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

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   EUROPEAN COMMISSION  Brussels, 24.5.2023  COM(2023) 622 final  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 {SWD(2023) 622 final}  
 
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 

THE COUNCIL OF THE EUROPEAN UNION, 

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

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

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

Having regard to the recommendation of the European Commission, 

Having regard to the resolutions of the European Parliament, 

Having regard to the conclusions of the European Council, 

Having regard to the opinion of the Employment Committee, 

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

Having regard to the opinion of the Social Protection Committee, 

Having regard to the opinion of the Economic Policy Committee, 

Whereas: 

(1) 

Regulation  (EU)  2021/241  of  the  European  Parliament  and  of  the  Council3,  which 
established  the  Recovery  and  Resilience  Facility,  entered  into  force  on  19  February 
2021. The Recovery and Resilience Facility provides financial support to the Member 
States  for  the  implementation  of  reforms  and  investments,  entailing  a  fiscal  impulse 
financed  by  the  EU.  In  line  with  the  European  Semester  priorities,  it  contributes  to 
economic  and  social  recovery  and  to  the  implementation  of  sustainable  reforms  and 
investments,  in  particular  to  promote  the  green  and  digital  transition  and  make  the 
Member States’ economies more resilient. It also helps strengthen public finances and 
boost  growth  and  job  creation  in  the  medium  and  long  term,  improve  territorial 
cohesion  within  the  EU  and  support  the  continued  implementation  of  the  European 
Pillar of Social Rights. The maximum financial contribution per Member State under 
the Recovery and Resilience Facility was updated on 30 June 2022, in accordance with 
Article 11(2) of Regulation (EU) 2021/241.  

1 
2 
3 

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

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(2) 

On 22 November 2022, the Commission adopted the 2023 Annual Sustainable Growth 
Survey4,  marking  the  start  of  the  2023  European  Semester  for  economic  policy 
coordination. The  European Council endorsed the priorities of the  survey  around the 
four  dimensions  of  competitive  sustainability  on  23  March  2023.  On  22  November 
2022,  on  the  basis  of  Regulation  (EU)  No  1176/2011,  the  Commission  also  adopted 
the  2023  Alert  Mechanism  Report,  in  which  it  identified  Portugal  as  one  of  the 
Member States that may be affected or may be at risk of being affected by imbalances, 
and for which an in-depth review would be needed. On the same date, the Commission 
also  adopted  an  opinion  on  Portugal’s  2023  draft  budgetary  plan.  The  Commission 
also adopted a recommendation for a Council recommendation on the economic policy 
of the euro area, which the Council adopted on 16 May 2023, as well as the proposal 
for  the  2023  Joint  Employment  Report  analysing  the  implementation  of  the 
Employment  Guidelines  and  the  principles  of  the  European  Pillar  of  Social  Rights, 
which the Council adopted on 13 March 2023.  

(3)  While the  EU  economies are showing remarkable resilience, the  geopolitical  context 
continues  to  have  a  negative  impact.  As  the  EU  stands  firmly  with  Ukraine,  the  EU 
economic  and  social  policy  agenda  is  focused  on  reducing  the  negative  impact  of 
energy shocks on both vulnerable households and companies in the short term, and on 
keeping  up  efforts  to  deliver  on  the  green  and  digital  transition,  support  sustainable 
and inclusive growth, safeguard macroeconomic stability and increase resilience in the 
medium  term.  It  also  focuses  heavily  on  increasing  the  EU’s  competitiveness  and 
productivity. 

(4) 

On  1  February  2023,  the  Commission  issued  the  Communication  A  Green  Deal 
Industrial  Plan  for  the  Net-Zero  Age5  to  boost  the  competitiveness  of  the  EU’s  net-
zero  industry  and  support  the  fast  transition  to  climate  neutrality.  The  plan 
complements  ongoing  efforts  under  the  European  Green  Deal  and  REPowerEU.  It  
aims to provide a more supportive environment for scaling up the EU’s manufacturing 
capacity  for  the  net-zero  technologies  and  products  required  to  meet  the  EU’s 
ambitious climate targets, as well as ensuring access to relevant critical raw materials, 
including  by  diversifying  sourcing,  properly  exploiting  geological  resources  in 
Member States and maximising the recycling  of raw materials. The plan  is  based on 
four pillars:  a predictable and simplified regulatory  environment,  speeding up access 
to finance, enhancing skills, and open trade for resilient supply chains.  On 16 March 
2023,  the  Commission  also  issued  the  Communication  Long-term  competitiveness  of 
the EU: looking beyond 20306, structured along nine mutually reinforcing drivers with 
the objective to work towards a growth enhancing regulatory framework. It sets policy 
improvements,  well  focused 
priorities  aimed  at  actively  ensuring  structural 
investments and regulatory measures for the long-term competitiveness of the EU and 
its Member States. The recommendations below help address those priorities. 

