4 
of the toolbox contains detailed examples of subsidies on 
the candidates for reform. 

37 

 
                                                 
Table A6.1: Indicators tracking progress on the European Green Deal from a macroeconomic perspective 

Sources: (1) Historical and projected emissions, as well as Member States’ climate policy targets and 2005 base year emissions 
under the Effort Sharing Decision (for 2020) are measured in global warming potential (GWP) values from the 4th Assessment 
Report (AR4) of the Intergovernmental Panel on Climate Change (IPCC). Member States’ climate policy targets and 2005 base 
year emissions under the Effort Sharing Regulation (for 2030) are in GWP values from the 5th Assessment Report (AR5). The 
table above shows the base year emissions 2005 under the Effort Sharing Decision, using AR4 GWP values. Emissions for 2017-
2021 are expressed in percentage change from 2005 base year emissions, with AR4 GWP values. 2021 data are preliminary. The 
table shows the 2030 target under Regulation (EU) 2023/857 that aligns it with the EU’s 55% objective, in percentage change 
from 2005 base year emissions (AR5 GWP). Distance to target is the gap between Member States’ 2030 target (with AR5 GWP 
values) and projected emissions with existing measures (WEM) and with additional measures (WAM) (with AR4 GWP values), in 
percentage change from the 2005 base year emissions. Due to the difference in global warming potential values, the distance to 
target is only illustrative. The measures included reflect the state of play as of 15 March 2021.  
(2) Net removals are expressed in negative figures, net emissions in positive figures. Reported data are from the 2023 
greenhouse gas inventory submission. 2030 value of net greenhouse gas removals as in Regulation (EU) 2023/839 
amending Regulation (EU) 2018/841 (LULUCF Regulation) – Annex IIa, kilotons of CO2 equivalent, based on 2020 submissions. 
(3) Renewable energy and energy efficiency targets and national contributions are in line with the methodology established under 
Regulation (EU) 2018/1999 (Governance Regulation).  
(4) Percentage of total revenue from taxes and social contributions (excluding imputed social contributions). Revenue from the EU 
Emissions Trading System is included in environmental tax revenue.  
(5) Expenditure on gross fixed capital formation for the production of environmental protection services (abatement and 
prevention of pollution) covering government, industry, and specialised providers.  
(6) European Commission, Study on energy subsidies and other government interventions in the European Union, 2022 edition.  
(7) The climate protection gap refers to the share of non-insured economic losses caused by climate-related disasters. This 
indicator is based on modelling of the current risk from floods, wildfires and windstorms as well as earthquakes, and an 
estimation of the current insurance penetration rate. The indicator does not provide information on the split between the 
private/public costs of climate-related disasters. A score of 0 means no protection gap, while a score of 4 corresponds to a very 
high gap (EIOPA, 2022).  
(8) Sulphur oxides (SO2 equivalent), ammonia, particulates < 10 µm, nitrogen oxides in total economy (divided by GDP).  
(9) Battery electric vehicles (BEV) and fuel cell electric vehicles (FCEV). 

38 

2030200520172018201920202021target/valueWEMWAMGreenhouse gas emission reductions in effort sharing sectors (1)Mt CO2eq; %; pp48.6-17%-17%-15%-21%--28.7%10.313.3Net carbon removals from LULUCF (2)kt CO2eq3,48921,472-3,497-4,499-4,707-6,021-1358n/an/a200520172018201920202021Share of energy from renewable sources in gross final consumption of energy (3)%20%31%30%31%34%34%47%Energy efficiency: primary energy consumption (3)Mtoe24.922.822.622.119.519.521.5Energy efficiency: final energy consumption (3)Mtoe19.016.616.917.115.015.614.9201620172018201920202021201920202021Environmental taxes (% of GDP)% of GDP2.62.62.62.52.42.32.42.22.2Environmental taxes (% of total taxation) (4)% of taxation 7.67.67.47.36.76.65.95.65.5Government expenditure on environmental protection% of total exp.1.31.31.41.51.41.71.71.61.6Investment in environmental protection (5) % of GDP0.30.30.30.3--0.40.40.4Fossil fuel subsidies (6)EUR2021bn0.60.70.70.80.8-53.050.0-Climate protection gap (7) score 1-42.02.01.5Net greenhouse gas emissions1990 = 100113.0124.0118.0113.099.098.076.069.072.0Greenhouse gas emission intensity of the economykg/EUR'100.390.400.370.340.35-0.310.300.26Energy intensity of the economykgoe/EUR'100.130.130.120.120.12-0.110.11-Final energy consumption (FEC)2015=100101.2103.5105.5107.193.598.0102.994.6-FEC in residential building sector2015=100102.5101.8104.6105.1109.5109.8101.3101.3106.8FEC in services building sector2015=10097.297.7101.0100.191.793.0100.194.4100.7Smog-precursor emission intensity (to GDP) (8)tonne/EUR'101.461.451.391.341.25-0.90.9-Years of life lost due to air pollution by PM2.5per 100.000 inh.296.4311.1266.4257.4250.9-581.6544.5-Years of life lost due to air pollution by NO2per 100.000 inh.124.4137.3127.8115.680.6-309.6218.8-Nitrates in ground watermg NO3/litre19.318.518.318.521.9-21.020.8-Land protected areas% of total22.222.3-22.322.322.426.226.426.4Marine protected areas% of total3.8--4.5-4.510.7-12.1Organic farming% of total utilised agricultural area6.76.85.77.48.119.38.59.1-201720182019202020212022202020212022Share of zero-emission vehicles (9)% in new registrations0.82.03.15.49.010.85.48.910.7Number of AC/DC recharging points (AFIR categorisation)---269038976242188626330028432518Share of electrified railways%64.464.467.167.167.167.156.6n/a56.6Hours of congestion per commuting driver per year28.728.427.327.5n/an/a28.7n/an/aMobility'Fit for 55'DistanceProgress to policy targetsNational contribution to 2030 EU targetPortugal EUFiscal and financialindicatorsEnergyPollutionBiodiversityClimate 
 
     
 
ANNEX 7: ENERGY SECURITY AND AFFORDABILITY 

capacity,  Portugal  relies  mostly  on  LNG  supplies 
from  the  USA  and  Nigeria  through  the  Sines  LNG 
terminal.  The  deep-water  port  of  Sines  has  the 
capacity  to  receive  large  LNG  ships  and  an 
investment of EUR 4.5 million is planned to enable 
transhipment  in  the  port (58).  Portugal  is  supplied 
by  two  pipelines:  one  mostly  to  import  gas  from 
Algeria  via  Morocco  and  Spain,  and  another 
smaller one to connect Portugal to Galicia in Spain. 

Graph A7.1: Underground storage levels in 
Portugal 

for 

Despite  its  low  dependence  on  gas  supplies 
from  Russia,  Portugal  consumes  most  of  its 
gas 
the  production  of  electricity. 
Continuing  to  rely  on  gas  for  electricity 
production  may  lead  to  increasing  risks  for 
electricity  supply  security,  aggravated  by 
more  frequent  extreme  droughts.  Further 
investments  in  the  rollout  of  renewables,  in 
financing  energy  efficiency  projects,  and 
investment 
in  the  grids  would  help  to 
increase  resilience  in  terms  of  electricity 
supply  security.  This  Annex (53)  sets  out  actions 
carried out by Portugal to achieve the REPowerEU 
objectives,  including  through  the  implementation 
of  its  recovery  and  resilience  plan,  in  order  to 
improve  energy  security  and  affordability  while 
accelerating  the  clean  energy  transition,  and 
contributing to enhancing the EU’s competitiveness 
in the clean energy sector (54). 

Relying mostly on liquefied natural gas (LNG) 
supplies and from non-EU sources, Portugal’s 
gas supply security is very resilient. It fulfilled 
its  gas  storage  obligations  last  winter,  reaching 
98.32%  by  1  November  (well  above  the  EU  legal 
obligation of 80%), and ended the heating season 
with  a  filling  gas  storage  at  95.90% at  15  April 
2023 (55)  (see  Graph  A7.1).  It  has  3.97  TWh  of 
underground gas storage at the Carriço facility (56), 
with  a  total  capacity  of  around  0.41  billion  cubic 
metres (bcm), representing around 7% of its total 
yearly  demand.  In  September  2022,  a  1.2  TWh 
this  gas  storage  facility  was 
extension  of 
announced (57).  Despite 
storage 

limited 

its 

(53)  It is complemented by Annex 6 as the European Green Deal 
focuses on the clean energy transition, by Annex 8 on the 
actions taken to mitigate energy poverty and to protect the 
most vulnerable ones, by Annex 9 as the transition to a 
circular economy will unlock significant energy and resource 
savings, further strengthening energy security and 
affordability, and by Annex 12 on industry and single market 
complementing ongoing efforts under the European Green 
Deal and REPowerEU. 

(54)  in line with the Green Deal Industrial Plan COM(2023) 62 
final, and the proposed Net-Zero Industry Act COM(2023) 
161 final 

(55)  Regulation of the European Parliament and of the Council 
amending Regulations (EU) 2017/1938 and (EC) No 
715/2009 with regard to gas storage and Implementing 
Regulation (EU) 2022/2301 of 23 November 2022 setting 
the filling trajectory with intermediary targets for 2023 for 
each Member State with underground gas storage facilities 
on its territory and directly interconnected to its market area 

(56)  The Carriço UGS facility is managed by REM Armazenagem 

and it is composed by six salt caverns. 

(57)  Council of Ministers Decision 82/2022. 

Source: JRC calculation based on AGSI+ Transparency 
Platform, 2022-3 (Last update 2 May 2023) 

A  decarbonisation  policy  focused  on  broad 
electrification, 
if  not  accompanied  by 
significant  investment  in  renewables  and 
transmission  and  distributions  networks, 
could jeopardise Portugal’s electricity supply 
security.  With  the  phasing  out  of  coal  since 
November  2021,  Portugal´s  electricity  production 
is  now  split  between  renewables  (wind,  solar 
power and hydropower) and natural gas (Annex 6). 
is  for 
Over  half  the  natural  gas  consumed 
electricity  production  (see  Graph  A7.2).  Portugal 
was  a  net  importer  of  electricity  from  2012  to 
2021,  having  been  only  a  net  exporter  in  2016, 
2017  and  2018.  As  a  result  of  the  frequent 
droughts,  hydropower  ran  low  (10  pp  lower  in 
2022 when compared with the previous year) (59), 
in particular during summer, limiting water use for 
electricity production. As a result, the share of gas 
consumption  for  electricity  generation  increased 
from  23%  in  2021  to  32%  in  2022 (60).  With 
droughts  being  more 
for 
hydropower can be in short supply. Energy storage 
through  pumped  hydropower  may  increase  the 
flexibility  of  the  energy  system.  Portugal  has 

frequent,  water 

(58)  Idem. 

(59)  REN, APREN Analysis. 

(60)  Idem. 

39 

 
 
                                                 
 
                                                 
 
 
in 

target 

terms  of 

interconnection 

electricity 
for  2030. 
Significant  progress  is  expected  in  the  coming 
years 
interconnections,  with 
commissioning  of  electricity  projects  of  common 
interest  in  the  Iberian  Peninsula  by  2030.  Biscay 
Bay  and  the  Pyrenees  crossing  projects  will 
increase  the  interconnection  level  between  Spain 
and  France,  making  it  important  for  Portugal  to 
also  increase  in  interconnection  capacity  through 
the Portugal-Spain interconnection between Beariz 
and  Ponte  de  Lima  and  to  strengthen  the 
Pedralva-Sobrado grid. In October 2022, the heads 
of  state  and  government  of  France,  Spain  and 
Portugal 
joint  statement  statement 
underlining  the  importance  of  accelerating  the 
development  of  energy  interconnections,  with  a 
focus on electricity and hydrogen infrastructures.  

issued  a 

socio-economic 

Despite  the  high  risks  of  a  rise  in  energy 
prices  for  the  most  vulnerable  people,  the 
structure  of  Portugal’s  energy  market  and 
the  measures  put  in  place  have  made  it 
possible to avoid price peaks, as in other EU 
countries.  Portugal’s  energy  poverty  indicators 
are among the most worrying (see Annex 8), with 
over  1  in  3  poor  households  experiencing  energy 
poverty.  Even  before  the  energy  crisis,  Portugal 
already  had  price  intervention  measures  in  place 
for  vulnerable  consumers  –  the  social  tariff  for 
electricity and natural gas that provides discounts 
on  parts  of  distribution  tariffs  to  reduce  the 
electricity  and  gas  bills  of  households  who  meet 
certain 
requirements.  Most 
contracts are fixed-price contracts. However, when 
renewing  contracts,  some  suppliers  have  stopped 
fixed-price  contracts,  offering  only 
offering 
variable  contracts  instead.  The  implementation  of 
the  ‘Iberian  exemption’  has  brought  significant 
benefits,  cutting  prices  by  21.21%  in  the  first  7 
if  the 
months  than  they  would  have  been 
mechanism  had  not  been  applied.  However,  with 
the  signicant  decrease  of  the  gas  prices,  the 
mechanism  has  not  been  trigerred 
in  more 
recently (March and April 2023).  The deployment 
rate  for  rolling  out  intelligent  metering  systems 
was of 52% in October 2022, relatively low for a 
country 
decentralised 
connected  renewable  electricity  generation  but  a 
full rollout is expected by 2024. 

increase 

aiming 

to 

adopted  measures  covering  both  the  public  and 
private  energy,  water  and  transport  sectors (61). 
Some  of  the  most  relevant  actions 
incude 
switching  off  lights  in  the  evening  in  public  and 
private  buildings,  communication  and  awareness 
campaigns  aimed  at  public  administration,  and 
additional  professional 
training  and  capacity 
building  to  increase  expertise  of  public  servants. 
Implementation  of  such  measures  led  to  a  gas 
demand reduction of 16% over the period August 
2022  -  March  2023  when  compared  to  the 
previous  5-years  average (62).  This  gas  demand 
reduction  is  mainly  due  to  the  decrease  on 
consumption  in  industry, households  and services. 
Unless  these  savings  made  structural  through 
energy  efficiency  measures,  there  are  increasing 
risks of demand destruction. 

Graph A7.2: Share of gas Consumption per sector, 
2021 

Source: Eurostat 

electricity 

Improving 
grids 
and 
increase 
interconnection  capacities  would 
the  resilience  of  the  electricity  system  and 
make 
it  possible  to  deploy  renewable 
capacity  more  quickly.  The  current  state  of  the 
electricity transmission and distribution grids limits 
the development of clean energies. Further energy 
infrastructure 
including 
investments 
improvements in electricity storage  – would make 
it  easier  to  integrate  more  renewable  energy 
sources  into  the  grid.  In  2022  the  cross-border 
interconnection level of Portugal was 10.92% and 
Portugal  is  still  behind  on  reaching  the  15% 

– 

(61)  Portuguese Energy Saving Plan 2022-2023 

(62)  EU countries agreed to reduce their gas demand by 15% 

compared to their average consumption in the past 5 years, 
between 1 August 2022 and 31 March 2023, with measures 
of their own choice. Spain benefits from a partial derogation 
and may limit the mandatory demand reduction by 8 
percentage points.  

40 

61.5%27.4%0.5%4.8%5.8%0.2%EnergyIndustryTransportServices and public sectorHouseholdsAgriculture, forestry andfishery 
      
                                                 
Graph A7.3: Portugal´s energy retail energy prices 
for industry (top) and households (bottom) 

from  renewable  sources  and  streamlining  all 
considering 
It 
licensing  processes. 
increasing human and technical resources in public 
administration  to  better  respond  to  the  demand 
for  permits  for  renewable  energy  generation 
facilities. 

is  also 

in 

its 

renewables 

penetration 

further  upscaling 

Portugal  is  among  the  EU’s  front  runners  in 
hydrogen  development,  with  ambitious 
targets 
its  hydrogen  strategy  and 
significant  investments  made  as  part  of  its 
recovery  and  resilience  plan.  There  is  still 
potential  to  tap  into  key  sectors  for  Portugal  to 
reach 
and 
decarbonisation  targets.  This  would  include  in 
particular 
its  biomethane 
production,  where  a  clear  funding  and  incentives 
plan is needed.  Portugal’s biomethane potential in 
2030  is  approximately  0.5  bcm/year.  Its  first 
biomethane  plant  started  operations  in  2021  and 
injected  biomethane  into  the  natural  gas  grid  in 
2022.  In  January  2023,  Portugal  announced  the 
first 
tendering  process,  using  a  centralised 
purchasing  system,  for  the  supply  of  renewable 
hydrogen and biomethane (65). The port of Sines is 
developing  into  an  hub  for  exporting  hydrogen  to 
Western Europe. 

Additional  efforts  of  Portugal  in  energy 
efficiency  would  also  contribute  to  further 
reduce  the  country’s  dependency  from  fossil 
from  grant-based  public 
fuels.  Departing 
incentives,  such  as  direct  financial  support, 
towards  schemes  that  combine  grants,  financial 
instruments  and  technical  assistance  is  essential 
to  start  leveraging  private  investment  in  energy 
efficiency.  This  is  especially  relevant  for  building 
renovation  but  also  to  facilitate  SME’s  access  to 
energy  efficient  solutions  for  their  activities  (e.g. 
through  implementation  of  energy  audits  results). 
Given  the  significant  financial  needs  of  energy 
renovations,  Portugal  may  need  to  dedicate 
additional  resources  to  this  matter.  Regarding 
market  surveillance  activities,  Portugal  is  not 
carrying  out  checks  on  products  covered  by 
ecodesing  and  energy  labelling.  This  may  imply 
concerns  with  respect  to  the  level  playing  field 
among  economic  operators  and  uncertainty  as  to 
the  compliance  levels  of  the  concerned  products, 

(1) On electricity, the band consumption is for DC for 
households and ID for industry 
(2) On gas, the band consumption is D2 for households and I4 
for industry  

Source: Eurostat 

There is still potential to see what more can 
be  done  in  key  sectors  and  technologies  for 
Portugal to reach its renewables penetration 
and  decarbonisation  targets,  but  the  lack  of 
skilled  and  sufficient  human  resources  to 
manage  a  growing  number  of  renewable 
projects  may  make  this  hard  to  do.  There  is 
room  to  ramp  up  the  deployment  of  PV  energy 
(particularly  decentralised  solutions  such  as 
rooftop  installations),  which  is  underdeveloped 
compared to wind (2.5 GW installed capacity of PV 
energy versus 5.5 GW of wind energy in 2022 (63). 
Particular attention should also be paid to offshore 
wind,  which  has  big,  unexploited  potential  in 
Portugal  (only  25MW  of  installed  capacity  in 
2022) (64).  It  has  announced  the  preparation  of  a 
10  GW  auction  for  offshore  wind  planned  for 
It  has  taken  measures  on  permitting 
2023. 
procedures  for  renewable  energy  sources  by 
approving exceptional measures aimed at ensuring 
the simplification of energy production procedures 

(63)  IRENA, Renewable capacity statistics 2023 

(64)  Iden 

(65)  Ordinance No. 15/2023 of 4 January. 

41 

050100150200250€/MWhGas PortugalGas EUElectricity PortugalElectricity EU050100150200250300€/MWhGas PortugalGas EUElectricity PortugalElectricity EU 
  
 
                                                 
                                                 
also  shown  positive  trends  over  the  past  years 
with EUR 5.1 million of investments in climate tech 
firm in 2021, all in the energy (generation and grid 
tech)  sector.  However,  this  only  represents  1%  of 
VC  investments in  Portugal  and  is  below  the  EU’s 
overall figure of 10% of VC investments in energy 
firms.  

Graph A7.4: Private R&I investment in Energy 
Union R&I priorities - Portugal 

Source: JRC SETIS (2022) 

and therefore missed energy and CO2 savings and 
consumer trust (66).  

to 

contribute 

The  training  of  new  workers  and  the 
reskilling  and  upskilling  of  the  existing 
timely 
workforce  would 
implementation  of  Portugal’s  plans  for  the 
energy renovation of public, educational and 
lacks  trained 
residential  buildings.  Portugal 
workforce 
integrated 
construction 
renovation services, including installers  of heating 
appliances  in  sufficient  numbers  and  with  the 
relevant skillsets. 

and 

in 

Portugal  remains  highly  dependent  on  non-
EU  countries  for  clean  energy  technologies. 
Portugal  imports  most  of  its  solar  PV  modules 
from  China,  and  has 
limited  manufacturing 
capabilities, with one module manufacturer (Open 
Renewable)  located  in  the  country.  For  wind, 
Portugal  has  manufacturing  capacity  for  blades, 
generators  and  nacelles  from  two  producers,  and 
no  manufacturing  capacity  for  offshore  wind 
components.  In  late  2022,  a  Chinese  battery 
manufacturer signed the first agreement with the 
Agency  for  Investment  and  Foreign  Trade  of 
Portugal  (AICEP)  to  set  up  a  battery  factory. 
Portugal is also awaiting the environmental impact 
lithium  mines  before 
assessment 
launching  an  auction  of  mining 
licenses. 
Employment  in  solid  biomass,  hydropower,  solar 
photovoltaic and wind energy accounted  for more 
than 90% of the renewable energy employment in 
2021.  Labour  shortage 
in  manufacturing  of 
electrical  equipment  has  significantly increased in 
the EU since 2020. With more than 30% of labour 
shortage in manufacturing of electrical equipment 
in the first quarter of 2023, Portugal ranks above 
the EU average. 

two 

for 

Despite  of  positive  signs  in  the  innovation 
ecosystem, Portugal still lags behind of other 
EU countries. The latest research and innovation 
(R&I)  trends  are  positive.  However,  private  R&D 
spending  on  Energy  Union  priorities  in  Portugal 
(0.022%  as  a  share  of  GDP),  that  mostly  (71%) 
renewables,  was 
targeted 
significantly  below  the  EU  average  in  2019. 
Portugal  has  developed  pioneering  projects  for 
floating  offshore  wind  and  has  two  designated 
innovative  offshore  energy 
areas  for  testing 
technologies.  Venture  capital  investments  have 

investments 

in 

(66)  The internet-supported information and communication 
system for the pan-European market surveillance 

42 

70%24%71%8%29%5%13%26%17%9%21%7%0%0%0%201020142019[% per priority]CCUSNuclear safetySustainable transportEfficient systemsSmart systemRenewables382347Total [mn Euro] 
                                                 
      
 
Table A7.1: Key Energy Indicators 

(1)  The ranking of the main supliers is based on the latest available figures (for 2021) 
(2) FSRU included 
(3) Venture Capital investments include Venture Capital deals (all stages) and Private Equity Growth/Expansion deals (for 
companies that have previously been part of the portfolio of a VC investment firm). 
Source: Eurostat, Gas Infrastructure Europe (Storage and LNG Transparency Platform), JRC SETIS (2022), JRC elaboration based 
on PitchBook data (06/2022) 

43 

EU20182019202020212018201920202021Import Dependency [%] 76%74%65%67%58%61%57%56%of Solid fossil fuels 99%122%-7%5%44%44%36%37%of Oil and petroleum products 104%98%98%98%95%97%97%92%of Natural Gas 101%100%99%100%83%90%84%83%Dependency from Russian Fossil Fuels [%]of Hard Coal2%6%0%0%40%44%49%47%of Crude Oil20%11%0%0%30%27%26%25%of Natural Gas 0%2%10%14%40%40%38%41%20152016201720182019202020212022Gross Electricity Production (GWh)52,420 60,329 59,432 59,636 53,154 53,078 50,980 -Combustible Fuels30,005 29,903 38,344 32,155 27,687 25,214 21,894 -Nuclear- - - - - - - -Hydro9,800 16,909 7,632 13,628 10,243 13,633 13,455 -Wind11,607 12,474 12,248 12,617 13,667 12,299 13,216 -Solar 796 871 992 1,006 1,342 1,716 2,237 -Geothermal 204 172 217 230 215 217 179 -Other Sources8                 -             0                -             -           -           -           -Net Imports of Electricity (GWh)2,266         5,085-        2,684-        2,657-        3,399       1,456       4,753       -   As a % of electricity available for final consumption 5%-11%-6%-5%7%3%10% -Electricity Interconnection (%)8.70%8.25%9.2%8.0%13.7%10.9%20152016201720182019202020212022Gas Consumption (in bcm)4.75.26.35.86.15.95.75.6Gas Imports - by type (in bcm)6.36.610.09.711.711.411.3n.a.Gas imports - pipeline4.74.96.35.86.15.95.7n.a.Gas imports - LNG1.51.63.73.85.65.55.6n.a.Gas Imports - by main source supplier (in bcm) (1)Nigeria1.81.84.34.76.56.25.9n.a.United States0.00.21.11.02.62.23.8n.a.Russia0.00.00.00.00.21.31.6n.a.Algeria2.72.72.41.70.50.60.1n.a.Others1.81.92.32.31.80.90.1n.a.2019202020212022LNG TerminalsNumber of LNG Terminals (2)1111LNG Storage capacity (m3 LNG)390,000390,000390,000390,000Underground StorageNumber of storage facilities1111Operational Storage Capacity (bcm)0.40.40.40.42019202020212022VC investments in climate tech start-ups and scale-ups (EUR Mln) (3)4.20.45.1n.a.as a % of total VC investments in Portugal1.1%0.3%1.0%n.a.Research & Innovation spending in Energy Union R&i priorites (2)Public R&I (EUR mln)54.062.7n.a.n.a.Public R&I (% GDP)0.025%0.029%n.a.n.a.Private R&I (EUR mln)46.5n.a.n.a.n.a.Private R&I (% GDP)0.02%n.a.n.a.n.a.CLEAN ENERGYPortugalENERGY DEPENDENCEELECTRICITYDIVERSIFICATION OF GAS SUPPLIES 
 
 
 
      
 
ANNEX 8: FAIR TRANSITION TO CLIMATE NEUTRALITY 

in 

the 

line 

with 

This  Annex  monitors  Portugal’s  progress  in 
ensuring  a  fair  transition  towards  climate 
neutrality  and  environmental  sustainability, 
notably  for  workers  and  households 
in 
vulnerable  situations.  To  ensure  a  fair  green 
transition 
Council 
Recommendation (67),  significant  investments  in 
skills  will  be  crucial.  Coupled  with  the  relatively 
level  of  energy  poverty,  this  poses  a 
high 
challenge on the way to a fair green transition and 
the  implementation  of  REPowerEU.  Under  the 
recovery 
the 
modernisation  of  course  content  offered  by 
vocational  education  and  training  institutions  and 
the  adult  qualification  and 
learning 
investments contributes to the green transition (68). 
The  European  Social  Fund  Plus  (ESF+)  contributes 
to  green  skills  and  jobs  through  investments  in 
education and access to employment. 

resilience 

lifelong 

(RRP), 

plan 

and 

Employment in sectors most affected by the 
green transition remains stable overall while 
the  green  economy  is  expanding  strongly, 
with  workers  in  declining  activities  still 
needing  active  support.  The  greenhouse  gas 
(GHG)  emissions  intensity  of  Portugal’s  workforce 
fell  from  13.2  to  9.7  tonnes  between  2015  and 
2021, and is below the EU average of 13.7 tonnes 
(see  Graph A8.1  and  Table A8.1).  Employment  in 
Portugal’s  energy-intensive  industries  represented 
2.5%  of  total  employment  in  2020,  which  has 
been  stable  since  2018  and  is  below  the  EU 
average  of  3.0%.  Employment  in  mining  and 
quarrying has remained broadly stable since 2015. 
However,  the  recent  closure  of  the  three  largest 
CO2-emiting  plants  in  the  country  -  the  coal-fired 
plants  in  Sines  and  Pego  and  the  oil  refinery  in 
Matosinhos  -  is  not  reflected  in  these  figures. 
Workers  in  the  affected  regions  need  active 
support to acquire new qualifications and find new 
employment  opportunities.  Total 
in  the 
environmental  goods  and  services  sector  grew  by 
16.9%  in  2015-19 (EU:  +8.3%),  reaching  2.3%  of 
total  employment,  close  to  the  EU  average  (see 
Annex  9  for  circular  jobs  specifically).  The  job 
vacancy 
in 
relatively 
construction,  a  key  sector for  the  green  transition 

including 

jobs 

rate 

low, 

is 

(67)  Council Recommendation of 16 June 2022 on ensuring a fair 

transition towards climate neutrality (2022/C 243/04) 
(2022/C 243/04) covers employment, skills, tax-benefit and 
social protection systems, essential services and housing. 

(1.5%  vs  4.0%  in  EU  in  2022) (69).  In  Portugal,  an 
investment  plan  will  support  the  setting  up  of 
sections  dedicated 
energies 
to 
throughout 
training  centres 
managed  by  the  Public  Employment  Services,  in 
order  to  improve  and  to  expand  the  training 
opportunities in this area. 

the  network  of 

renewable 

Graph A8.1: Fair transition challenges in Portugal 

Source: Eurostat, EMPL-JRC GD-AMEDI/AMEDI+ projects and 
World Inequality Database (see Table A8.1). 

industries,  workers’  participation 

Upskilling  and  reskilling  in  declining  and 
transforming  sectors  increased.  In  energy-
intensive 
in 
education  and  training  increased  from  9.3%  in 
2015  to  12.1%  in  2022  and  is  above  the  EU 
average  (10.4%).  In  Portugal,  32%  of  citizens 
believe  they  do  not  have  the  necessary  skills  to 
contribute  to  the  green  transition  (EU:  38%) (70). 
Specific 
investments  under  the  RRP  aim  to 
strengthen training and skills in the blue economy 
and  the  bio-economy.  The  Just  Transition  Fund 
provides training to help reskill workers in regions 
affected  by  the  green  transition,  together  with  a 
broader  training  offer  at  national 
level  and 
flexibility  mechanisms  to  encourage  in-company 
training. In particular, the EUR 223.8 million to be 
invested from the Just Transition Fund in Alentejo 
Litoral, Médio Tejo and the city of Matosinhos are 
expected to contribute to the creation of 490 new 
jobs,  to  finance  the  reskilling  and  training  of  390 
workers  and  support  research  and  innovation  in 
SMEs  in  emerging  green  sectors.  For  the  period 
2021-2027,  ESF+  investments  worth  EUR 609 
million  will  contribute  to  green  skills  and  jobs 
under 
for  Demography, 
Qualifications and Inclusion’, out of which EUR 399 

‘Programme 

the 

(69)  Eurostat (JVS_A_RATE_R2) 

(68)  See 2022 Country Report (Annex 6) and Annex 3 for an 

(70)  Special Eurobarometer 527. Fairness perceptions of the 

overview. 

green transition (May-June 2022). 

44 

00.511.522.533.5GHG per workerEmployment EIIEducation &training EIIEnergy povertyTransportpoverty(proxy)CarboninequalityEU LatestPT Latest (vs EU Latest)PT 2015 (vs EU Latest) 
 
                                                 
  
                                                 
 
Table A8.1: Key indicators for a fair transition in Portugal 

Source:  Eurostat (env_ac_ainah_r2, nama_10_a64_e, ilc_mdes01), EU Labour Force Survey (break in times series in 2021), 
EMPL-JRC GD-AMEDI/AMEDI+ projects and World Inequality Database (WID). 

million will go directly to investments in education, 
training and lifelong learning, and EUR 41.4 million 
will improve access to employment.  

While  energy  poverty 
indicators  have 
improved  in  recent  years,  Portugal  remains 
among  the  worst  performers  in  the  EU  and 
the spike in energy prices can be expected to 
worsen  the  situation.  The  share  of  the  total 
population unable to keep their homes adequately 
warm  fell  considerably  from  23.8%  in  2015  to 
16.4% in 2021, while remaining well-above the EU 
average  of  6.9% (71).  In  particular,  27.9%  of  the 
population  at  risk  of  poverty  were  affected  in 
2021  (EU:  16.4%  in  2021),  as  were  18.9%  of 
lower middle-income households (in deciles 4-5) in 
2021 (EU: 8.2% in 2021). Before the  energy price 
hikes, an estimated 28.7% of the total population 
and  68%  of  the  (expenditure-based)  at-risk-of-
poverty 
residential 
(AROP)  population  had 
expenditure  budget  shares  for  electricity,  gas  and 
other  fuels (72)  above  10%  of  their  household 
budget  (still  above  the  estimated  EU  average  of 
26.9 and 48.2%, respectively). A national strategy 
to fight energy poverty is being discussed (73). 

The  increased  energy  prices  in  2021-2023 
negatively  affect  households’  budgets,  in 
particular  for  low-income  groups.  As  a  result 
of energy price changes during the August 2021 to  
January  2023  period  relative  to  the  prior  18 
months  (see  Annex  7),  in  the  absence  of  policy 
support and behavioural responses, the fraction of 
individuals living in households which spend more 
than  10%  of  their  budget  on  energy  would  have 
increased  by  10.8  percentage  points (pps)  for  the 
whole  population  and  by  13.1  pps  among  the 

(71)  Energy poverty is a multi-dimensional concept. The indicator 
used focuses on an outcome of energy poverty. Further 
indicators are available at the Energy Poverty Advisory Hub. 

(72)  Products defined according to the European Classification of 
Individual Consumption according to Purpose (ECOICOP): 
CP045. 

(expenditure-based)  AROP  population,  less  than 
the  EU-level  increases  (16.4  pps  and  19.1  pps, 
respectively) (74).  The  expenditure  shares  of  low 
and  lower-middle  income  groups  would  have 
increased the most, for both electricity and gas, as 
shown  in  Graph A8.2.  Among  the  (expenditure-
based)  AROP  population,  the  share  of  individuals 
living in households with budget shares for private 
fuels (75)  above  6%  would  have 
transport 
increased  by  4.3  pps  (as  the  EU  average),  while 
remaining above the EU average in January 2023 
(55.7% vs 37.9%) due to the increase in transport 
fuel prices. The RRP includes measures to support 
clean  urban  mobility  and 
improve  energy 
efficiency in social housing.  

Graph A8.2: Distributional impacts of energy prices 
due to rising energy expenditure (2021-2023) 

(1) Mean change of energy expenditure as a percentage (%) 
of total expenditure per income decile (D) due to observed 
price changes (August 2021-January 2023 relative to the 18 
months prior), excl. policy support and behavioural responses. 
Source: EMPL-JRC GD-AMEDI/AMEDI+ projects, based on 
Household Budget Survey 2015 and Eurostat inflation data 
for CP0451 and CP0452. 

Access  to  public  transport  displays  a  deep 
urban-rural  divide.  Just  under  half  of  the 
Portuguese population perceive public transport to 
be  available  (45%  vs  55%  in  the  EU)  and 

(74)  EMPL-JRC GD-AMEDI/AMEDI+ ; see details in the related 

technical brief. 

(73)  Public consultation phase concluded on 3rd March 2023. 

(75)  ECOICOP: CP0722. 

45 

0.0%0.5%1.0%1.5%2.0%2.5%3.0%ElectricityGasElectricityGasElectricityGasElectricityGasElectricityGasElectricityGasElectricityGasElectricityGasElectricityGasElectricityGasD1D2D3D4D5D6D7D8D9D10PT GasPT ElectricityEU GasEU ElectricityIndicatorDescriptionPT 2015PT LatestEU LatestGHG per workerGreenhouse gas emissions per worker - CO2 equivalent tonnes13.29.7 (2021)13.7 (2021)Employment EIIEmployment share in energy-intensive industries, including mining and quarrying (NACE B), chemicals (C20), minerals (C23), metals (C24), automotive (C29) - %2.32.5 (2020)3 (2020)Education & training EIIAdult participation in education and training (last 4 weeks) in energy-intensive industries - %9.312.1 (2022)10.4 (2022)Energy povertyShare of the total population living in a household unable to keep its home adequately warm - %23.816.4 (2021)6.9 (2021)Transport poverty (proxy)Estimated share of the AROP population that spends over 6% of expenditure on fuels for personal transport - %51.455.7 (2023)37.1 (2023)Carbon inequalityAverage emissions per capita of top 10% of emitters vs bottom 50% of emitters5.55.4 (2020)5 (2020) 
                                                 
   
                                                 
 
  
 
affordable  (46%  vs  54%  in  the  EU),  while  more 
citizens consider transport as being of good quality 
(58%  vs  60%  in  the  EU).  As  regards  these 
perceptions, rural areas in Portugal perform worse 
than  urban  areas  in  all  three  aspects,  scoring 
below  the  EU  average  of  rural  areas (76).  The 
average  carbon  footprint  of  the  top  10%  of 
emitters among the population in Portugal is about 
5.4  times  that  of  the  bottom  50%  (see  Graph 
A8.1),  i.e.  slightly  more  pronounced  than  the  EU 
average (5.1 times). In Portugal, the average levels 
of  air  pollution  in  2020  stood  below  the  EU 
average  (8.1  vs  11.2  µg/m  PM2.5),  with  17%  of 
the population living in regions exposed to critical 
levels  of  air  pollution (77).  This  has 
led  to 
significant  health 
in  particular  on 
impacts, 
vulnerable  groups,  and  2 640  premature  deaths 
annually (78).  

(76)  EU (rural): 46%, 48%, 56% respectively. Special 

Eurobarometer 527. 

(77)  Double the recommendations in the WHO Air Quality 

Guidelines. (annual exposure of 5µg/m3) 

(78)  EEA- Air Quality Health Risk Assessment 

46 

 
 
                                                 
PRODUCTIVITY 
ANNEX 9: RESOURCE PRODUCTIVITY, EFFICIENCY AND CIRCULARITY 

The  circular  economy  transition  is  key  to 
climate  and 
delivering  on 
the  EU’s 
environmental  goals  and  provides 
large 
socioeconomic  benefits.  It  spurs  job  growth, 
innovation  and  competitiveness  and 
fosters 
resilience  and  resource  security.  The  circularity 
transition  of  industry,  the  built  environment  and 
agri-food  can  generate  significant  environmental 
improvements (see Annex 6), as they rank among 
the most resource-intensive systems. 

in 

increase 

Portugal’s  circular  economy  transition  needs 
to  be  improved  to  meet  the  EU’s  circular 
economy goals. The EU’s 2020 circular economy 
action  plan  (CEAP)  aims  at  doubling  the  circular 
material  use  rate  between  2020  and  2030. 
Portugal’s  circular  use  of  material  was  2.1%  in 
2016  and  2.5%  in  2021,  compared  to  the  EU 
average of 11.7%. Portugal is thus well below the 
EU  average,  with  a  slight 
its 
performance.  The  CEAP  also  aims  to  significantly 
decrease  the  EU’s  material  footprint.  In  2020, 
Portugal’s  material  footprint  (17.1  tonnes  per 
head)  was  above  the  2020  EU-27  average  (13.7 
tonnes per head), which confirms the upward trend 
since  2016  (15  tonnes  per  head).  The  labour 
market  benefits  of  the  circular  transition  have 
considerably  increased,  with  continuous  growth  in 
direct  circular  jobs  from  2016  (0.6%)  to  2019 
(3.2%).  As  regards  health  and  safety  in  circular 
jobs,  fatal  accidents  in  waste  management  and 
materials  recovery  are  above  the  average  of  all 
economic  sectors  and  above  the  EU  average  in 
Portugal (79). 