(5) 

In 2023, the European Semester for economic policy coordination continues to evolve 
in  line  with  the  implementation  of  the  Recovery  and  Resilience  Facility.  Fully 
implementing  the  recovery  and  resilience  plans  remains  essential  for  delivering  the 
policy priorities under the European Semester, as the plans address all or a significant 
subset  of  the  relevant  country-specific  recommendations  issued  in  recent  years.  The 
2019, 2020 and 2022 country-specific recommendations remain equally relevant also 

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COM(2022) 780 final. 
COM(2023) 62 final.  
COM(2023) 168 final.  

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(6) 

(7) 

for  recovery  and  resilience  plans  revised,  updated  or  amended  in  accordance  with 
Articles 14, 18 and 21 of Regulation (EU) 2021/241.  
The REPowerEU Regulation7 adopted on 27 February 2023 aims to rapidly phase out 
the  EU’s  dependence  on  Russian  fossil  fuel  imports.  This  will  contribute  towards 
energy security and the diversification of the EU’s energy supply, while increasing the 
uptake of renewables, energy storage capacities and energy efficiency. The Regulation 
enables  Member  States  to  add  a  new  REPowerEU  chapter  to  their  national  recovery 
and  resilience  plans  in  order  to  finance  key  reforms  and  investments  that  will  help 
achieve the REPowerEU objectives. They will also help boost the competitiveness of 
the EU’s net-zero industry as outlined in the Green Deal  Industrial Plan for the Net-
Zero Age and address the energy-related country-specific recommendations issued to 
the  Member  States  in  2022  and,  where  applicable,  in  2023.  The  REPowerEU 
Regulation  introduces  a  new  category  of  non-repayable  financial  support,  made 
available  to  Member  States  to  finance  new  energy-related  reforms  and  investments 
under their recovery and resilience plans.  

On 8 March 2023, the Commission adopted a communication providing fiscal policy 
guidance for 2024. It aims to support the preparation of Member States’ stability and 
thereby  strengthen  policy  coordination8.  The 
convergence  programmes  and 
Commission recalled that the general escape clause of the Stability and Growth Pact 
will be deactivated at  the end of 2023.  It  called  for fiscal  policies in  2023-2024 that 
ensure  medium-term  debt  sustainability  as  well  as  raise  potential  growth  in  a 
sustainable manner. Member States were invited to set out in their 2023  stability and 
convergence programmes how their fiscal plans will ensure that the 3% of GDP deficit 
reference value is adhered to as well as plausible and continuous debt reduction, or for 
debt  to  be  kept  at  prudent  levels  in  the  medium  term.  The  Commission  invited 
Member States to phase out national fiscal measures introduced to protect households 
and  firms  from  the  energy  price  shock,  starting  with  the  least  targeted  ones.  It 
indicated that, if support measures needed to be extended because of renewed energy 
price  pressures,  Member  States  should  target  such  measures  much  better  than  in  the 
past  towards  vulnerable  households  and  firms.  The  Commission  proposed  that  the 
fiscal  recommendations would be  quantified and differentiated  and be  formulated on 
the basis of net primary expenditure as proposed in its Communication on orientations 
for  a  reform  of  the  EU  economic  governance  framework9.  It  recommended  that  all 
Member States should  continue to  protect  nationally  financed investment and ensure 
the  effective  use  of  the  Recovery  and  Resilience  Facility  and  other  EU  funds,  in 
particular  in  light  of  the  green  and  digital  transition  and  resilience  objectives.  The 
Commission  indicated  that  it  will  propose  to  the  Council  to  open  deficit-based 
excessive deficit procedures in spring 2024 on the basis of the outturn data for 2023, in 
line with existing legal provisions. 

(8) 

On  26  April  2023,  the  Commission  presented  legislative  proposals  to  implement  a 
comprehensive reform of the EU’s economic governance rules. The central objective 
of the proposals is to strengthen public debt sustainability and promote sustainable and 

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Regulation  (EU)  2023/435  of  the  European  Parliament  and  of  the  Council  of  27  February  2023 
amending Regulation (EU) 2021/241 as regards REPowerEU chapters in recovery and resilience plans 
and  amending  Regulations  (EU)  No  1303/2013,  (EU)  2021/1060  and  (EU)  2021/1755,  and  Directive 
2003/87/EC (OJ L 63, 28.2.2023, p. 1). 
COM(2023) 141 final. 
COM(2022) 583 final. 

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(9) 

inclusive growth in all Member States through reforms and investments. The proposals 
aim at providing Member States with more control over the design of their medium-
term plans, while putting in place a more stringent enforcement regime to ensure that 
Member  States  deliver  on  the  commitments  undertaken  in  their  medium-term  fiscal-
structural plans. The objective is to conclude the legislative work in 2023. 