Portugal  has  adopted  policies  to  address 
circular economy challenges, with results yet 
to  materialise.  Portugal  adopted  a  national 
circular  economy  action  plan  in  2017  and  a  new 
one is being prepared. New national legislation on 
waste  management  was  approved  in  2020.  The 
new  national  waste  management  plan  (PNGR 
2030)  and the Strategic Plan for Municipal Waste 
(PERSU 2030) have been adopted in March 2023. 
The  new  regional  waste  management  plan  for 
Azores is undergoing adoption. The progress in this 
field  has  overall  been  limited.  Therefore,  it  is 
essential to adopt the pending measures, including 
additional efforts and further investments. 

(79)  Eurostat [HSW_N2_02] for NACE Rev. 2 sector E38; 7.11 

fatal accidents p. 100 000 employed in 2018-2020 vs 2.32 
for all sectors in PT; 6.33 in the EU-27 for sector E38 

47 

recycling 

performance 

Portugal’s 
has 
stagnated  over  recent  years,  remaining  well 
below  the  EU’s  binding  targets.  With  a 
municipal waste recycling rate of 28.9%, Portugal 
missed  the  EU  target  for  recycling  of  50%  by 
2020.  Portugal  is  at  risk  of  missing  the  EU’s 
recycling  targets  for  several  packaging  fractions 
and  municipal  waste  for  2025  and  is  at  a 
significant  distance  from  the  landfill  reduction 
target for 2035. In 2020, 51% of municipal waste 
was still being landfilled, more than double the EU 
average (23%). The situation varies by region, but 
Portugal will need to make considerable efforts to 
meet  the  EU’s  recycling  targets  for  the  period  up 
in  separate 
to  2035  through 
collection  and  treatment  of  waste  with  a  view  to 
recycling, in particular for packaging and biowaste. 

improvements 

Graph A9.1: Trend in material use 

Source: Eurostat 

The  industrial  system  is  yet  to  become 
circular.  The  economy,  particularly  industry,  is 
less  efficient  at  using  materials  than  the  EU 
average,  with  a  resource  productivity  of  1.4 
purchasing power standard per kilogramme vs 2.3 
in  2021,  undermining  Portugal’s 
for  the  EU 
resilience  (see  Annex  5).  Furthermore,  resource 
productivity  has  remained  stable  since  2016, 
indicating  significant  potential  to  boost  repair, 
reuse  and  use  of  secondary  raw  materials.  The 
Portuguese RRP has an investment focused on the 
introduction  of  new  technologies  or  improved 
production processes to decarbonise them, such as 
through  the  incorporation  of  new  raw  materials 
and  circular  economy  measures  (Investment  TC-
C11-i01). 

0.020.040.060.080.0100.0120.00.02.04.06.08.010.012.014.016.018.0201620172018201920202021kg/capitatonnes/capitaMaterial footprint Portugal (tonnes/capita)Material footprint EU-27 (tonnes/capita)Trade in recyclable raw materials Portugal (imports extra EU, kg/capita)Trade in recyclable raw materials EU-27 (imports extra EU, kg/capita) 
 
 
                                                 
             
 
Graph A9.2: Treatment of municipal waste 

Source: Eurostat 

The  built  environment  system  continues  to 
exacerbate  the  depletion  of  resources.  The 
recovery rate of construction and demolition waste 
has  slightly  decreased  since  2016  but  remains 
above the EU average (95% vs 89%). Soil sealing 
is  stable  between  2016  and  2018  and  is  very 
similar  to  the  EU  average.  In  any  event,  there  is 
scope  for 
renovating  existing  buildings  and 
improving their use and for increasing the share of 
secondary raw materials used in construction. The 

Portuguese RRP contains a series of measures that 
address the issue of circular economy in buildings, 
designed  to  support  costs  of  projects  promoting 
renovation,  energy  efficiency,  decarbonisation, 
water efficiency and circular economy in buildings. 

The  agri-food  system  has  yet  to  design  out 
food waste. Portugal’s composting and anaerobic 
digestion  per  head  has  fluctuated  but  remains 
below the EU  average in 2021 at 86 kg per head 
vs  100  kg,  which  was  also  not  in  line  with  best 
practice.  Increasing  composting  and  anaerobic 
digestion  could  enhance  Portugal’s  strategic 
autonomy  by  means  of  producing  organic 
fertilisers and or biomethane.  

There remains a financing gap in the circular 
economy, 
including  waste  management.  
Additional  investments  will  be  required  to 
address  growing  needs.  The  financing  gap  was 
estimated  at  EUR  389  million  per  year  between 
2014  and  2020.  Over  this  period,  investment 
needs  were  estimated  to  be  at  least  EUR  838 
million  per  year  while  investment  baselines  were 
EUR 449 million per year (see Annex 6). Additional 
investments  are  necessary  in  improving  separate 
waste  collection  and  treatment  infrastructure  to 
divert waste from landfilling, with particular focus 
on packaging and biowaste. 

Table A9.1: Overall and systemic indicators on circularity 

(1) Persons employed in the circular economy only tracks direct jobs in selected sub-sectors of NACE codes E, C, G and S; (2) the 
circular material use rate measures the share of material recovered and fed back into the economy in overall material use; (3) the 
recovery rate of construction and demolition waste includes waste which is prepared for reuse, recycled or subject to material 
recovery, including through backfilling operations; (4) soil sealing: 2016 column refers to 2015 data; (5) food waste includes 
primary production, processing and manufacturing, retail and distribution, restaurants and food services, and households.  
Source: Eurostat, European Environment Agency 

48 

474486507513513514-1000100200300400500600201620172018201920202021Kg per capita Waste treatment to be determinedDifference waste generated/treatmentLandfill/disposalTotal incineration (including energy recovery)Composting and digestionMaterial recyclingEU-27AREA201620172018201920202021EU-27 Latest year EU-27Overall state of the circular economyMaterial footprint (tonnes/capita)15.017.016.817.117.1-13.72020YoY growth in persons employed in the circular economy (%)10.61.11.63.2--2.92019Water exploitation index plus (WEI+) (%)13.123.321.311.4--3.62019IndustryResource productivity (purchasing power standard (PPS) per kilogram)1.51.41.41.51.41.42.32021Circular material use rate (%)22.12.02.22.32.32.511.72021Recycling rate (% of municipal waste)30.929.129.128.926.830.549.62021Built environmentRecovery rate from construction and demolition waste (%)397.0-93.0-95.0-89.02020Soil sealing index (base year = 2006)4104.3-108.4---108.32018Agri-foodFood waste (kg per capita)5----184.0-131.02020Composting and digestion (kg per capita)79.083.086.086.072.086.0100.02021 
       
 
 
             
 
ANNEX 10: DIGITAL TRANSFORMATION 

its 

for 

targets 

Digital  transformation  is  key  to  ensuring  a 
resilient and competitive economy. In line with 
the  Digital  Decade  policy  programme,  and  in 
particular  with 
digital 
transformation  by  2030,  this  Annex  describes 
Portugal’s  performance  on  digital  skills,  digital 
infrastructure/connectivity and the digitalisation of 
businesses  and  public  services.  Where  relevant,  it 
refers  to  progress  on  implementing  the  recovery 
and  resilience  plan  (RRP).  Portugal  allocates  22% 
of 
digital 
(EUR 3.7 billion) (80). 

budget 

total 

RRP 

its 

to 

The  Digital  Decade  policy  programme  sets 
out a pathway for Europe’s successful digital 
transformation  by  2030.  The  programme 
provides  a  framework  for  assessing  the  EU’s  and 
Member States’ digital transformation, notably via 
the  Digital  Economy  and  Society  Index  (DESI).  It 
also provides the EU and its Member States with a 
way  to  work  together,  including  via  multi-country 
projects, to accelerate progress towards the Digital 
Decade  digital  targets  and  general  objectives (81). 
More  generally,  several  aspects  of  digital 
transformation  are  particularly  relevant  in  the 
current  context.  In  2023,  the  European  Year  of 
Skills, building the appropriate skillset to make full 
use of the opportunities that digital transformation 
offers  is  a  priority.  A  digitally  skilled  population 
increases  the  adoption  of  new  technology  and 
leads to productivity gains (82). Digital technologies, 
infrastructure  and  tools  all  play  a  role  in  the 
fundamental  transformation  needed  to  adapt  the 
energy 
structural 
the 
challenges (83).  

system 

current 

to 

an  ascending  trend.  The  proportion  of  female  ICT 
specialists  exceeds  the  EU  average.  However, 
Portugal  has  significant  room  to  accelerate  the 
implementation of its measures and amplify them, 
and  catch  up  with  the  EU’s  top  performers. 
is  a  national  priority 
Improving  digital  skills 
reflected  in  its  RRP  with  initiatives  targeting 
various population groups.  

digital 

infrastructure/connectivity, 
On 
Portugal shows mixed results. It performs well 
in  fast  broadband  (NGA),  fixed  very  high  capacity 
network  (VHCN)  and  fibre  to  the  premises  (FTTP) 
coverage, significantly surpassing the EU average. 
However, its overall 5G coverage, at 70%, is below 
the  EU  average  of  81%.However,  a  large  part  of 
that  is  rolled  out  in  the  3.4-3.8  GHz  spectrum 
band,  which  is  important  for  enabling  advanced 
applications  requiring  large  spectrum  bandwidth. 
Additional  work  could  ensure  that  fixed  VHCN 
coverage and especially 5G mobile coverage reach 
all households, including those in rural areas.   

improvement 

is  room  for 

There 
in  the  
digitalisation  of  Portuguese  businesses.  The 
proportion  of  businesses  with  basic  digital 
intensity  (70%)  is  slightly  above  the  EU  average 
(69%). The usage of cloud computing and big data 
applications  is  below  the  EU  averages.  However, 
the  use  of  artificial  intelligence  is  far  more 
prevalent in Portugal (17%) than in the EU overall 
(8%).  Implementing  the  RRP  measures  efficiently 
could  help  SMEs  to  bridge  the  knowledge  gaps  in 
applying  digital  solutions,  which  in  turn  could 
enhance  their  ability  to  integrate  them  into  their 
business processes.  

Portugal  has  a  medium  performance  on 
digital  skills.  It  scores  slightly  above  the  EU 
average  for  both  at  least  basic  digital  skills,  as 
well  as  for  the  share  of  ICT  specialists,,  following 

(80)  The share of financial allocations that contribute to digital 
objectives has been calculated using Annex VII of the RRF 
Regulation. 

(81)  The Digital Decade targets as measured by DESI indicators 
and complementary data sources are integrated to the 
extent currently available and/or considered particularly 
relevant in the MS-specific context.  

(82)  See for example OECD (2019): OECD Economic Outlook, 

Digitalisation and productivity: A story of complementarities, 
OECD Economic Outlook, Volume 2019 Issue 1 | OECD 
iLibrary (oecd-ilibrary.org). 

(83)  The need and possible actions for a digitalisation of the 
energy system are laid out in the Communication 
‘Digitalisation the energy system – EU action plan’ 
(COM(2022)552. 

identity  card 

Portugal  is  a  good  performer  in  providing 
digital  public  services.  It  is  almost  at  par  with 
the EU average in providing digital public services 
to  businesses,  and  exceeds  the  EU  average  for 
digital services for the public. Portugal has two eID 
schemes  notified  at  level  of  assurance  ‘high’:  the 
Digital  Mobile  Key  (Chave  Móvel  Digital)  and  the 
national 
(eID  card,  Cartão  de 
Cidadão).  It  is  also  involved  in  two  pilot  projects 
testing  the  European  Digital  Identity  Wallet  in 
everyday  usem  funded  by  the  Digital  Europe 
Programme.  Portugal  places  great  emphasis  on 
implementing  ‘digital  by  default’  across  its  public 
sector  services  and  IT  systems.  It  has  allocated a 
substantial  part  of  its  digital  RRP  investment  to 
the  digitalisation  of  the  state’s  finances,  the 
business  environment  and  improving  the  public 
administration’s  efficiency.  In  terms  of  access  to 

49 

 
 
                                                 
 
e-health  records  Portugal  scores  with  62  out  of 
100 below the EU average score of 71.  

Table A10.1: Key Digital Decade targets monitored by DESI indicators 

(1) This represents about 10% of total employment. 
(2) The Fibre to the Premises coverage indicator is included separately as its evaluation will also be monitored separately and 
taken into consideration when interpreting VHCN coverage data in the Digital Decade. 
(3) At least 75 % of Union enterprises have taken up one or more of the following, in line with their business operations: (i) cloud 
computing services; (ii) big data; (iii) artificial intelligence.   

Source: Digital Economy and Society Index 

50 

EUDigital Decade target by 2030 DESI 2021DESI 2022DESI 2023DESI 2023(EU)Digital skillsAt least basic digital skillsNA55%55%54%80%% individuals2021202120212030ICT specialists (1)4.0%4.7%4.7%4.5%20 million% individuals in employment aged 15-7420202021202120212030Digital infrastructure/connectivityFixed Very High Capacity Network (VHCN) coverage87%91%93%73%100%% households20202021202220222030Fibre to the Premises (FTTP) coverage (2)82%88%91%56%-% households20202021202220222030Overall 5G coverage0%0%70%81%100%% populated areas202020212022202220305G coverage on the 3.4-3.8 GHz spectrum bandNANA48%41%-% populated areas202220222030Digitalisation of businessesSMEs with at least a basic level of digital intensityNANA70%69%90%% SMEs202220222030Big data (3)11%11%11%14%75%% enterprises20202020202020202030Cloud (3)NA29%29%34%75%% enterprises2021202120212030Artificial Intelligence (3)NA17%17%8%75%% enterprises2021202120212030Digitalisation of public servicesDigital public services for citizensNA797877100Score (0 to 100)2021202220222030Digital public services for businessesNA828284100Score (0 to 100)2021202220222030Access to e-health recordsNANA6271100Score (0 to 100)202320232030Portugal 
 
   
 
 
 
 
 
 
 
 
 
 
 
ANNEX 11: INNOVATION 

This  Annex  provides  a  general  overview  of  the 
performance of Portugal’s research and innovation 
system,  which  is  essential  for  delivering  the  twin 
green and digital transition. 

Portugal is a ‘moderate innovator’ according 
to  the  2022  edition  of  the  European 
Innovation  Scoreboard (84).  Following  a  sharp 
decrease  in  2020,  Portugal’s  overall  innovation 
performance  increased  in  2022  but  still  remains 
below  the  EU  average  (85.8%  of  the  EU  average 
compared to 89.7% of the moderate innovators). 

Graph A11.1: R&D intensity in 2021 

(RRP)  addresses  this  challenge. 

increased  over  the  last  decade  (5.7%  of  total 
publications in 2021), it remains well below the EU 
(7.1%).  Moreover,  Portugal  performs 
average 
modestly 
in  terms  of  the  share  of  public 
expenditure  on  R&D  financed  by  businesses 
(0.016%  in  2019  compared  to  an  EU  average  of 
0.054%).  The  Portuguese  recovery  and  resilience 
plan 
Indeed, 
several  measures,  especially  under  Component 5 
of  the  RRP (86),  are  aimed  at  improving  public-
private  partnerships  and  fostering  business-
academia consortia and collaborative laboratories. 
The  ‘Collaborative  Laboratories’  (COLABs)  are  a 
promising  initiative  as  they  bring  together  higher 
education  institutions,  enterprises,  technological 
centres,  companies,  business  associations  and 
other relevant partners. 

tax 

incentives 

Despite  a  high  level  of  support  for  business 
innovation,  businesses’  innovation  capacity 
remains limited. The public system offers a high 
level  of  support  for  business  R&D  expenditure. 
Notably, 
for  business  R&D 
expenditure as % of GDP rose from 0.09% in 2010 
to  0.201%  in  2019,  well  above  the  EU  average. 
However,  when  looking  at  technology  outputs,  it 
can  be  observed  that  the  country’s  overall 
patenting  activity  remains 
limited.  Access  to 
finance  for  young  innovative  firms still  remains  a 
challenge,  as  the  availability  of  venture  capital  is 
still  quite  low  and  has  decreased  markedly  since 
2010 (0.021% in 2021 compared with 0.028% in 
2010). 

Portugal  has  a  good  public  research  system 
which  attracts  new  talent  but  which  also 
suffers from brain drain. Indeed, the number of 
new  graduates  in  science  and  engineering  per 
thousand  population  aged  24-35  is  one  of  the 
highest  in  Europe  (19.5  in  2020  compared  to  an 
EU average of 16) and the country is also able to 
attract  foreign  doctoral  students  (roughly  33%  of 
the total number and the share has been steadily 
increasing  since  2015 (87)).  However,  the  country 
experiences  substantial  levels  of  brain  drain (88). 
Different  factors  contribute  to  this  phenomenon, 
including  recruitment  processes  for  researchers 

Source: Eurostat 

Insufficient levels of public and private R&D 
investment  continue  to  weigh  on  Portugal’s 
research  and  innovation  performance.  While 
the  country  has  set  ambitious  targets  for  R&D 
expenditure in the forthcoming years, including an 
R&D intensity (85) target of 2.4% by 2025, the goal 
is  still  far  from  being  achieved.  Despite  a  slow 
increase in recent years, total R&D intensity stood 
at  1.68%  in  2021  against  an  EU  average  of 
2.26%.  Public  expenditure  on  R&D  has  remained 
stagnant,  at  around  0.64%  in  the  last  decade. 
However,  business  enterprise  expenditure  on  R&D 
is  steadily  increasing  but  is  still  below  the  EU 
average  (1%  of  GDP  in  2021  against  an  EU 
average of 1.49%). 

The low degree of public-private cooperation 
remains a major bottleneck. While the share of 
public-private scientific co-publications has slightly 

(84)  2022 European Innovation Scoreboard, Country profile: 

Portugal https://ec.europa.eu/assets/rtd/eis/2022/ec_rtd_eis-
country-profile-pt.pdf The EIS provides a comparative 
analysis of innovation performance in EU countries, including 
the relative strengths and weaknesses of their national 
innovation systems (also compared to the EU average). 

(85)  Defined as gross domestic expenditure on R&D as a 

percentage of GDP. 

(86)  In Component 12 of the Portuguese RRP there is also a 

measure supporting business-academia cooperation in the 
field of bioeconomy (C12.i01). 

(87)  Source: Eurostat 

(88)  Talent circulation and intersectoral mobility: analytical report 
with a mapping of talent mobility and causes of brain drain: 
knowledge ecosystems in the new era-KI0722381ENN.pdf. 

51 

00,511,522,5R&D IntensityPublic expenditurePrivate expenditureas % of GDPEUPT 
 
  
                                                 
                                                 
 
Table A11.1: Key innovation indicators 

(1) EU average for the latest available year or the year with the highest number of country data. 
Source: Eurostat, OECD, DG JRC, Science-Metrix (Scopus database and EPO’s Patent Statistical database), Invest Europe 

as 

and 

perceived 

precarious 

fixed-term 

academics, 

it  difficult 

post-doctoral 

lacking 
and 
transparency (89), 
work 
conditions (90).  The  academic  sector  often  offers 
positions 
unstable, 
making 
to  secure  a  permanent 
academic  post.  COLABs  could  be  a  tool  for 
they  aim  at 
diminishing  brain  drain  as 
consolidating  research  communities,  and  also  for 
creating,  directly  and  indirectly,  qualified  and 
scientific  employment  in  Portugal  through  the 
innovation 
implementation  of 
agendas.  However,  further  efforts  will  be  needed 
to  retain  talent  and  strengthen  the  attractiveness 
of academic careers in Portugal. 

research  and 

(89)  Talent circulation and intersectoral mobility: analytical report 
with a mapping of talent mobility and causes of brain drain: 
knowledge ecosystems in the new era-KI0722381ENN.pdf. 

(90)  OECD Review of Higher Education, Research and Innovation: 

Portugal (2019): 

https://www.oecd-ilibrary.org/docserver/9789264308138-

en.pdf?expires=1669907865&id=id&accname=oid031827&
checksum=D62C22DB51A43DD26752612666522CBF 

. 

52 

EUaverage (1)R&D intensity (GERD as % of GDP)1.541.241.41.611.682.26Public expenditure on R&D as % of GDP0.680.650.640.660.640.76Business enterprise expenditure on R&D (BERD) as % of GDP0.710.580.730.9211.49Scientific publications of the country within the top 10% most cited publications worldwide as % of total publications of the country 9.799.2::9.8Patent Cooperation Treaty (PCT) patent applications per billion GDP (in PPS)0.61.01.0::3.3Public-private scientific co-publications as % of total publications4.44.85.55.65.77.1Public expenditure on R&D financed by business enterprise (national) as % of GDP0.0080.0120.0140.016:0.054New graduates in science & engineering per thousand pop. aged 25-341316.218.619.5:16.0Total public sector support for BERD as % of GDP0.1280.1550.264::0.194R&D tax incentives: foregone revenues as % of GDP0.090.110.201::0.1Share of environment-related patents in total patent applications filed under PCT (%)22.0 15.3 9.6: :13.3Venture capital (market statistics) as % of GDP0.0280.0290.0180.0200.0210,074Employment in fast-growing enterprises in 50% most innovative sectors3.156.9::5.52021Quality of the R&I systemAcademia-business cooperationHuman capital and skills availabilityPublic support for business enterprise expenditure on R&D (BERD)Green innovation Finance for innovation and economic renewalPortugal2010201520192020Key indicators  
 
 
                                                 
 
  
 
ANNEX 12: INDUSTRY AND SINGLE MARKET 

Productivity  growth remains a key  challenge 
labour 
for  the  Portuguese  economy.  Real 
productivity  per  person  employed  increased  by 
4.6% in 2022 after the pandemic-related declines 
of  2020.  However,  productivity  growth  has  been 
slow  in  the  last  decade,  decreasing  from  around 
80% in 2010 to 74.6% of the EU average in PPS in 
2022.  In  industry,  real  labour  productivity  per 
person  increased  by  1.7%  in  2022,  slightly  above 
the  EU  average  of  1.4%.  Moreover,  Portugal 
displays  relatively  low  levels  of  investment:  gross 
fixed capital formation represented 20.3% of GDP 
in  2022,  compared  to  22.7%  for  the  EU.  Public 
investment,  which  dropped  below  2%  of  GDP 
between  2016-19,  has  rebounded  to  2.47%  in 
2022,  boosted  by  EU  funds,  although  it  is  still 
below  Portugal’s  peer  countries  and  the  EU 
average level.  

Graph A12.1: Labour productivity per person 
employed and hour worked in PPS (EU = 100) 

Source: Eurostat 

long-term  barriers  to 

Some 
investment 
remain.  According  to  IMD (91),  Portugal  was  the 
42nd  most  competitive  economy  in  the  world  in 
2022,  falling  from  36th  in  2021.    Availability  of 
skilled  staff,  rising  energy  costs  and  uncertainty 
about the future are the three most cited barriers 
to  investment  in  Portugal (92).  After  a  rebound  in 
2021 (increasing by 8.7%), investment is expected 
to  slow,  growing  only  by  0.8%  in  2022  due  to 
costs, 
supply 
conditions 
worsening 
high 
uncertainty. 
in  construction,  which 
accounts  for  almost  half  of  the  total,  stands  out, 
with  its  background  of  constraints  related  to  the 
lack of skilled staff, materials and rising costs. 

rising  production 
and 

financing 
Investment 

constraints, 

Graph A12.2: Business environment and 
productivity drivers 

Source: 1) % of GDP, 2021 Eurostat;  
2) composite indicator, 2021 European Investment Fund 
access to finance index;  
3) average payment delay in number of days, 2022 Intrum;  
4) % of firms in manufacturing facing constraints, 2022 
European Commission business consumer survey;  
5) proportion of contracts awarded with a single bidder, 2022 
Single Market Scoreboard. 

of 

that 

The  business  environment  shows  room  for 
improvement.  The  share  of  companies  reporting 
business  regulation  as  a  major  obstacle  for  their 
long-term  investment  is  higher  in  Portugal  than 
the  EU  average  (46.2%  vs  29.6%  in  2022) (93). 
Inefficiencies  in  the  Portuguese  justice  system 
the 
may  also  hamper  business  activities: 
proportion 
the 
rate 
companies 
independence of courts and judges as bad is 45%, 
one of the highest in the EU, and 54% of them do 
not  feel  confident  that  their 
is 
law  and  courts (94).  The 
protected  by 
Portuguese  RRP  includes  measures  to  modernise 
the justice and business environment by removing 
barriers to investment, increasing the efficiency of 
administrative  and  tax  courts  and  simplifying  the 
insolvency framework. Regarding barriers raised by 
burdensome  licensing  requirements,  in  December 
2022  Portugal  launched  the  “Simplex  Ambiental” 
programme, a package of measures to change the 
environmental  rules  for  developing  hydrogen  and 
renewable  energy  projects  aiming  to  simplify 
administrative  licensing  processes  for  households 
and industry (See annex 7). 

investment 

the 

(91)  IMD, World Competitiveness Booklet, 2022 

(92)  EIB Investment Survey, European Union, 2022 

(93)  European Investment Survey 2022 

(94)  2022 Perceived independence of the national justice 

systems in the EU among companies 

53 

60.070.080.090.0100.0110.0120.02010201120122013201420152016201720182019202020212022EU-27SpainItalyPortugal1) Businessinvestments2) EIF access tofinance index3) Payment gap- G2B3) Payment gap- B2B4) Materialshortage4) Labourshortage5) Single bidsEuropean UnionPortugal 
 
      
                                                 
        
                                                 
 
 
Access  to  finance  remains  a  constraint  for 
firms,  mainly  in  terms  of  equity  (see  table  of 
indicators). Bank finance is the preferred source of 
finance  for  about  80%  of  Portuguese  firms  using 
external  finance,  with  most  of  the  bank  loans 
taken  at  a  variable  or  mixed  rate.  However, 
venture  capital  investment  represents  just  0.02% 
of  GDP.  The  RRP  aims  to  improve  the  access  to 
equity  and  quasi-equity  investments  for  viable 
companies.  On  late  payments,  actual  payment 
times remain rather high, particularly in the public 
sector  (57  days  for  business  transactions  and  65 
days  for  the  public  sector),  particularly  in  some 
regions  like  Azores  and  Madeira.  In  June  2022, 
arrears 
the  National  Health  Service 
amounted  to  EUR  644.4  million,  an  increase  of 
4.4%  compared  to  the  previous  year.  41.8%  of 
SMEs  experienced  some  payment  delays  in  the 
last  six  months,  in  line  with  the  EU  average  (see 
indicators).  RRP  reforms  aimed  at 
table  of 
the  governance  model  of  public 
improving 
hospitals  and  modernising  and  simplifying  public 
financial  management  should  help  improve  the 
situation. 

from 

Graph A12.3: Employment in technology and 
knowledge-intensive sectors 

Source: Eurostat 

is  hampered  by 

SME  growth 
low  R&D 
investment and digital uptake. According to the 
2022 Innovation Scoreboard, Portugal is classified 
as  a  moderate  innovator  but  underperforming 
relative  to  its  European  peers  (85.8%  of  the  EU 
average)  with  the  gap  widening.  R&D  business 
expenditure  is  highlighted  as  a  relative  weakness 
as  well  as  the  number  of 
innovative  SMEs 
collaborating  with  each  other  (see  Annex  11). 
Moreover,  in  2022  the  share  of  employment  in 
high  and  medium  high-technology  manufacturing 
out  of  those  employed  in  manufacturing  is  3.8% 
(compared  to  the  EU  average  of  5.9%)  and  the 

(13% 

sectors 

labour  force  is  concentrated  in  low  and  medium 
Portugal 
low-technology 
compared to the EU average of 9.9%). Additionally, 
SMEs face many challenges in digitalisation, being 
below the EU average in digital intensity and in the 
usage  of  big  data,  cloud  technologies  and  online 
selling (95) (see Annex 10). 

in 

The  Portuguese  economy  is  well  integrated 
into the single market. Despite Portugal’s trade 
integration  in  the  single  market  for  goods  and 
services  being  below  the  EU  average  (34.4  vs 
45.8),  almost  70%  of  exports  and  68%  of 
Portuguese imports resulted from intra-EU trade in 
2022.  In  services,  tourism  exports  continued  to 
rebound 
in  2022,  to  about  4%  below  pre-
pandemic levels; their share in GDP, relatively high 
by  European  standards,  dropped  from  8.1%  in 
2019 to 3.7% in 2020, rebounding to 7.9% in the 
first  half  of  2022.  Some  structural  barriers 
hamper  competition  in  the  provision  of  business 
services, in particular restrictions in 2021 on highly 
regulated  professions  like  civil  engineers,  tourist 
guides, 
lawyers,  accountants/tax  advisers  and 
architects (96). 

(95)  Digital Economy and Society Index (DESI) 2022 

(96)  Commission’s Communication on taking stock of and 

updating the reform recommendations for regulation in 
professional services of 2017.  

54 

0.2.4.6.8.10.12.14.16.201620192022EU-27 High and medium high-technology manufacturingEU-27 Low and medium low-technology manufacturingPortugal High and medium high-technology manufacturingPortugal Low and medium low-technology manufacturing 
     
                                                 
Table A12.1: Industry and the Single Market 

(1) last available year 
Source: (1) AMECO, (2) Eurostat, (3) ECFIN BCS, (4) Eurostat, (5) COMEXT and Commission calculations, (6) Eurostat, (7) Eurostat, 
(8) OECD, (9) Single Market Scoreboard, (10) EIB survey, (11) Eurostat: (12) Intrum, (13) SAFE Survey, (14) EIF SME Access to 
Finance Index 

55 

POLICY AREAINDICATOR NAME20182019202020212022EU27 average (*)Net private investment, level of private capital stock, net of depreciation, % GDP (1)0.81.200.913.7Net public investment, level of public capital stock, net of depreciation, % GDP (1)-0.8-0.8-0.5-0.2-0.30.4Real labour productivity per person in industry (% yoy)(2)1.31-4.93.71.71.4Cost competitive-nessNominal unit labour cost in industry (% yoy)(2)2.73.36.21.26.12.9Material shortage (industry), firms facing constraints, % (3)86581647Labour shortage using survey data (industry), firms facing constraints, % (3)88791128Vacancy rate (business economy)(4)1.21.30.91.323.1Concentration in selected raw materials, Import concentration index based on a basket of critical raw materials (5)0.170.180.180.180.210.18Installed renewables electricity capacity, % of total electricity produced (6)67.267.267.272.8n.a.50.9Single Market integrationEU trade integration, % (7)29.429.527.030.334.445.8RestrictionsEEA Services Trade Restrictiveness Index (8)0.050.050.050.050.050.05Public procurement Single bids, % of total contractors (9)213824202429Investment obstaclesImpact of regulation on long-term investment, % of firms reporting business regulation as major obstacle (10)45.545.348.145.846.229.6Bankruptcies, Index (2015=100)(11)54.349.751.144.836.786.8Business registrations, Index (2015=100) (11)125.6137.2104.4115.5134.2121.2Payment gap - corporates B2B, difference in days between offered and actual payment (12)121718121313Payment gap - public sector, difference in days between offered and actual payment (12)322824121015Share of SMEs experiencing late payments in past 6 months, % (13)n.a.40.341.638.141.843EIF Access to finance index - Loan, Composite: SME external financing over last 6 months, index values between 0 and 1 (14)0.560.550.650.46n.a.0.46EIF Access to finance index - Equity, Composite: VC/GDP, IPO/GDP, SMEs using equity, index values between 0 and 1 (14)0.070.070.070.09n.a.0.23BUSINESS ENVIRONMENT - SMEsBusiness demographyLate paymentsAccess to financeHEADLINE INDICATORSEconomic StructureRESILIENCEShortagesStrategic dependenciesSINGLE MARKET 
 
        
 
ANNEX 13: PUBLIC ADMINISTRATION 

This  Annex  outlines  the  performance  of 
Portugal’s  public  administration,  which  is 
essential for providing services and carrying 
out  reforms.  Overall,  Portugal  scores  slightly 
below  the  average  of  the  EU-27  on  government 
effectiveness  (Portugal:  0.99,  EU-27:  1.02) (97). 
Portugal  has  launched  several  reforms  under  its 
recovery  and  resilience  plan,  keeping  up  the 
momentum of reform in key policy areas, including 
the  digital  transition  in  the  private  and  public 
sectors, public finance, and public administration. 

share  of 

The  ageing  of  the  public  administration  and 
the attractiveness of public employment are 
significant risks for Portugal.  The ratio of 25-
49  to  50-64  year-olds  is  relatively  low  in  the 
public  administration  (Portugal:  1.3,  EU-27:  1.5), 
and in other public sector areas such as education. 
This  represents  a  risk  to  continuity  and  capacity. 
The 
the  public 
employees 
administration  with  higher  education  remains 
below the EU-27 average (Portugal: 38.4%, EU-27: 
52%)  (Table  A13.1).  The  government’s  reform 
efforts  focus  on  speeding  up  the  recruitment 
process (98),  investing  in  training  for  senior  civil 
servants,  improving  integrity,  creating  a  better 
work-life  balance  and  building  an 
innovation 
culture (99).  

in 

Portugal  ranks  below  the  EU-27  average  on 
regulatory  governance 
indicators.  Recent 
reforms  made  regulatory  impact  assessments 
obligatory  for  primary  and  secondary  legislation. 
An  oversight  body  monitors  their  quality  and 
provides  guidance  to  ministries.  However,  the 
focus is on simplification. Evaluation of impact and 
regulatory  ex  post  assessments  are  not  well 
established.  Consultations  with  stakeholders  take 
place  at  a  late  stage  in  the  process,  which  keeps 
Portugal’s performance on the OECD indicators on 
regulatory  governance  and  policy  well  below  the 
EU  average  (Portugal:  1.27,  EU-27:  1.68)  (Graph 
A13.1) (100). 

(97)  Worldwide Governance Indicators, 2021. 

(98)  Diário da República, Portaria No 12-A/2021 de 11 de 

Janeiro (https://dre.pt/dre/detalhe/portaria/12-a-2021-
153519418).   

(99)  AMA, Axis 1 - Investing in People - 1 year of the Strategy for 

Innovation and Modernisation of the State and Public 
Administration, 2021 (https://www.youtube.com/watch?v=OG
SZBRv98ow).  

(100) OECD, Better Regulation Practices across the European Union 

2022. 

is  high.  However, 

The  overall  performance  on  e-government 
the  share  of 
maturity 
individuals  using  the  internet  to  interact  with  the 
government  is  below  the  EU  average  (Portugal: 
59%;  EU-27  65%)  and  has  seen  only  a  slow 
increase  since  2018.  Portugal’s  recovery  and 
resilience  plan  contains  a  range  of  measures  to 
accelerate the digital transformation of the public 
administration between 2022 and 2026.  

the 

The  efficiency  of 
justice  system 
continues  to  face  challenges,  especially  in  the 
administrative  and  tax  courts.  In  administrative 
cases,  the  time  it  takes  to  hand  down  a  decision 
remains long, having registered a slight increase in 
delays in first instance cases, and further delays in 
second  instance.  Although  the  number  of  pending 
administrative cases in first instance remains high, 
a significant improvement can be seen in the rate 
of  resolving  cases,  which  is  above  120%.  The 
overall  quality  of  the  justice  system  is  good.  The 
level of digitalisation is advanced, with procedural 
rules  allowing  the  use  of  digital  technology  in 
courts  for  civil,  commercial,  administrative  and 
criminal  cases.  Although  gaps  remain,  digital 
technology is being used by courts and prosecution 
services  for  a  significant  number  of  procedures. 
Measures  are  being  taken  to  address  the  lack  of 
staff, although some concerns remain, in particular 
regarding non-judicial staff and public prosecutors. 
As  regards  judicial  independence,  no  systemic 
deficiencies have been reported (101). 

(101) For a more detailed analysis of the performance of the 
justice system in Portugal, see the 2023 EU Justice 
Scoreboard (forthcoming) and the country chapter for 
Portugal in the 2023 Rule of Law Report (forthcoming). 

56 

 
 
                                                 
 
                                                 
 
Table A13.1: Public administration indicators 

(1) High values denote a good performance, except for indicator # 6. (2) 2022 value. If not available, the 2021 value is shown. 
(3) Measures the user centricity (including for cross-border services) and transparency of digital public services as well as the 
existence of key enablers for the provision of those services. (4) Defined as the absolute value of the difference between the 
percentage of men and women in senior civil service positions. 
Flags: (b) break in time series; (d) definition differs; (u) low reliability. 
Source: ICT use survey, Eurostat (# 1); E-government benchmark report (# 2); Open data maturity report (# 3); Labour Force 
Survey, Eurostat (# 4, 5, 7), European Institute for Gender Equality (# 6); Fiscal Governance Database (# 8, 9); OECD Indicators of 
Regulatory Policy and Governance (# 10). 

Graph A13.1: Portugal. a) Regulatory impact assessment, b) Stakeholder engagement and c) Ex post 
evaluation of legislation 

Source: Indicators of Regulatory Policy and Governance Surveys 2017 and 2021, (http://oe.cd/ireg). 

57 

PT201720182019202020212022EU-27(2)161.355.253.856.958.9n/a64.82n/an/an/a82.378.479.172.93n/a0.50.40.50.70.80.8432.832.032.834.837.4 (b)38.452.0512.813.213.113.417.0 (b)17.716.9615.65.07.81.01.66.611.071.51.41.31.41.3 (b)1.31.580.60.60.60.60.7n/a0.792.02.02.02.02.0n/a1.5101.03n/an/an/a1.27n/a1.7Medium term budgetary framework indexIndicator (1)E-government and open government dataShare of individuals who used the internet within the last year to interact with public authorities (%)E-government benchmark overall score (3) Open data and portal maturity indexEducational attainment level, adult learning, gender parity and ageingShare of public administration employees with tertiary education (levels 5-8, %)Participation rate of public administration employees in adult learning (%)Gender parity in senior civil service positions (4)Ratio of 25-49 to 50-64 year olds in NACE sector OPublic financial management Strength of fiscal rules indexEvidence-based policy makingRegulatory governance0.000.501.001.502.002.503.0000.511.522.53PT2017PT2021PT2017PT2021Primary lawsSecondary lawsb) Stakeholder engagement MethodologyOversightSystematic adoptionTransparencyEU-270.000.501.001.502.002.503.0000.511.522.53PT2017PT2021PT2017PT2021Primary lawsSecondary lawsc) Ex-postevaluation of legislationMethodologyOversightSystematic adoptionTransparencyEU-270.000.501.001.502.002.503.0000.511.522.53PT2017PT2021PT2017PT2021Primary lawsSecondary lawsa) Regulatory impact assessmentMethodologyOversightSystematic adoptionTransparencyEU-27 
 
 
   
 
     
FAIRNESS 
ANNEX 14: EMPLOYMENT, SKILLS AND SOCIAL POLICY CHALLENGES IN LIGHT OF 
THE EUROPEAN PILLAR OF SOCIAL RIGHTS  

The  European  Pillar  of  Social  Rights  is  the 
compass  for  upward  convergence  towards 
better  working  and  living  conditions  in  the 
EU. This Annex provides an overview of Portugal’s 
progress in implementing the Pillar’s 20 principles 
and EU headline and national targets for 2030 on 
employment, skills and poverty reduction. 