On 22 April 2021, Portugal submitted its national recovery and resilience plan to the 
Commission, in accordance with Article 18(1) of Regulation (EU) 2021/241. Pursuant 
to  Article  19  of  Regulation  (EU)  2021/241,  the  Commission  assessed  the  relevance, 
effectiveness,  efficiency  and  coherence  of  the  recovery  and  resilience  plan,  in 
accordance with the assessment guidelines of Annex V to that Regulation. On 13 July 
2021,  the  Council  adopted  its  Decision  on  the  approval  of  the  assessment  of  the 
recovery and resilience plan for Portugal10. The release of instalments is conditional on 
a decision by the Commission,  taken in  accordance with  Article 24(5) of  Regulation 
(EU)  2021/241,  that  Portugal  has  satisfactorily  fulfilled  the  relevant  milestones  and 
targets  set  out  in  the  Council  Implementing  Decision.  Satisfactory  fulfilment 
presupposes  that  the  achievement  of  preceding  milestones  and  targets  has  not  been 
reversed. 

(10)  On 29 April 2023, Portugal submitted its 2023 National Reform Programme and, on 
29 April 2023, its 2023 Stability Programme,  in  line with  Article 4(1) of Regulation 
(EC)  No  1466/97.  To  take  account  of  their  interlinkages,  the  two  programmes  have 
been  assessed  together.  In  accordance  with  Article  27  of  Regulation  (EU)  2021/241, 
the  2023  National  Reform  Programme  also  reflects  Portugal’s  biannual  reporting  on 
the progress made in achieving its recovery and resilience plan.  

in 

addressing 

(11)  The Commission published the 2023 country report for Portugal11 on 24 May 2023. It 
assessed  Portugal’s  progress 
country-specific 
recommendations adopted by the Council between 2019 and 2022, and took stock of 
Portugal  implementation  of  the  recovery  and  resilience  plan.  Based  on  this  analysis, 
the  country  report  identified  gaps  with  respect  to  those  challenges  that  are  not 
addressed  or  only  partially  addressed  by  the  recovery  and  resilience  plan,  as  well  as 
new  and  emerging  challenges.  It  also  assessed  Portugal’s  progress  on  implementing 
the  European  Pillar  of  Social  Rights  and  on  achieving  the  EU  headline  targets  on 
employment, skills and poverty reduction, as well as progress in  achieving the UN’s 
Sustainable Development Goals.  

relevant 

the 

(12)  The  Commission  carried  out  an  in-depth  review  under  Article  5  of  Regulation  (EU) 
No 1176/2011 for Portugal and published its results on 24 May 202312. It concluded 
that Portugal is experiencing macroeconomic imbalances. In particular, vulnerabilities 
related to high private, government and external debt are receding but remain present. 
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  While  they  are  now  below  pre-
pandemic  levels,  they  remain  at  still  elevated  levels.  The  clearly  negative  net 
international  investment  position  improved  too,  both  before  and  after  the  pandemic, 
and  external  indebtedness  is  projected  to  further  recede,  supported  by  continued 

10 

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12 

Council Implementing Decision of 13 July 2021 on the approval of the assessment of the recovery and 
resilience plan for Portugal (ST 10149/21; ST 10149/21 ADD 1; ST 10149/21 ADD 1 REV 1). 
SWD(2023) 622 final. 
SWD(2023) 641 final. 

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economic  growth  despite some slowdown in  2023. The small  current  account  deficit 
worsened marginally in 2022 reflecting higher energy prices but that deterioration was 
mitigated  by  the  further  marked  recovery  in  exports,  especially  of  tourism.  Going 
forward,  the  assumed  continued  easing  of  energy  prices  and  a  further  increase  in 
tourism  exports,  as  well  as  ongoing  policies  in  support  of  energy  efficiency  and 
renewables,  are  projected  to  balance  the  current  account  and  to  further  support 
adjustment  in  the  net  international  investment  position.  House  prices  have  grown 
strongly  for  several  years,  while  non-performing  loans  continued  to  decline  from 
already  moderate  levels.  The  main  risks  to  the  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. Policy progress 
has been favourable, with a particular focus on the RRP, and continuing implementing 
the RRP should deliver further improvements. 

(13)  Based on data validated by Eurostat,13 Portugal’s general government deficit decreased 
from 2.9% of GDP in 2021 to 0.4% in 2022, while general government debt fell from 
125.4% of GDP at the end of 2021 to 113.9% at the end of 2022. 