Despite the overall  positive  developments  in 
the  Portuguese  labour  market  following  the 
pandemic,  youth  employment  remains  highly 
precarious.  The  employment  rate  has  been 
increasing throughout 2021 and 2022, in line with 
economic  growth,  and  reached  77.5%  in  2022, 
above  the  EU  average  (74.7%).  Conversely,  the 
unemployment  rate  continues  to  fall,  standing  at 
6%  in  2022,  just  below  the  EU  average  of  6.1%. 
However,  the  tightening  of  the  labour  market 
throughout  2021  was  relatively  mild,  and  the  job 
vacancy  rate  remained  below  the  EU  average  at 
1.5% in 2022. Long-term unemployment is slightly 
above  the  EU  average  (2.7%  against  2.4%  in 
2022),  while  the  rate  of  young  people  neither  in 
employment  nor  in  education  and  training  (NEET) 
is lower than the EU average (8.4% versus 11.7% 
in  2022).  Nevertheless,  the  youth  unemployment 
rate (15-24 age group) continues to be one of the 
highest in the EU and stood at 19% in 2022 (EU: 
14.5%),  confirming  a  worrying  long-term  trend. 
Additionally,  young  people  are  still  faced  with 
precarious job conditions: 59.6% of workers in the 
15-24  age  group  were  on  temporary  contracts  in 
2022  (45.1%  for  15-29),  significantly  above  the 
EU average (49.5% and 35.6% respectively). Policy 
developments  such  as  the  decent  work  agenda 
reform  approved  by  the  national  parliament  in 
February  2023,  the  medium-term  agreement  on 
improving  income,  wages  and  competitiveness 
(signed with social partners in October 2022) and 
a  new  hiring  support  measure  targeting  young 
people  could  play  a  major  role  in  tackling  youth 
unemployment.  Addressing 
long-standing 
challenge  is  important  to  achieve  the  national 
employment rate target of 80% by 2030. 

this 

Table A14.1: Social Scoreboard for Portugal 

Update of 27 April 2023. Members States are classified on 
the Social Scoreboard according to a statistical methodology 
agreed with the EMCO and SPC Committees. It looks jointly at 
levels and changes of the indicators in comparison with the 
respective EU averages and classifies Member States in seven 
categories. For methodological details, please consult the 
Joint Employment Report 2023. Due to changes in the 
definition of the individuals’ level of digital skills in 2021, 
exceptionally only levels are used in the assessment of this 
indicator; NEET: neither in employment nor in education and 
training; GDHI: gross disposable household income. 
Source: Eurostat 

to 

face  challenges 
Portugal  continues 
stemming from the structural skills deficit of 
the  adult  population.  The  share  of  the  adult 
population  (aged  25-64)  that  has  not  completed 
lower-secondary  education  stands 
more  than 
significantly above the EU average (39.7% in 2022 
compared  to  20.5%).  Regional  disparities  on  this 
indicator  are  substantial.  In  2022,  it  ranged  from 
28.9%  in  the  Área  Metropolitana  de  Lisboa  to 
58.7%  in  the  Região  Autónoma  dos  Açores.  The 
rate  of  early  leavers  from  education  and  training 
fell  sharply  in  recent  years  (see  Annex  15).  Low-
skilled  adults  (aged  25-64)  are  less  willing  to 
participate  in  education  and  training  than  other 
groups  (5.4%  of  adults  with  less  than  upper 
secondary  education  vs  24%  of  adults  with 

58 

6.055.38.45.65.6677.56.02.7108.4522.422.92016.25.950.42.3Critical situationTo watchWeak but improvingGood but to monitorOn averageAt risk of poverty or social exclusion rate for children                       (% of population aged 0-17, 2021)Disability employment gap(percentage points, 2021)Better than averageEqual opportunities and access to the labour marketEarly leavers from education and training(% of population aged 18-24, 2022)Youth NEET rate(% of population aged 15-29, 2022)Gender employment gap(percentage points, 2022)Income quintile ratio(S80/S20, 2021)Share of individuals who have basic or above basic overall digital skills (% of population aged 16-74, 2021)Dynamic labour markets and fair working conditionsSocial protection and inclusionLong term unemployment(% of active population aged 15-74, 2022)GDHI per capita growth                                                              (2008=100, 2021)Best performersImpact of social transfers (other than pensions) on poverty reduction (% reduction of AROP, 2021)Children aged less than 3 years in formal childcare(% of population under 3-years-old, 2021)Self-reported unmet need for medical care(% of population 16+, 2021)Housing cost overburden(% of total population, 2021)At risk of poverty or social exclusion rate                                            (% of total population, 2021)Employment rate(% of population aged 20-64, 2022)Unemployment rate(% of active population aged 15-74, 2022)Policy areaHeadline indicator 
 
 
 
   
 
 
(VET), 

financing 

tertiary  educational  attainment  in  2022).  As  part 
of  its  recovery  and  resilience  plan,  Portugal  will 
invest  significantly  in  vocational  education  and 
training 
the 
notably  by 
construction/renewal of 365 technological centres, 
which is accompanied by an update of the national 
catalogue  of  qualifications  and  an  agreement 
signed in 2021 with social partners to improve VET 
and qualifications. On adult learning, the Qualifica 
flagship initiative can play a large role, notably by 
setting  out  appropriate  pathways  for  providing 
basic  skills  to  adults  (numeracy,  literacy  and 
digital).  Ensuring  the  complementary  use  of  EU 
and national funds in the coming years will be key 
to  correcting  structural  skills  deficits.  Investing  in 
adult learning will also be essential to achieve the 
2030  headline  national  target  on  participation  in 
education and training (60%). 

Table A14.2: Situation of Portugal on 2030 
employment, skills and poverty reduction targets 

(1) Adult Education Survey, adults in learning in the past 12 
months 
(2) Number of persons at risk of poverty or social exclusion 
(AROPE), reference year 2019 
Source: Eurostat, DG EMPL 

indicators  show  rising 

Social 
levels  of 
poverty  and  persisting  limitations  on  the 
the  social 
adequacy  and  coverage  of 
protection system. The share of people at risk of 
poverty  or  social  exclusion  increased  by  2.4 
percentage  points  (pps)  between  2020  and  2021 
to  reach  22.4%,  breaking  a  positive  downward 
trend in the previous 5 years and placing Portugal 
above  the  EU  average  (21.7%).  This  deterioration 
was one of the most serious in the EU (against  a 
backdrop  of  overall  stability  across  most  Member 
States),  and  it  shows  the  need  for  a  speedy 
implementation  of  the  delayed  national  strategy 
to combat poverty. The percentage of expenditure 
on  social  protection  over GDP  remains lower than 
the EU average (27.5% against 31.7%). Moreover, 
the  capacity  of  social 
(excluding 
pensions) to reduce poverty fell to 20% in 2021, a 
drop  of  6  pps  from  2020.  This 
reversed 
improvements made over the 3 previous years and 
contrasted  with the overall  EU trend in 2021. The 

transfers 

in 

respect 

adequacy of minimum income is low and has been 
eroding  since  2009,  standing  now  at  35%  of  the 
at-risk-of-poverty  threshold.  The  share  of  people 
in  quasi-jobless  households  on  social  benefits  is 
below the EU average (88.9% vs. 96.4% in the EU 
in  2021)  and  has  deteriorated  since  2009.  Gaps 
remain  in  formal  access  to  social  protection  for 
several  categories  of  non-standard  workers 
(seasonal  workers, 
trainees,  some  domestic 
to 
particular  with 
workers), 
unemployment  and  sickness  benefits.  Effective 
access  was  low,  in  particular  for  workers  on 
temporary contracts (12.6% compared to 41.4% in 
EU)  and  for  self-employed  people  (3.4%  vs 
10.8%).  Emerging  risks  related  to  high  inflation 
and  the  energy  crisis  add  to  structural  deficits,  in 
particular  on  energy  poverty  (see  Annex  8).  This 
raises  new  challenges  on  Portugal’s  capacity  to 
achieve its national 2030 poverty reduction target 
(765 000 fewer people at risk of poverty or social 
exclusion  than  in  2019).  Despite  reforms  and 
investments  under  the  country’s  recovery  and 
resilience  plan  and  European  Social  Fund  Plus, 
improving the coverage and adequacy of the social 
protection  system,  in  particular  by  rationalising 
and  better  tailoring  their  delivery  remains  of 
utmost  importance  to  ensure  social  inclusion  and 
reduce poverty levels. 

Providing affordable social housing and long-
term  care  services  remain  insufficient  in 
face  of  growing  demand.  The  housing  cost 
overburden  rate  increased  in  2021,  particularly 
amongst the poorest (102), while the property rental 
market remains very tight (103).  This puts pressure 
on access to housing and further accentuates the 
need  to  speed  up  the  delivery  of  affordable  and 
social  housing.  Access  to  long-term  care  services, 
even  if  improving,  remains  insufficient  in  face  of 
triggered  by  adverse 
the  growing  demand 
demographic  developments.  Public  spending  on 
long-term  care  is  also  very  low  –  less  than  a 
quarter of the EU average (0.4% v 1.7% of GDP in 
2019). 

(102) 22.3% with house cost overburden among the first quintile 

of income (the poorest 20%), against 14.4% the year before; 
among the general population, the figure is 5.9% against 
4.1% in 2020. 

(103) The median rent of new contracts increased 7.6% in Q3-

2022 year-on-year (INE, provisional data). 

59 

IndicatorsLatest dataTrend            (2015-2022)National target by 2030EU target by 203077.5(2022)38.0(2016)+139(2021)Poverty reduction2 (thousands)-765-15 000Employment (%)8078Adult learning1 (%)6060 
 
   
 
                                                 
ANNEX 15: EDUCATION AND TRAINING 

This  Annex  outlines  the  main  challenges  for 
Portugal’s education and training system in light of 
the  EU-level 
targets  and  other  contextual 
indicators  under  the  European  Education  Area 
strategic framework, based on the 2022 Education 
and Training Monitor. 

is  taking  steps  to  extend 

Portugal 
its 
preschool  network  and  make  attendance  of 
early  childhood  education  and  care  (ECEC) 
universal. Supported by its national recovery and 
resilience  plan  (RRP),  the  Portuguese  government 
plans  to  expand  its  preschool  network,  aiming  to 
provide free access to ECEC to all children above 3 
years.  In  2020,  participation  of  children  between 
the  age  of  3  to  compulsory  schooling  age  in 
Portugal was at the EU average (92.9% vs 93.0%), 
but  still  below  the  EU-level  target  (96%).  ECEC 
attendance  of  children  aged  3  is  below  the  EU 
average  (83.2%  vs  87.8%  in  2020),  but  above 
average for children aged 4 and 5. 99.1% of ECEC 
teachers  are  women  (against  the  EU-27  average 
of 95.7%). The teaching population is also ageing. 
On average, the ratio of teachers aged over 50 to 
those under 35 years old is 7 to 1. 

upper 

completing 

low  of  5.9%.  However, 

The  number  of  students  leaving  education 
secondary 
without 
education  is  decreasing.  In  2021,  the  rate  of 
students  leaving  education  and  training  early 
(ELET) was 6.0%, similar to 2021 when it reached 
regional 
a  historic 
disparities continue, ranging from over 20% in the 
Azores  and  the  Algarve  to  a  level  below  national 
average  in  the  Norte  region.  The  implementation 
of  comprehensive  policies,  such  as  the  priority 
intervention  educational  territories  programme 
(TEIP) (104) and the national programme for school 
success  promotion  (PNPSE) (105),  especially  helped 
to reduce ELET rates (from 23% in 2011, to 14% 
in 2016 and 8.9% in 2020). 

in 

Despite  major  progress 
improving 
education  outcomes,  equity  challenges  are 
ongoing.  Recent  education  policy  reforms  and 
measures seem to have helped reduce the rate of 
ELET,  improving  basic  skills  and  fostering  higher 
level  of 
education  enrolment.  However, 
progress  differs  across  Portuguese  regions,  and 
socio-economic  background  still  plays  a  relevant 
role  in  student  performance.  Students  of  low 

the 

(104) https://www.dge.mec.pt/teip 

(105) https://pnpse.min-educ.pt/programa 

socio-economic status are 8.8 times (EU 5.6 times) 
more likely to underachieve in reading, maths and 
science  (combined) 
in  school  education  than 
students  of  high  socio-economic  status  (see 
figure).  The  COVID-19  pandemic  may  have 
among 
educational 
increased 
Portuguese students (106). 

inequalities 

Graph A15.1: Underachievers in reading, maths and 
science (combined) by socio-economic status 

Source: JRC's calculation on OECD (PISA 2018) 

history, 

(especially 

geography, 

Ageing of the teacher population and teacher 
shortages  in  certain  fields  are  becoming 
major  educational  challenges.  In  2020,  48.4% 
of  schoolteachers  (ISCED  1-3)  were  over  50  (EU 
average  39.2%).  20%  of  today’s  teachers  will 
retire  within  the  next  5 years  and  58%  within  10 
years. Currently, there is already a lack of qualified 
in 
teachers  for  various  subjects 
Portuguese, 
biology, 
mathematics, physical chemistry, ICT, English, and 
philosophy).  This  is  particularly  relevant  in  the 
metropolitan  area  of  Lisbon,  in  Setubal  and  the 
Algarve.  By  2030/2031,  around  34 500  new 
teachers  will  be  needed  to  avoid  a  shortage  of 
qualified teachers (107). The Ministry of Education is 
preparing  a  proposal  to  amend  the  law  on 
the 
professional 
qualification.  With 
government 
teacher 
shortages, for example by creating scope to recruit 
professionals  with 
academic 
a 
background.  In  addition,  the  abuse  of  fixed-term 
teacher contracts.in public schools and differences 
in  working  conditions  between  teachers  of  basic 
and secondary education remain key challenges.  

is  seeking 

relevant 

remedy 

this, 

to 

(106) CNE (2021). Efeitos da pandemia COVID-19 na educação: 
Desigualdades e medidas de equidade [Effects of the 
COVID-19 pandemic on education: Inequalities and equity 
measures] Lisboa: CNE. 
https://www.cnedu.pt/content/noticias/estudos/Estudo_Assem
bleiaRepublica-Efeitos_da_pandemia_COVID-19.pdf. 

(107) https://www.dgeec.mec.pt/np4/%7B$client 

ServletPath%7D/?newsId=1304&fileName=DGEEC_Estudo_
Diagnostico_de_Necessidade_.pdf 

60 

4.6 8.8 5.6 3.5 0%10%20%30%40%50%60%RomaniaPortugalEUEstoniaCombined underachievement in reading, maths and scienceLow socio-economic statusCountry averageHigh socio-economic status 
 
                                                 
   
                                                 
 
Table A15.1: EU-level targets and other contextual indicators under the European Education Area 
strategic framework 

Source: (1.3,4.5,7.8,9.10,11) = Eurostat; 2 = OECD (PISA); 6 = European Commission (Joint Research Centre). Notes: Data is not 
yet available for the remaining EU-level targets under the European Education Area strategic framework, covering 
underachievement in digital skills and participation of adults in learning. The equity indicator shows the gap in the share of 
underachievement in reading, mathematics and science (combined) among 15-year-olds between the lowest and highest quarters 
of socio-economic status. 

The  attainment  of  tertiary  education 
is 
increasing,  underpinned  by  measures  to 
support  access  to  higher  education.  The 
tertiary  education  attainment  (TEA)  rate  in  2022 
was  44.4%,  3.1  pps  less  than  in  2021  when 
reached  a  record  high  (47.5%),  above  the  EU 
average  (42.0%)  and  EU-level  target  (45%).  Yet 
large  regional  differences  in  TEA  exists,  with  the 
highest  TEA  rate  in  the  metropolitan  area  of 
Lisbon and the lowest in the Azores. TEA rates also 
differ  according  to  country  of  origin  (see  Table 
A15.1).  In  Portugal,  the  gender  gap (108)  in  favour 
of  women  is  above  the  EU  average  (20.7%  vs 
11.1%).  To  expand  access  to  tertiary  education, 
tuition fees were reduced and more students were 
granted  scholarships,  notably  students  from 
disadvantaged  backgrounds. 
the 
government  has  taken  a  range  of  measures  to 
widen  higher  education  enrolment  in  less  densely 
populated regions and increased the offer of two-
year  short-cycle  higher  education  professional 
courses. 

In  addition, 

(108) The gender gap is the difference between the proportion of 
women and men tertiary graduates according to Eurostat 
[educ_uoe_grad02]. 

Portugal  is  increasing  the  share  of  tertiary 
graduates  in  ICT.  The  percentage  of  science, 
technology,  engineering  and  mathematics  (STEM) 
graduates  among  all  graduates  in  2020  was 
27.8% (almost the same as in 2015). However, the 
share  of  ICT  graduates  (2.6%)  doubled  compared 
with 2015 (1.2%), while the share of graduates in 
natural science, mathematics and statistics (6.2%) 
remained at the 2015 level. 

education 

institutions 

need 
Higher 
investment  in  teaching  capacities.  There  is  a 
clear  need  for  pedagogical  training  for  higher 
education teachers to make higher education more 
attractive to students and to prevent dropout (109). 
Academic staff is ageing and predominantly male. 
Around  5%  of  tertiary-level  staff  are  under  30 
while 47% are 50 or older. Women make up 44% 
of the teaching staff at tertiary level. 

(109) Alarcão, T. (2015). Supervisão da Prática Pedagógica-Uma 

Perspectiva de Desenvolvimento e Aprendizagem-2a Edição. 
Leya; Xavier, ARC and Leite, C. (2019). Mapping of 
pedagogical training of university professors in Portuguese 
public universities. Revista Lusofona de Educacao, v 45, n. 
45, p. 109-123, 2019. http://hdl.handle.net/11449/199996>. 

61 

96%88.7%d91.9%92.9%2020, d93.0%2020Reading< 15%17.2% 20.0%20.2%201822.5%2018Mathematics< 15%23.8% 22.3%23.3%201822.9%2018Science< 15%17.4% 21.1%19.6%201822.3%2018< 9 %13.7%11.0%6.0% 9.6%Men16.4%12.5%7.9%11.1%Women11.0%9.4%3.9%8.0%Cities11.8%9.6%4.9%8.6%Rural areas17.3%12.2%7.9%10.0%Native13.5%10.0%5.9%8.3%EU-born:u20.7%:u20.3%Non EU-born16.1%23.4%:u22.1%6Equity indicator (percentage points)::20.8201819.320187Exposure of VET graduates to work based learningTotal ≥ 60% (2025) : :74.3%60.1%45%33.1%36.5%44.4%42.0%Men25.4%31.2%36.9%36.5%Women40.6%41.8%51.9%47.6%Cities40.5%46.2%48.9%52.2%Rural areas24.1%26.9%35.8%30.2%Native33.4%37.7%44.9%43.0%EU-born40.1%32.7%48.4%39.5%Non EU-born26.3%27.0%39.1%35.7%36.0% 38.3%48.4%202039.2%2020Tertiary educational attainment (age 25-34)8Total8By gender9By degree of urbanisation10By country of birth11Share of school teachers (ISCED 1-3) who are 50 years or over1Participation in early childhood education (age 3+)2Low achieving 15-year-olds in:Early leavers from education and training (age 18-24)3Total3By gender4By degree of urbanisation5By country of birth20152022IndicatorTargetPortugalEU27PortugalEU27 
                                                 
                                                 
 
     
 
health  is  projected  to  increase  by  1.6  percentage 
(compared  to  0.9 
points  of  GDP  by  2070 
percentage  points  for  the  EU  overall),  which  may 
add  to  possible  fiscal  sustainability  challenges  in 
the long term.  

Graph A16.2: Projected increase in public 
expenditure on healthcare over 2019-2070 

ANNEX 16: HEALTH AND HEALTH SYSTEMS 

A  healthy  population  and  an  effective, 
accessible  and  resilient  health  system  are 
prerequisites  for  a sustainable  economy and 
society.  This  Annex  provides  a  snapshot  of 
in 
population  health  and  the  health  system 
Portugal.  

Life expectancy in Portugal is slightly higher 
than in the EU overall and has rebounded to 
some extent after it fell in 2020. An increase 
in  life  expectancy  was  observed  in  Portugal  in 
2021  despite  a  further  increase  in  COVID-19 
mortality  compared  to  2020 (110).  Portugal  fares 
in  avoiding  deaths  from 
comparatively  well 
treatable  causes. 
In  2020,  diseases  of  the 
circulatory  system  (“cardiovascular  diseases”)  and 
cancer were the leading causes of death. 

Graph A16.1: Life expectancy at birth, years 

AWG reference scenario 
Source: European Commission / EPC (2021) 

In  2020,  spending  on  prevention  in  Portugal 
amounted  to  1.9%  of  total  spending  on 
healthcare,  compared  to  3.4%  for  the  EU 
overall.  This  is  comparatively  low,  with  six  other 
Member  States  also  reporting  a  level  below  2%. 
Between  2019  and  2020,  spending  on  prevention 
in Portugal increased by around 10%, compared to 
a 26% increase for the EU overall. Across the EU, 
this increase  was  primarily  driven  by  spending  on 
disease  detection,  surveillance, 
control  and 
response programmes as part of the public health 
response to COVID-19.  

Portugal  faces  shortages  and  an  uneven 
distribution of health workers. Despite the rise 
in  recent  years,  the  number  of  practising  nurses 
per 1 000 inhabitants (7.3 in 2020) remains below 
the  level  across  the  EU.  There  are  also  shortages 
in other medical specialties and in certain regions. 
Working  conditions  are  an  important  issue,  with 
low  remuneration  being  a  deterrent,  in  particular 
for nurses. The share of active physicians over the 
age  of  55  in  Portugal  (40%,  compared  to  an  EU 
unweighted  average  of  35.9%)  raises  concerns 
about 
long-term  accessibility  of  health 
services.  In  an  attempt  to  address  geographical 
the  availability  of  physicians, 
disparities 
Portugal  has  put  in  place  a  programme  of 
incentives  for  doctors  (including  a  remuneration 
bonus)  to  take  up  positions  in  areas  with  a 
shortage of practitioners. To increase the capacity 
of  the  health  workforce  during  the  COVID-19 
pandemic,  hiring  health  workers  (including  retired 
limit)  under 
health  workers,  without  age 

the 

in 

Source: Eurostat 

Health  spending  relative  to  GDP  in  Portugal 
was slightly below the average across the EU 
in 2020. Spending per capita on outpatient care is 
comparable  to  the  EU  average,  whereas  spending 
on  inpatient  care,  pharmaceuticals  and  medical 
devices  is  below  the  EU  average.  In  2020,  total 
healthcare  spending  increased  to  10.6%  of  GDP. 
This is in line with the upward trend in all Member 
States  in  2020.  In  Portugal,  this  increase  largely 
reflects the significant GDP contraction (by around 
8.3%, compared to 5.6% in the EU overall). This is 
also  corroborated  by  the  fact  that,  as  a  share  of 
total  public  spending,  health  spending  in  2020 
remained  relatively  stable  at  around  15.2%.  The 
public 
is 
comparatively  low  in  Portugal  (64.5%  in  2020). 
This translates into one of the highest proportions 
of  out-of-pocket  payments  for  healthcare  in  the 
EU,  which  in  Portugal  is  almost  twice  the  EU 
average  level.  Based  on  the  age  profile  of  the 
Portuguese  population,  public  expenditure  on 

expenditure 

health 

share 

of 

(110) Based on data provided directly by Member States to ECDC 
under the European Surveillance System (data current as of 
13 April 2023). 

62 

81,381,681,581,981,181,580,980,981,081,380,480,1201620172018201920202021PortugalEU6,65,70,91,602468EUPortugal% of GDP20192070increase 
 
        
                                                 
        
 
Table A16.1: Key health indicators 

Note: The EU average is weighted for all indicators, except for (*) and (**), for which the EU simple average is used. The simple 
average for (*) uses data for 2020 or most recent year if former not available. Doctors' density data refer to practising doctors in 
all countries except EL, PT (licensed to practice) and SK (professionally active). Nurses' density data refer to practising nurses in all 
countries except FR, PT, SK (professionally active) and EL (nurses working in hospitals only).  
Source: Eurostat; except: ** ECDC 

exceptional  contractual  conditions  was  facilitated 
and caps on overtime payments were removed.  

targeting  also 

Through  its  recovery  and  resilience  plan 
(RRP),  Portugal  plans  to  invest  EUR  1.383 
billion  (8.3%  of  the  RRP’s  total  value)  in 
healthcare.  The  RRP  includes  a  set  of  mutually 
supporting reforms and investments to strengthen 
the  response  capacity  of  the  National  Health 
Service (NHS) in the fields of primary, mental and 
long-term  healthcare,  combined  with  efficiency-
oriented  measures  to  improve  the  governance, 
cost-effectiveness,  accessibility  and  quality  of 
public  hospital  services.  Investments  are  also 
geared  towards  digitalising  the  NHS  as  a  whole, 
with  specific  measures 
the 
outermost regions of Madeira and the Azores. The 
government has already adopted a decree-law on 
mental  health,  which  sets  out  the  principles  for 
organising,  managing  and  evaluating  mental 
services.  A  new  performance-based 
health 
template  has  been 
management 
introduced 
state-owned 
enterprises  in  the  NHS.  Furthermore,  a  referral 
mechanism has been set up to direct inappropriate 
or  avoidable  cases  from  emergency  services  in 
NHS  hospitals to  primary healthcare  services.  The 
process  of  decentralising  health  responsibilities 
planning, 
responsibility 
(for 
management and investment decisions in primary 
healthcare units) to municipalities is ongoing. Work 
on  digitalising  the  health  system  is  progressing 
too,  for  example  in  terms  of  upgrading  local 
information 
and 
technology 
implementing telehealth and telemonitoring. 

for  managers 

networks 

example 

contract 

for 

in 

63 

20172018201920202021EU average (latest year) Treatable mortality per 100 000 population (mortality avoidable through optimal quality healthcare)84.082.979.079.1NA91.7 (2020)Cancer mortality per 100 000 population243.5243.3244.8240.5NA242.2 (2020)Current expenditure on health, % GDP 9.39.49.510.6NA10.9 (2020)Public share of health expenditure, % of current health expenditure61.261.260.964.5NA81.2 (2020)Spending on prevention, % of current health expenditure 1.81.81.81.9NA3.4 (2020)Acute care beds per 100 000 population325329333334NA387.4 (2019)Doctors per 1 000 population *5.05.25.35.5NA3.9 (2020)Nurses per 1 000 population *6.76.97.17.3NA8.3 (2020)Consumption of antibacterials for systemic use in the community, daily defined dose per 1 000 inhabitants per day (total consumption in CY and CZ) **16.917.717.913.713.714.5 (2021) 
 
 
   
 
ANNEX 17: ECONOMIC AND SOCIAL PERFORMANCE AT REGIONAL LEVEL 

In  Centro,  Aveiro  performed  above  the  regional 
to  dynamic  businesses  and 
average 
innovation;  and  Viseu,  which 
regional 
economic hub where several industries are located. 

thanks 

is  a 

in  GDP  per  capita  mirror 
Disparities 
important  labour  productivity  gaps.  Regional 
inequalities  in  labour  productivity  decreased  in 
2000-2020  and  particularly in  the  second  half  of 
the last decade (see Graph A17.2).  

Graph A17.2: Labour productivity (real GVA per 
worker), EU-27 and Portugal, 2000-2020 

Source: Eurostat, DG REGIO elaboration 

The  employment  and  unemployment  rates 
are slightly better than the EU average, with 
some regional differences. In 2021, the lowest 
employment  rates  (from  20  to  64  years)  were  in 
the  two  autonomous  regions  and  outermost 
regions  of  Azores  and  Madeira  (69%  and  70%). 
The  unemployment  rate  was  highest  in  Algarve 
(8.2%), Madeira (7.9%) and the Azores (7.2%). 

of 

level 

capital 

The 
varied 
human 
considerably.  The  share  of  the  population  aged 
30-34  with  a  high  level  of  education  was  higher 
than the EU average of 42% in the capital region 
(50%) and Centro (46%) in 2021 but lower in the 
Azores (23%), Algarve (30%) and Madeira (35%).  

the 

innovation  potential 

Leveraging 
to 
improve  regional  economic  performance  and 
competitiveness.  Despite  a  positive  general 
trend in R&D investment over the last decade, the 
low level of science-industry co-operation remains 
a  key  challenge  (see  Annex  11).  The  innovation 
performance and competitiveness also still differs 
significantly  at  the  regional  level.  In  the  capital 
region  R&D  investment  represented  2.0%  of  GDP 
in  2020,  followed  by  Norte  (1.8%),  and  Centro 
(1.4%) but below 1% in all other regions.  

This  Annex  showcases  the  economic  and 
social regional dynamics in Portugal, providing 
an  update  on  economic,  social  and  territorial 
cohesion  in  and  among  the  Portuguese  regions 
compared  with  the  EU  as  a  whole  and  the  main 
regional economic recovery challenges. 

Portugal is diverging from the EU as a whole 
in  terms  of  GDP  per  capita  as  it  continues 
growing  at  a  slower  pace.  In  2021,  GDP  per 
capita  was  below  the  EU  average  in  all  regions 
(with  disparities  between  the  capital  region  and 
other  regions).  In  the metropolitan  area  of  Lisbon 
GDP  per  capita  was  96%  of  the  EU  average  but 
below 75% in all other regions (except Algarve at 
76%). 

Portugal's  regions  are  converging  on  each 
other,  but  this  convergence  is  mainly  driven 
by economic contraction in the capital region. 
Regional  disparities  in  GDP  per  capita  remained 
roughly  constant  in  2000-2009  but  have  been 
decreasing since 2010, mostly due to a steady and 
substantial loss in the capital region.  

Norte  and  Centro  were  the  only  Portuguese 
regions  growing  faster  than  the  EU  average  in 
2011-2020.  The  capital  region's  GDP  per  capita 
contracted  in  the  same  period  and  other  regions 
experienced  zero  or  negative  growth 
(Graph 
A17.1). 

Graph A17.1: GDP per capita (2010) and GDP 
growth (2011-2020) - Portugal 

(1) Bubble size corresponds to population size, 2020 
Source: Eurostat, DG REGIO elaboration 

Endogenous factors and processes have been 
the main drivers in regional economic growth 
(above the EU average) in Norte and Centro. 
In Norte, the highest growth was recorded in Ave, 
where manufacturing is the main activity;  Cávado 
and Alto Minho, which have more diverse economic 
activities;  and  Douro,  where  tourism  is  gaining 
ground.  

64 

-1.0-0.50.00.51.01.55060708090100110120130Annual real GDP per head growth2011-2020 (average % change on the preceding year)GDP (PPS) per head in 2010 (EU = 100)Capital regionOther NUTS2 regionsNational averageEU27202530354045505560000102030405060708091011121314151617181920thousands of EUR per  personCapital regionOther NUTS2 regionsEU27National average 
 
   
  
 
 
 
Table A17.1: Selected indicators at regional level 

Source: Eurostat, EDGAR database 

In  2020,  the  highest  share  of  innovation  sales 
(new to market) was in Norte (16.3%), followed by 
the  capital  region  and  Centro  (both  with  13.3%). 
The  regions  with  the  lowest  shares  of  innovation 
sales were the autonomous and outermost regions 
of  Madeira  and  the  Azores  (6.8%  and  7.2% 
respectively). (111)  The  capital  region  is  the  most 
competitive among the Portuguese regions, with a 
score  above  the  EU  average  (110),  followed  by 
Norte (92.1), Centro (89.0), and Algarve (81.9). The 
level  of  competitiveness  is  significantly  lower  in 
Alentejo  and  Madeira 
(both  79.1  and  77.9 
respectively), and the Azores (66.2). (112) 

The  population  shrank 
in  almost  all 
Portuguese  regions  in  2011-2020.  The  only 
exception was the capital region, whose population 
grew by 1.6%. Alentejo had the largest decrease in 
population  (8.1%),  while  Centro  and  Madeira  both 
decreased by around 5%.   

The  ratio  of  the  number  of  persons  aged  65  and 
above to the number of persons working age 15-
64  increased  in  all  regions  in  2011-2021.  This 
share  ranges  from  44.5%  in  Centro  to  24.5%  in 
the  Azores.  Norte,  Centro,  and  Madeira  recorded 
the highest increase by 10.1 pps, 9.6 pps and 8.6 
pps, respectively. (113)  

The  autonomous  and  outermost  regions  of 
the Azores and Madeira are facing particular 
challenges, 
territorial 
to 
specificities.  In  2021,  GDP  per  capita  in  the 
Azores  was  66%  of  the  EU  average  and  70%  in 
Madeira. Madeira showed negative GDP per capita 

their 

due 

(111) The Community Innovation Survey – 2020. 

(112) The Regional Competitiveness Index – 2022. 

(113) Statistics Portugal – 2021.  

65 

growth  (-0.6%)  and  slightly  above  zero  in  the 
Azores in 2011-2020. Both regions had one of the 
highest unemployment rates in 2021.  

The  share  of  the  population  with  a  high  level  of 
education in the Azores was 22.6% (the lowest in 
Portugal) and in Madeira it was one of the lowest. 
Both  regions  also  continue  to  exhibit 
lower 
innovation performance. 

In  addition,  the  population  at  risk  of  poverty  or 
social exclusion (AROPE) in Madeira and the Azores 
was  significantly  higher  than  in  Portugal  as  a 
whole  and  reached  29%  and  27%  respectively  in 
2021. 

The  social-economic  consequences  of  the 
COVID-19  pandemic  have  been  particularly 
severe  in  some  regions.  All  Portuguese  regions 
recorded  a  decrease  in  terms  of  GDP  per  head 
capita  in  2019-2020.  Algarve  and  Madeira    were 
the  Portuguese  regions  which  experienced  the 
highest  contraction  in  2019-2021  (by  -10.5  pps 
and -5.5 pps respectively).  

In contrast to the upward trend in 2015-2019, the 
employment  rate  fell  in  all  regions  in  2020. 
Employment  recovered  in  most  regions  in  2021, 
in  the  Azores  and  Madeira,  where 
but  not 
employment continued to decrease by 2.0 pps and 
0.4  pps  respectively.  Unemployment  rates,  which 
rose in most regions in 2020 have only recovered 
significantly  in  the  capital  region  and  remain 
above  the  2019  value  in  Algarve,  Madeira  and 
Centro. 

Region nameGDP per head (PPS)Productivity (GVA (PPS) per person employed)Real productivity growthGDP per head growthPopulation growthUnemployment rateAt-risk-of-poverty or social exclusionPopulation with high educational attainmentR&D expenditureIndex, EU27 = 100, 2021Index, EU27 = 100, 2021Average % change on the preceding year, 2011-2020Average % change on the preceding year, 2011-2020Average annual change per 1000 residents, 2011-2020% of active population, 2021% of population, 2021% of population aged 30-34, 2021% of GDP, 2020European Union100100.00.20.61.77.021.741.62.3Portugal7570.00.00.2-2.66.622.443.71.6Norte6561.50.41.0-3.56.625.842.51.8Algarve7667.7-0.4-0.1-3.08.225.429.60.5Centro (PT)6665.10.70.8-4.55.822.646.31.4Área Metropolitana de Lisboa9685.0-0.7-0.71.66.817.250.02.0Alentejo7168.4-0.6-0.1-8.16.620.338.20.9Região Autónoma dos Açores6662.40.10.0-1.97.227.522.60.3Região Autónoma da Madeira7067.20.3-0.6-5.47.929.234.70.5 
                                                 
 
  
 
MACROECONOMIC STABILITY 
ANNEX 18: KEY FINANCIAL SECTOR DEVELOPMENTS 

The  banking  sector  is  concentrated  and 
includes  relevant  foreign  players.  The  size  of 
the Portuguese banking sector, equivalent to twice 
Portugal’s  GDP,  is  relatively  small  compared  with 
the  EU  average.  The  sector  is  concentrated,  with 
the five largest banks in control of three quarters 
of  banking  assets.  The  state  plays  a  significant 
role  in  the  sector  as  it  owns  the  biggest  credit 
institution in the country. Another salient structural 
feature  of  the  Portuguese  banking  system  is  the 
prevalence  of  foreign  players  among  the  top  five 
lenders, and the fact that just one bank is publicly 
listed on the local stock market. 

The  Portuguese  banking  sector  has  come  a 
long  way  since  the  financial  crisis  of  2008-
2009 but it underperforms European peers in 
a  number  of  key  indicators.  As  a  result  of  the 
financial  assistance  granted  to  Portugal  in  2011, 
which entailed an ambitious plan to modernise its 
domestic  financial  sector,  the  banks’  capital 
positions  and  non-performing-loan  (NPL)  ratios 
have  improved  considerably  in  recent  years.  In 
addition, most banks have made great progress in 
digitalisation  and  cost-efficiency.  Portuguese 
banks  have  also  strengthened  their  capital  ratios 
lately,  although the sector’s average is still  below 
the  EU  average  (17.2%  capital  adequacy  ratio  in 
Q3-2022 compared to an EU average of 18.6%). It 
there  are  major 
is  also  noteworthy 
differences  in  capital  ratios  among  Portuguese 
lenders.  As  reflected 
the  2022  EU-wide 
in 
transparency  exercise  by  the  European  Banking 
Authority,  the  weakest  Portuguese  bank  covered 
by  this  exercise  had  a  capital  ratio  of  only  8.9%, 
whereas  the  strongest  one  had  a  far  more 
comfortable ratio of 17.8%. Moreover, despite the 
to 
noteworthy  efforts  of  Portuguese  banks 
continue  downsizing  their  stock  of  NPLs,  the  NPL 
ratio is still one of the highest in the EU (3.2% in 
Q3-2022  against  an  EU  average  of  1.8%). 
Moreover,  these  weaknesses  hinder  the  ability  of 
banks to effectively support economic growth and 
efficiently allocate capital to the economy.  

that 

Rising  interest  rates  are  boosting  banks’ 
revenues.  The  impact  of  rising  interest  rates  on 
banks’  balance  sheets  has  not  yet  been  fully  felt, 
but  most  indicators  and  estimates  suggest  it  will 
have a positive net effect on banks overall. Higher 
interest  rates  have  boosted  banks’  net-interest 
income. As a result, the profitability of Portuguese 
banks has been rising consistently in 

Graph A18.1: Banks' NPL ratio 

Source: ECB. 

recent quarters and now stands well above the EU 
average  (8.2%  return  on  equity  as  of  Q3-2022 
compared  with  an  EU  average  of  6.1%).  This 
should  allow  banks  to  strengthen  their  capital 
ratios and deal more rapidly with legacy issues so 
they  can  focus  on  funding  the  real  economy.  In 
addition,  neither  higher  interest  rates  nor  the 
reduction in real household disposable income due 
to  high  inflation  have  yet  to  translate  into  an 
increase  in  corporate  and  household  defaults. 
Banks  seem  to  be  reasonably  well  prepared 
(through  provisions)  to  counter  most  potential 
vulnerabilities that originate from inflation and the 
normalisation of monetary policy. 

The  housing  market  and  its  implications  for 
financial stability remain an area of concern. 
Given  that  90%  of  mortgages  in  Portugal  are  at 
variable  rates,  the  rise  in  Euribor  may  increase 
monthly  loan  payments  substantially.  Households 
under  financial  stress  may  end  up  defaulting  on 
their  mortgage  loans.  However,  there  are  some 
mitigating  factors.  For  example,  the  proportion  of 
disposable  income  required  to  cover  the  average 
monthly  mortgage  payment  in  Portugal  is  still 
bearable for most households (114) and well below 
the  level  seen  a  decade  ago.  Moreover,  the 
macroprudential 
borrower-based  measures 
adopted  in  Q3-2018  by  Portugal’s  central  bank, 
Banco de Portugal, have increased the resilience of 
increased  the 
households.  This  has 
resilience  of  the  banking  system.  For  the  most 

in  turn 

(114) 90% of the mortgage loans have an effort rate below 27%. 

66 

0%2%4%6%8%10%12%14%16%18%20%EU averagePortugal 
 
 
  
                                                 
 
Table A18.1: Financial soundness indicators 

(1) Last data: Q3-2022. 
(2) Data is annualised. 
Source:  ECB, Eurostat, S&P Global Capital IQ Pro 
Source:  

indebted households, struggling to cope with their 
monthly  mortgage  bills,  a 
recently  adopted 
law (115) recommends that banks renegotiate their 
mortgage  contracts  to  deal  with  rising  interest 
rates and pre-emptively avoid defaults. 

Inflation  and  the  economic  slowdown  have 
not  yet  translated  into  defaults.  Both  banks 
and  the  financial  authorities  need  to  closely 
monitor  the  impact  of  rising  interest  rates  on 
credit institutions. They also need to pay particular 
attention  to  the  performance  of  credit  to  the 
companies  and  households  most  exposed  to 
energy  and  commodity  price  increases.  In  that 
respect,  the  reform  of  the  insolvency  regime  and 
the transposition of Directive (EU) 2019/1023 will 
have  a  positive 
the  existing 
restructuring  mechanisms  and  procedures.  The 
intention  of  this  Directive  remains:  (i)  to  provide 
companies and creditors with legal tools that allow 
them  to  efficiently  manage  financially  distressed 
companies;  and  (ii)  by  the  same  token,  increase 
the  survival  rate  or  preserve  the liquidation  value 
of  failing  firms.  Other  reforms 
in 
component  18  of  Portugal’s  RRP  will  also  help 
increase 
insolvency  and 
the  efficiency  of 
company-recovery procedures.  

impact  on 

included 

Appropriately  disclosing  and  managing 
climate  risk  is  essential.  According  to  the 
Portuguese  central  bank,  about  60%  of  banks’ 
exposures  to  non-financial  corporations  are  in 

(115) Decreto-Lei n.º 80-A/2022, de 25 de novembro. 

67 

sectors, 

primarily 

climate-policy-relevant 
in: 
(i) construction;  (ii)  the  transaction  in  and  use  of 
buildings; (iii) the production and use of means of 
transportation; and (iv) energy-intensive industries. 
This  is  a  significant  exposure  to  carbon-intensive 
sectors. As the transition to a low-carbon economy 
accelerates,  banks  need  to  assess  the  different 
industries that they finance. Lenders also need to 
evaluate:  (i)  the  impact  of  policies  addressing 
climate change; and (ii) how the transition to a less 
emissions-intensive  economy  will  impact  banks’ 
business models. 

inflation  and  market 

Insurance  companies  are  sensitive  to  a  rise 
risks.  Despite 
in 
inflationary pressures, growth in premium revenue 
is  supporting  the  sector’s  profitability  in  2022-
2023,  but  in  the  non-life  part  of  the  insurance 
sector, profits are coming under pressure. As is the 
case  elsewhere,  the  unexpectedly  high  inflation  is 
losses  for  non-life 
likely  to  generate  some 
businesses 
remains 
exposed  to  natural  catastrophes,  including  low-
such  as  wildfires, 
frequency 
earthquakes  and  – 
floods, 
particularly in the southern part of the country. 

in  Portugal.  The  sector 

increasingly  – 

catastrophes 

201720182019202020212022EUMedianTotal assets of the banking sector (% of GDP)200.8190.8181.2206.3204.5182.3276.8207.9Share (total assets) of the five largest banks (%)73.173.073.373.673.9--68.7Share (total assets) of domestic credit institutions (%)169.768.368.468.569.368.9-60.2NFC credit growth (year-on-year % change)-0.31.80.99.54.50.8-9.1HH credit growth (year-on-year % change)-0.20.91.21.63.83.4-5.4Financial soundness indicators:1        - non-performing loans (% of total loans)13.39.46.14.93.63.21.81.8- capital adequacy ratio (%)15.215.216.718.118.017.218.619.8- return on equity (%)2-0.82.74.30.04.98.26.16.6Cost-to-income ratio (%)152.960.259.256.051.647.560.651.8Loan-to-deposit ratio (%)178.976.276.472.168.978.988.678.0Central bank liquidity as % of liabilities6.95.85.49.211.04.3-2.9Private sector debt (% of GDP)163.0155.1149.5163.7156.9--120.7Long-term interest rate spread versus Bund (basis points)273.4144.3101.092.666.8102.8-93.3Market funding ratio (%)42.843.745.245.845.9-50.840.0Green bonds issued to all bonds (%)--0.41.01.72.03.92.31-34-1011-1718-2425-27Colours indicate performance ranking among 27 EU Member States. 
                                                 
 
   
 
ANNEX 19: TAXATION  

Table A19.1: Taxation indicators 

(1) Forward-looking effective tax rate (OECD). 
(2) A higher value indicates a stronger redistributive impact of taxation. 
(*) EU-27 simple average  
For more data on tax revenues as well as the methodology applied, see European Commission, Directorate-General for Taxation 
and Customs Union, Taxation trends in the European Union: data for the EU Member States, Iceland, Norway and United Kingdom: 
2021 edition, Publications Office of the European Union, 2021, https://data.europa.eu/doi/10.2778/843047 and the Data on 
Taxation webpage, data https://ec.europa.eu/taxation_customs/taxation-1/economic-analysis-taxation/data-taxation_en. 
For more details on the VAT gap, see European Commission, Directorate-General for Taxation and Customs Union, VAT gap in the 
EU: report 2022, Publications Office of the European Union, 2022, https://data.europa.eu/doi/10.2778/109823. 
Source: European Commission, OECD. 

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

information  on 

Portugal’s  tax  revenue  is  relatively  low  in 
proportion  to  its  GDP.  Labour  taxes  contribute 
the most in terms of tax revenue, although labour 
tax revenue as a percentage of GDP (and also as a 
percentage of total taxation) was below the EU-27 
average in 2021. Revenue from consumption taxes 
as  a  percentage  of  GDP  was  relatively  high  and 
environmental tax revenue was slightly above the 
EU-27 average. Capital tax revenue was below the 
EU-27  average  and  has  been  steadily  declining 
since  2019.  Revenue  from  property  taxes  was 
above  the  EU-27  average,  but  revenue  from 
recurrent  property  taxes,  which  are  generally 
among the taxes least detrimental to growth, was 
lower than the EU-27 average. 

Portugal’s labour tax burden is slightly more 
progressive than the EU average. Graph A19.2 
shows  that  the  labour  tax  wedge  for  Portugal  in 
2022  was  considerably  higher  than  the  EU 
average for single people at the average wage, but 

also  for  low  income  earners  at  50%  and  67%  of 
the average wage and high income earners at 167 
% of the average wage. Second earners at a wage 
level of 67% of the average wage, whose spouses 
earn  the  average  wage,  were  subject  to  a  tax 
wedge  that  was  significantly  higher  than  the  EU 
average.  Portugal’s  system  of  tax  benefits  under 
personal  income  tax  helped  reduce  inequality  (as 
measured  by  the  difference  in  GINI  coefficients 
before  and  after  taxes  and  benefits,  see  Table 
A19.1) by more than the EU average in 2021 (116). 
tax  benefit  system 
Nevertheless,  Portugal’s 
remains complex (see Section 3). Furthermore, the 
average 
corporate 
forward-looking  effective 
income  tax  rates  were  considerably  above the  EU 
average in 2021.  

There  is  scope  to  improve  Portugal’s  tax 
administration  performance.  Its  Recovery  and 
Resilience Plan (RRP) includes measures to combat 
fraud  and  evasion  in  social  security  contributions 

(116) However, evidence suggests that recent reforms to the 
personal income tax, consisting of updates in the tax 
brackets or reduction of marginal tax rates, could have 
nonetheless contributed to increase inequality in Portugal. A 
JRC analysis, based on EUROMOD, simulating the 
distributional and poverty impact of the personal income tax 
reform introduced by the Portuguese State Budget for 2023, 
concludes that while the impact of the reform in poverty 
would be limited, inequality (as measured by the Gini 
coefficient) would likely worsen. 

68 

2010201920202021202220102019202020212022Total taxes (including compulsory actual social contributions) (% of GDP)30.434.535.235.336.437.939.940.040.6Labour taxes (as % of GDP)12.614.816.316.220.020.721.320.9Consumption taxes (as % of GDP)11.412.812.112.610.811.110.711.2Capital taxes (as % of GDP)6.47.06.76.57.18.18.08.5Total property taxes (as % of GDP)1.72.22.32.41.92.22.22.2Recurrent taxes on immovable property (as % of GDP)0.60.80.80.71.11.21.21.1Environmental taxes as % of GDP2.42.52.42.32.42.42.22.2Tax wedge at 50% of average wage (Single person) (*)28.128.128.135.135.333.932.331.932.131.7Tax wedge at 100% of average wage (Single person) (*)37.141.441.541.941.941.040.139.939.739.7Corporate income tax - effective average tax rates (1) (*)25.025.125.119.519.419.1Difference in Gini coefficient before and after taxes and cash social transfers (pensions excluded from social transfers) (2) (*)8.48.38.58.48.67.78.17.8Outstanding tax arrears: total year-end tax debt (including debt considered not collectable) / total revenue (in %) (*)36.745.931.640.7VAT Gap (% of VAT total tax liability, VTTL)8.28.011.09.1PortugalEU-27Tax structureProgressivity & fairnessTax administration & compliance 
 
 
                                                 
 
     
 
 
 
 
 
 
 
 
Graph A19.1: Tax revenues from different tax types as % of total taxation 

Note: Values for EU are GDP-weighted EU averages (EU aggregates) 
Source: European Commission 

increased 

and  benefits,  and  measures  to  modernise  tax 
courts.  Portugal  has  also 
the 
digitalisation of its tax administration in the areas 
of  taxpayer  services,  IT  systems  and  compliance. 
Tax arrears increased in 2020 by 9.2 pps to 45.9% 
of total net revenue, from an already significantly 
high  level,  5.2  pps  above the  EU-27  average.  The 
VAT  gap  (the  gap  between  revenues  actually 
collected  and  the  theoretical  tax  liability)  has 
steadily  been  decreasing  since  2016,  reducing  by 
nearly  4 pps  until  2019.  In  2020,  the  estimated 
VAT tax base for Portugal declined in parallel with 
VAT revenue, as in most Member States. The VAT 
gap 
remained  broadly 
unchanged at 8% of the total  VAT liability (below 
the  EU-wide  gap  of  9.1%).  However,  Portugal’s 
VAT  policy  gap  (which  is  an  estimate  of  revenue 
loss  due  to  the  use  of  reduced  VAT  rates  and 
exemptions)  increased  in  2020  to  53.01%  and 
remained well above the EU average of 45.77%. 

in  2020 

therefore 

Graph A19.2: Tax wedge for single and second 
earners as a % of total labour costs, 2022 

Second earner tax wedge assumes first earner at 100% of 
the average wage and no children. For the methodology of 
the tax wedge for second earners see OECD (2016) “Taxing 
Wages 2014-2015” 
Source: European Commission 

69 

35.338.041.947.742.62025303540455050100150Tax wedge, % of total labour costsEarnings in % of the average wageSingle earner - PTSingle earner - EU averageSecond earner -  PTSecond earner -  EU average51.4327.5421.0145.9335.6718.37Tax revenue shares in 2021, Portugal (outer ring) and the EU (inner ring)Taxes on labourTaxes on consumptionTaxes on capital5.074.321.491.000.060.192.112.644.612.75012345678Portugal -environmentaltaxationEU -environmentaltaxationPortugal -property taxationEU - propertytaxationEnvironmental and property taxation as % of total tax revenue, Portugal and the EUEnergy taxesTransport taxesResource/pollution taxesRecurrent property taxesOther property taxes 
 
 
 
 
 
 
 
 
 
      
 
      
 
ANNEX 20: TABLE WITH ECONOMIC AND FINANCIAL INDICATORS 

Table A20.1: Key economic and financial indicators 

(1) Domestic banking groups and stand-alone banks, EU and non-EU foreign-controlled subsidiaries and EU and non-EU foreign-
controlled branches. 
(2) Net international investment position (NIIP) excluding direct investment and portfolio equity shares.  
Source: Eurostat and ECB as of 2 May 2023, where available; European Commission for forecast figures (Spring forecast 2023). 

70 

2004-072008-122013-1920202021202220232024Real GDP (y-o-y)1.7-1.41.8-8.35.56.72.41.8Potential growth (y-o-y)0.9-0.40.71.32.01.82.02.1Private consumption (y-o-y)2.0-1.62.0-7.04.75.80.51.5Public consumption (y-o-y)1.4-1.10.30.34.61.72.71.3Gross fixed capital formation (y-o-y)0.6-7.74.0-2.28.73.02.93.6Exports of goods and services (y-o-y)5.61.55.5-18.613.416.75.43.2Imports of goods and services (y-o-y) 5.7-2.66.2-11.813.211.13.33.6Contribution to GDP growth:Domestic demand (y-o-y)1.8-2.82.0-4.95.54.61.41.9Inventories (y-o-y)0.3-0.10.0-0.50.30.00.00.0Net exports (y-o-y)-0.41.5-0.3-3.0-0.22.01.0-0.2Contribution to potential GDP growth:Total Labour (hours) (y-o-y)-0.3-1.10.30.20.50.20.50.6Capital accumulation (y-o-y)0.80.3-0.1-0.10.10.10.10.2Total factor productivity (y-o-y)0.40.40.61.11.41.51.41.3Output gap-1.0-1.7-0.7-6.6-3.41.31.71.3Unemployment rate8.912.611.37.06.66.06.56.3GDP deflator (y-o-y)3.00.61.72.01.54.45.82.3Harmonised index of consumer prices (HICP, y-o-y)2.51.90.6-0.10.98.15.12.7HICP excluding energy and unprocessed food (y-o-y)2.21.40.70.00.36.25.93.0Nominal compensation per employee (y-o-y)3.30.42.01.54.16.15.72.9Labour productivity (real, hours worked, y-o-y)1.71.10.40.32.43.61.00.5Unit labour costs (ULC, whole economy, y-o-y)1.4-0.21.38.70.61.53.71.7Real unit labour costs (y-o-y)-1.5-0.8-0.46.6-0.9-2.9-2.0-0.6Real effective exchange rate (ULC, y-o-y)-0.2-1.90.33.80.3-1.6-1.5-1.5Real effective exchange rate (HICP, y-o-y)0.6-0.5-0.20.2-1.7-1.4..Net savings rate of households (net saving as percentage of net disposable income)1.81.5-1.32.1-0.6-5.4..Private credit flow, consolidated (% of GDP)13.84.4-0.84.44.12.8..Private sector debt, consolidated (% of GDP)173.6203.4172.6163.7157.0142.7..of which household debt, consolidated (% of GDP)81.590.673.869.166.461.5..of which non-financial corporate debt, consolidated (% of GDP)92.1112.898.894.690.681.1..Gross non-performing debt (% of total debt instruments and total loans and advances) (1)1.24.110.53.93.0...Corporations, net lending (+) or net borrowing (-) (% of GDP)-4.5-1.72.30.40.4-0.71.21.2Corporations, gross operating surplus (% of GDP)19.820.921.919.420.621.423.223.3Households, net lending (+) or net borrowing (-) (% of GDP)1.33.02.45.23.40.51.00.7Deflated house price index (y-o-y)-1.6-2.94.98.17.95.9..Residential investment (% of GDP)5.73.72.73.43.84.0..Current account balance (% of GDP), balance of payments-9.4-8.00.8-1.0-0.8-1.31.11.0Trade balance (% of GDP), balance of payments-7.8-5.41.3-1.9-2.6-2.1..Terms of trade of goods and services (y-o-y)-0.10.01.01.4-1.2-3.23.10.3Capital account balance (% of GDP)1.41.51.11.01.70.9..Net international investment position (% of GDP)-77.1-107.8-112.9-104.6-95.0-83.9..NENDI - NIIP excluding non-defaultable instruments (% of GDP) (2)-44.3-71.3-64.7-46.7-36.5-29.4..IIP liabilities excluding non-defaultable instruments (% of GDP) (2)175.7213.4189.4183.5170.4148.6..Export performance vs. advanced countries (% change over 5 years)5.5-3.34.1-1.0-0.8...Export market share, goods and services (y-o-y)-2.4-3.72.2-10.20.312.42.7-0.6Net FDI flows (% of GDP)0.6-2.4-3.0-2.5-3.4-2.0..General government balance (% of GDP)-4.8-7.8-3.1-5.8-2.9-0.4-0.1-0.1Structural budget balance (% of GDP)..-1.7-1.6-1.3-0.8-0.8-0.8General government gross debt (% of GDP)71.4101.4127.3134.9125.4113.9106.2103.1forecast 
 
 
 
      
 
 
 
ANNEX 21: DEBT SUSTAINABILITY ANALYSIS 

This  Annex  assesses  fiscal  sustainability 
risks  for  Portugal  over  the  short,  medium 
and  long  term.  It  follows  the  same  multi-
dimensional 
European 
Commission’s  2022  Debt  Sustainability  Monitor, 
updated  based  on  the  Commission’s  2023  spring 
forecast. 

approach 

the 

as 

1  -  Short-term  risks  to  fiscal  sustainability 
are 
low  overall.  The  Commission’s  early-
detection  indicator  (S0)  does  not  signal  major 
short-term  fiscal  risks  (Table  A21.2). (117)  Gross 
financing needs are expected to remain moderate 
at around 10% of GDP in the short-term (i.e. over 
2023-2024),  although  declining  compared  with 
the  recent  peak  in  2020  (Table  A21.1,  Table  1). 
Financial  markets’  perceptions  of  sovereign  risk 
are investment grade, as confirmed by the spread 
and the ‘BBB’ (or equivalent) rating that the three 
main  rating  agencies  have  assigned  to  the 
Portuguese government debt. 

2 - Medium-term risks to fiscal sustainability 
are high overall.  

The  DSA  for  Portugal  shows  that,  under  the 
baseline,  the  government  debt-to-GDP  ratio 
is expected to remain at a high level over the 
medium-term (at 91.8% of the GDP in 2033), 
despite  being  on  a  continuously  declining 
path  (Graph  1). (118), (119)  The  assumed  structural 
primary balance (a surplus of 1.9% of GDP) seems 

(117) The S0 is a composite indicator of short-term risk of fiscal 
stress. It is based on a wide range of macro-financial and 
fiscal variables that have proven to perform well in the past 
in detecting situations of upcoming fiscal stress.  

(118) The assumptions underlying the Commission’s ‘no-fiscal 
policy change’ baseline notably comprise: (i) a structural 
primary surplus, before ageing costs, of 1.9% of GDP as of 
2024; (ii) inflation converging linearly towards the 10-year 
forward inflation-linked swap rate 10 years ahead (which 
refers to the 10-year inflation expectations 10 years from 
now); (iii) the nominal short- and long-term interest rates on 
new and rolled over debt converging linearly from current 
values to market-based forward nominal rates by T+10; (iv) 
real GDP growth rates from the Commission 2023 spring 
forecast until 2024, followed by EPC/OGWG ‘T+10 
methodology projections between T+3 and T+10, i.e. for 
2025-2033 (on average 0.8%); (v) ageing costs in line with 
the 2021 Ageing Report (European Commission, Institutional 
Paper 142, November 2020). For information on the 
methodology, see the 2022 Debt Sustainability Monitor. 

from  a 

favourable 

ambitious compared to past fiscal performance. At 
the  same  time,  the  baseline  projections  up  to 
2033  benefit 
(although 
diminishing)  snowball  effect  until  2030,  notably 
thanks 
of 
NextGenerationEU, with real GDP growth at around 
0.8%  of  GDP  over  2025-2033.  Government  gross 
financing  needs  are  expected  to  slightly  increase 
over the projection period, reaching 11% of GDP in 
2033, slightly above the level forecast for 2024. 

favourable 

impact 

the 

to 

to 

the 

lead 

to  worse 

The  baseline  projections  are  stress-tested 
against  four  alternative  scenarios  to  assess 
the  impact  of  changes  in  key  assumptions 
(Graph  1).  For  Portugal,  all  the  stress  tests 
scenarios  would 
results  as 
the  baseline,  with  particularly 
compared 
adverse  developments  under 
‘historical 
structural  primary  balance  (SPB)’  scenario.  If  the 
SPB  gradually  converged  to  a  surplus  of  0.4%  of 
GDP  (its  historical  15-year  average),  it  would 
result  in  a  persistently  higher  projected  debt-to-
GDP  ratio  (about  9  pps.)  higher  than  in  the 
baseline  in  2033.  A  permanent  worsening  of  the 
macro-financial  conditions,  as  reflected  under  the 
‘adverse interest- growth rate differential’ scenario 
(i.e. 1 pp. higher than the baseline) would also lead 
to higher government debt-to-GDP ratio (around 8 
pps.) by  2033,  as  compared  with  the  baseline.  As 
for the ‘lower structural primary balance’ scenario 
(i.e. SPB level permanently reduced by half of the 
cumulative forecast change), it would also provide 
to a higher government debt-to-GDP ratio by 2033 
(about  4  pps.)  compared  with  the  baseline.  A 
temporary  worsening  of  financial  conditions,  as 
reflected  in  the  ‘financial  stress  ‘scenario  (i.e. 
temporarily increase of interest rates by 2.4 pps.), 
would  also  lead  a  slightly  higher  public  debt-to-
GDP  ratio  by  2033  (about  2  pps.)  compared  with 
the baseline.  

Additionally,  stochastic  projections  show  a 
medium  sensitivity  of  these  projections 
against  plausible  unforeseen  events  (Graph 
2). (120)  These  stochastic  simulations  point  to  a 
22%  probability  of  the  debt  ratio  in  2027  being 
greater than in 2022, entailing medium risk given 
the  initial  high  level  of  debt.  In  addition,  such 
shocks  point  to  substantial  uncertainty  (i.e.  the 

(119) Table 1 shows the baseline debt projections and its 

(120) The stochastic projections show the joint impact on debt of 

breakdown into the primary balance, the snowball effect (the 
combined impact of interest payments and nominal GDP 
growth on the debt dynamics) and the stock-flow 
adjustment.  

2000 different shocks affecting the government’s budgetary 
position, economic growth, interest rates and exchange rates. 
The cone covers 80% of all the simulated debt paths, 
therefore excluding tail events. 

71 

 
 
                                                 
                                                 
 
 
Finally,  several  additional  risk  factors  need 
to  be  considered  in  the  assessment.  On  one 
hand,  risk-increasing  factors  are  related  to  the 
recent increase in interest rates, contingent liability 
risks  linked  to  State  guaranteed  credit  lines, 
including  those  granted  to  firms  and  the  self-
employed  during  the  COVID-19  crisis,  and  the 
negative  net international  investment  position. On 
the  other-hand,  risk-mitigating  factors  include 
Portugal’s  comfortable  cash  buffer,  relatively 
stable  financing  sources  (with  a  diversified  and 
large 
currency 
denomination  of  debt,  as  well  as  a  debt 
management  strategy  targeting  the  smoothening 
of  the  debt  redemption  profile.  In  addition,  the 
structural  reforms  under  the  NGEU/RRF,  if  fully 
implemented, could have a further positive impact 
on GDP growth in the coming years, and therefore 
help to mitigate debt sustainability risks. 

investor 

base) 

and 

the 

difference  between  the  10th  and  90th  debt 
the 
distribution 
government debt baseline projections.  

surrounding 

percentiles) 

3  -  Long-term  risks  to  fiscal  sustainability 
are low overall. (121)  

of 

indicator  points  to 

The  S2 
low  fiscal 
sustainability  risks.  The  indicator  shows  that, 
relative to the baseline, the SPB would not need to 
improve to ensure debt stabilisation over the long 
term.  This  result  is  underpinned  by  a  favourable 
initial  budgetary  position  (-1.5  pps.  of  GDP)  and 
the  projected  decrease  in  ageing-related  costs 
(contribution  of  -1.1  pps.  of  GDP).  Ageing  costs’ 
developments are primarily driven by the projected 
expenditure 
decrease 
(contribution of  -2.9 pps. of GDP), though pension 
spending  will  continue  to  increase  over  the  next 
decade to reach a peak of 14.6% of GDP in 2035 
before starting to decrease. Health and long-term 
care  spending  is  projected  to  increase  over  the 
projection  period  (joint  contribution  of  1.7  pps.  of 
GDP) (Table 2). However, a number of investments 
and  reforms  in  the  RRP  contribute  to  supporting 
the  efficiency  of  the  Portuguese  health-care 
system, so it will be important to carefully monitor 
their implementation. 

pension 

public 

indicator  signals 

Combined  with  the  S1  indicator,  long-term 
risks  are  assessed  as  low.  Indeed,  the  S1 
that  no 
sustainability  gap 
consolidation  effort  would  be  needed  to  reduce 
debt to 60% of GDP by 2070. This result is driven 
by  the  favourable  initial  budgetary  position  (-1.8 
pps.  of GDP),  which is partially  offset  by the  high 
Portuguese government debt ratio (contribution of 
0.9  pp.  of  GDP),  and  the  projected  ageing-related 
public  spending  (contribution  by  0.8  pp.  of  GDP) 
(Table 2).  

(121)The S2 fiscal sustainability gap indicator measures the 

permanent fiscal effort (SPB adjustment) in 2024 that would 
be required to stabilise public debt over the long term. It is 
complemented by the S1 fiscal sustainability gap indicator, 
which measures the permanent fiscal effort required in 2024 
to bring the debt-to-GDP ratio to 60% in the long term (by 
2070). For both the S1 and S2 indicators, the risk 
assessment depends on the amount of fiscal consolidation 
needed: ‘high risk’ if the required effort exceeds 6 pps. of 
GDP, ‘medium risk’ if it lies between 2 pps. and 6 pps. of 
GDP, and ‘low risk’ if the effort is negative or below 2 pps. of 
GDP. The overall long-term risk classification brings together 
the risk categories derived from S1 and S2. S1 may notch up 
the risk category derived from S2 when it signals a higher 
risk than S2. See the 2022 Debt Sustainability Monitor for 
further details. 

72 

 
                                                 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Table A21.1: Debt sustainability analysis - Portugal 

Source: Commission services. 

Table A21.2: Heat map of fiscal sustainability risks - Portugal 

Source: Commission services (for further details on the Commission's multidimensional approach, see the 2022 Debt 
Sustainability Monitor). 

73 

Table 1. Baseline debt projections20202021202220232024202520262027202820292030203120322033Gross debt ratio (% of GDP)134.9125.4113.9106.2103.1100.197.796.094.493.292.391.991.891.8Changes in the ratio18.3-9.5-11.5-7.7-3.1-3.0-2.3-1.7-1.6-1.2-0.8-0.5-0.10.0of whichPrimary deficit2.90.5-1.6-2.0-2.6-2.2-1.8-1.3-1.1-0.9-0.7-0.5-0.3-0.1Snowball effect10.9-6.5-10.9-6.6-1.5-0.8-0.6-0.4-0.5-0.3-0.20.00.20.1Stock-flow adjustments4.4-3.51.00.91.00.00.00.00.00.00.00.00.00.0Gross financing needs (% of GDP)20.812.211.110.69.89.510.110.310.210.09.611.811.611.4S1S2Overall index  (pps. of GDP)-0.1-2.6of which Initial budgetary position-1.8-1.5Debt requirement0.9Ageing costs0.8-1.1of which    Pensions-0.6-2.9     Health care1.01.3     Long-term care0.30.4Others0.10.2Table 2. Breakdown of the S1 and S2 sustainability gap indicators6070809010011012013014020202021202220232024202520262027202820292030203120322033Graph 1. Deterministic debt projections Historical SPB scenarioLower SPB scenarioFinancial stress scenarioAdverse 'r-g' scenarioBaseline% of GDPp10p20p40p60p80p9045556575859510511512513514520202021202220232024202520262027% of GDPGraph 2. Stochastic debt projections 2023-2027MedianBaselineBaselineHistorical SPBLower SPBAdverse 'r-g'Financial stressOverallHIGHHIGHHIGHHIGHHIGHMEDIUMDebt level (2033), % GDP91.8101.295.7100.093.6Debt peak year20222022202220222022Fiscal consolidation space24%41%33%24%24%Probability of debt ratio exceeding in 2027 its 2022 level22%Difference between 90th and 10th percentiles (pps. GDP)54.8(1)Debtlevelin2033.Green:below60%ofGDP.Yellow:between60%and90%.Red:above90%.(2)Thedebtpeakyearindicateswhetherdebtisprojectedtoincreaseoveralloverthenextdecade.Green:debtpeaksearly.Yellow:peaktowardsthemiddleoftheprojectionperiod.Red:latepeak.(3)Fiscalconsolidtationspacemeasurestheshareofpastfiscalpositionsinthecountrythatweremorestringentthantheoneassumedinthebaseline.Green:highvalue,i.e.theassumedfiscalpositionisplausiblebyhistoricalstandardsandleavesroomforcorrectivemeasuresifneeded.Yellow:intermediate.Red:low.(4)Probabilityofdebtratioexceedingin2027its2022level.Green:lowprobability.Yellow:intermediate.Red:high(alsoreflectingtheinitialdebtlevel).(5)thedifference between the 90th and 10th percentiles measures uncertainty, based on the debt distribution under 2000 different shocks. Green, yellow and red cells indicate increasing uncertainty.Short termMedium term - Debt sustainability analysis (DSA)Long termOverall                               (S0)Overall Deterministic scenariosStochastic projectionsS2S1Overall(S1 + S2)LOWHIGHLOWLOWLOW 
 
 
   
 
 
   
 
ANNEX 22: MACROECONOMIC IMBALANCE PROCEDURE ASSESSMENT MATRIX  

growing,  but  at  a  lower  rate,  with  a  marked 
reduction of housing prices being unlikely. 

energy 

efficiency, 

production 

implementation  of  Portugal’s  RRP 

Policy  progress  has  been  made  with  a 
particular  focus  on  RRP  implementation.  The 
is 
ongoing 
expected  to  have  a  significant  impact  on  the 
country’s 
of 
renewables  and  export  potential  that  ultimately 
support  the  country’s  external  position.  Large 
investments  in  digital  technologies  and  skills  as 
well  as  measures  to 
liquidity  and 
capitalisation  of  vulnerable  firms  are  set  to 
improve  the  country’s  productivity.  Most  of  the 
measures  included  in  the  Portuguese  RRP  remain 
to  be  implemented  until  mid-2026.  Authorities 
took  steps  to  address  issues  related  to  housing 
affordability resulting from the continuous growth 
in  house  prices.  Fiscal-structural  reforms  are  key 
to  strengthen  Portugal’s  medium-term  fiscal 
sustainability. Portugal has made limited progress 
in  improving  the  effectiveness  of  the  tax  and 
social protection systems. 

increase 

Based  on  this  assessment,  the  Commission 
considered  in  its  communication  European 
Semester – 2023 Spring Package (COM(2023) 
600  final)  that  Portugal  continues  to 
experience imbalances. 

The  Macroeconomic 
Imbalance  Procedure 
matrix presents the main elements of the in-
depth  review  undertaken  for  Portugal (122).  
The country was selected for an in-depth review in 
the  2023  Alert  Mechanism  Report.  This  in-depth 
review  on  the  prevention  and  correction  of 
macroeconomic  imbalances  presents  the  main 
findings  on  the  gravity  and  evolution  of  the 
challenges  identified,  as  well  as  policy  responses 
and potential policy needs. Findings cover all areas 
of vulnerability assessed in the in-depth review.  

Portugal  has  made  substantial  progress  in 
reducing  its  vulnerabilities  related  to  public, 
private  and  external  indebtedness.  After  a 
temporary  interruption  due  to  the  outbreak  of 
COVID-19  in  2020,  public,  private  and  external 
debt  to  GDP  ratios  resumed  their  declining  trend. 
All  debt  ratios  improved  to  levels  below  those  in 
the pre-pandemic period. The adverse energy price 
developments led to a modest deterioration in the 
current  account  balance  in  2022.  The  ratio  of  the 
country’s  NIIP  relative  to  GDP  remains  very 
negative,    at  -83.9%,  but  improved  substantially, 
helped  by  strong  economic  growth.  Similar 
improvements  were  observed  in  the  private  and 
public  debt  ratios.  The  external  debt  structure 
remained  overall  favourable  as  a  substantial  part 
of  the  NIIP  is  composed  of  non-defaultable  debt 
instruments. NPLs continued to decline. In nominal 
terms,  house  prices  increased  by  12.6%  in  2022 
and the average valuation gap increased to around 
24%.  The  banking  sector  proved  resilient  over 
2022,  as  profitability 
increased  and  non-
performing loans continued to decline. 

Going  forward,  the  country’s  public,  private 
and  external  indebtedness  is  projected  to 
continue  its  favourable  trajectory  supported 
by  economic  growth.  Although  real  economic 
growth  is  forecast  to  moderate,  nominal  GDP  is 
still expected to continue to increase at a relatively 
high  rate.  In  the  external  sector,  the  expected 
global  correction  in  energy  prices  and  a  further 
increase  in  foreign  tourism  revenues  are  set  to 
improve the current account balance to around 1% 
in 2023, and to further support the adjustment in 
the  NIIP.  House  prices  are  projected  to  continue 

(122)  European Commission (2023), In-Depth Review for Portugal, 
Commission staff working document (COM(2023) 641 final), 
in accordance with Article 5 of Regulation (EU) No 
1176/2011 on the prevention and correction of 
macroeconomic imbalances.  

74 

 
 
                                                 
 
 
Table A22.1: Assessment of macroeconomic imbalances matrix 

Source: European Commission 

75 

Gravity of the challengeEvolution and prospectsPolicy responseUnsustainable trends, vulnerabilities and associated risksExternal balanceThe net international investment position (NIIP) is estimated at -84% of GDP at the end of 2022, standing beyond the estimated prudential threshold of -55%. Non-defaultable instruments account for about 60% of the NIIP, reducing risks associated to external debt.The current account balances, at -1.3% of GDP in 2022,  was below the country-specific norm due to temporary factors mainly related to the exceptionally high prices of energy imports.After a temporary deterioration in 2020, driven by the negative impact of COVID-19, the NIIP improved markedly for a second year in a row from -105% of GDP at the end of 2020 to -95% at the end of 2021 and -84% at the end of 2022. Going forward, the NIIP is projected to retain a sound pace of improvement.The current account deficit widened from 0.8% of GDP in 2021 to 1.3% in 2022, driven by exceptionally high prices of energy imports. In real terms, exports grew much faster than imports due mainly to the strong recovery in tourism. The current account balance is forecast at around 1% of GDP for 2023 and 2024.Some policy needs remain to reduce Portugal’s energy import dependency and are being addressed by ongoing reforms and investments, including the RRP. Reducing the country’s net energy imports is key to reduce Portugal’s negative trade balance in the medium term. Ongoing policy actions are related to energy efficiency and increased use of renewable energy. Private debtThe high stock of private debt is mainly a legacy of the past in Portugal. Private debt is estimated at 143% of GDP at the end of 2022. Both household and corporate debt to GDP ratios are  above the estimated country specific fundamentals and prudential benchmarks. The stock of non-performing loans is estimated at 3.1% at the end of 2022 and poses a considerably lower risk than some years ago. Helped mainly by the strong nominal growth in GDP, the private debt-to-GDP ratio fell from 157% at the end of 2021 to 143% at the end of 2022. The ratio thus moved below its pre-pandemic level of 149% at the end of 2019 and well below its peak of 211% in 2012.With the projected growth in nominal GDP in 2023-2024, the private debt ratio is set to move close to the indicative scoreboard threshold of 133% by the end of 2024.The policy setting is overall consistent with a further unwinding of the private debt stock. Portugal introduced new measures for boosting liquidity and capital to companies. The state-owned promotional bank, Banco Português de Fomento (BPF), was set up in 2020. Since then, the bank issued a wide range of funds and guarantee lines to support companies in vulnerable sectors, as well as to address the issue of undercapitalisation of the Portuguese corporate sector.Public debtThe government debt-to-GDP ratio is estimated at 114% of GDP in 2022. The high government debt-to-GDP ratio makes Portugal vulnerable to changes in economic and financing conditions, which translate into certain fiscal sustainability risks. However, risks are mitigated by Portugal’s comfortable cash buffer, favourable maturity structure of its debt and stable financing sources.Portugal’s public debt-to-GDP ratio further decreased in 2022. After reaching a peak of 134.9% in 2020, the Portuguese public debt-to-GDP ratio resumed its downward trend and reached 113.9% in 2022, benefitting from the high inflation environment. It is projected to continue declining, to 103% in 2024. The fiscal balance improved to -0.4% in 2022 and is forecast to be close to balance in 2023 and 2024.Fiscal-structural reforms are key to strengthen Portugal’s medium-term fiscal sustainability. The full and effective implementation of the 2015 Budgetary Framework Law would provide for a stronger budgetary framework.As part of the Portuguese RRP, Portugal also envisages measures to strengthen the spending efficiency and to enable appropriate budgeting with the integration, among others, of spending reviews and the development of programme budgeting. Portugal has made limited progress in improving the effectiveness of the tax and social protection systems.ProductivityLow labour productivity hinders competitiveness and potential growth. Total factor productivity was a major contributor to Portugal’s potential growth in 2022 while the contributions of labour and capital were much smaller. Low productivity growth also limits the prospects of deleveraging and income convergence. On the other hand Portugal’s potential growth exceeds the euro average.After a drop in labour productivity and export market shares in 2020 due to the pandemic-driven contraction in tourism, Portugal marked a significant improvement in both indicators in 2021-2022. The economy expanded much faster than employment and exports rose faster than the growth of Portugal’s export markets.Total factor productivity is projected to remain broadly stable over the forecast period, while labour productivity growth is set to slow down.Policy progress has been made in areas related to productivity. Specific actions in the area refer to the digital transformation and business environment with the entry into force of the review of the training content in the field of digital skills and the legislation for the creation of digital signatures. Furthermore, authorities launched the digital academy and employment programmes with the aim to increase the digital skills of employees and managers with a particular focus on enterprises in industry, commerce, services, tourism and agriculture sectors. Investments are expected to contribute to the development of life-long vocational skills and training practices.HousingOver the last decade, house prices in Portugal have doubled in nominal terms with the last three years, 2020 to 2022, witnessing an increase of around 34%. In nominal terms, house prices increased at around 13% in 2022.  The average valuation gap increased to 24% in 2022.House price growth is expected to moderate going forward, as interest rates are on the rise.  Certain supply constraints will continue to exist and reduce the scope for a substantial reduction in house prices in a context of strong property demand by foreign investors. Some measures were taken in response to recent house price developments. The central bank adopted a macroprudential recommendation, lowering as of 2023 the average maturity for mortgage-backed loans to 30 years. This came on top of existing macroprudential measures. The government approved a draft programme targeting the Portuguese housing market (Programa Mais Habitação) in February 2023 with a draft Law proposal pending discussion and approval in the Portuguese Parliament.