(14)  The  general  government  balance  has  been  impacted  by  the  fiscal  policy  measures 
adopted to mitigate the economic and social impact of the increase in energy prices. In 
2022, such revenue-decreasing measures included a general fuel tax reduction and the 
carbon  rate  freeze  under  the  fuel  tax,  while  such  expenditure-increasing  measures 
included a one-time payment support payable in October 2022 for different population 
groups, such as pensioners, employees, children and the youth, lump-sum payments to 
low-income households  most vulnerable to  rising  energy  prices, and an  allocation to 
the  national  electricity  system  to  reduce  electricity  grid  tariffs.  The  Commission 
estimates  the  net  budgetary  cost  of  these  measures  at  2.0%  of  GDP  in  2022.  At  the 
same time, the estimated cost of COVID-19 temporary emergency measures dropped 
to 0.8% of GDP in 2022, from 2.0% in 2021. 

(15)  On 18 June 2021, the Council recommended that in 2022 Portugal14 use the Recovery 
and  Resilience  Facility  to  finance  additional  investment  in  support  of  the  recovery, 
while pursuing a prudent fiscal policy. Moreover, Portugal should preserve nationally 
financed investment.  The Council also  recommended  Portugal  to  limit  the growth  of 
nationally financed current expenditure. 

(16)  According to the Commission estimates, the fiscal stance15 in 2022 was supportive, at  
-1.5%  of  GDP.  As  recommended  by  the  Council,  Portugal  continued  to  support  the 
recovery  with  investments  financed  by  the  Recovery  and  Resilience  Facility. 
Expenditure financed by Recovery and Resilience Facility grants and other EU funds 
amounted  to  1.2%  of  GDP  in  2022  (1.7%  of  GDP  in  2021).  This  decrease  in 
expenditures  in  2022  was  due  to  the  lower  expenditure  financed  by  other  EU  funds, 
while that financed by the Recovery and Resilience  Facility increased between 2021 
and  2022.  Nationally  financed  investment  provided  a  contractionary  contribution  of 

13 
14 

15 

Eurostat-Euro Indicators, 47/2023, 21.4.2023. 
Council  Recommendation  of  18  June  2021  delivering  a  Council  opinion  on  the  2021  Stability 
Programme of Portugal, OJ C 304, 29.07.2021, p. 102. 
The  fiscal  stance  is  measured  as  the  change  in  primary  expenditure  (net  of  discretionary  revenue 
measures), excluding Covid-19 crisis-related temporary emergency measures but including expenditure 
financed  by  non-repayable  support  (grants)  from  the  Recovery  and  Resilience  Facility  and  other  EU 
funds,  relative  to  medium-term  potential  growth.  For  more  details  see  Box 1  in  the  Fiscal  Statistical 
Tables. 

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financed 

investment,  which  was  not 

0.1  percentage  points  to  the  fiscal  stance.16  Portugal  therefore  did  not  preserve 
the  Council 
nationally 
recommendation. At the same time, the growth in nationally financed primary current 
expenditure (net of new revenue measures) provided an expansionary contribution of 
1.9  percentage  points  to  the  fiscal  stance.  This  significant  expansionary  contribution 
included the additional impact of measures to mitigate the economic and social impact 
of  the  increase  in  energy  prices  (additional  net  budgetary  cost  of  2.0%  of  GDP). 
Portugal  therefore  sufficiently  limited  the  growth  in  nationally  financed  current 
expenditure. 

line  with 

in 

(17)  The macroeconomic scenario underpinning the budgetary projections  in  the Stability 
Programme is cautious in 2023 and realistic thereafter. The government projects real 
GDP  to  grow  by  1.8%  in  2023  and  2.0%  in  2024.  By  comparison,  the  Commission 
2023 spring forecast projects higher real GDP growth of 2.4% in 2023 and somewhat 
lower  growth  of  1.8%  in  2024.  The  difference  is  explained  by  a  higher  growth 
contribution  from  net  exports  in  the  Commission  forecast  for  2023,  while  the 
government expects higher investment growth in both 2023 and 2024. 

(18) 

In its 2023 Stability Programme, the government expects that the general government 
deficit  ratio  will  remain  at  0.4%  of  GDP  in  2023.  According  to  the  Programme,  the 
general government debt-to-GDP ratio is expected to decrease from 113.9.% at the end 
of 2022 to 107.5% at the end of 2023. The Commission 2023 spring forecast projects a 
government deficit of 0.1% of GDP for 2023. This is lower than the deficit projected 
in the Stability Programme, mainly due to higher revenue projected in the Commission 
2023  spring  forecast,  namely  from  both  indirect  and  direct  taxes.  The  Commission 
2023  spring  forecast  projects  a  lower  general  government  debt-to-GDP  ratio,  of 
106.2% at the end of 2023. The difference is mainly due to the more favourable debt-
reducing  growth-interest  rate  differential  projected  in  the  Commission  2023  spring 
forecast. 

(19)  The government balance in 2023 is expected to continue to be impacted by the fiscal 
policy measures adopted to mitigate the economic and social impact of the increase in 
energy prices. They consist of measures extended from 2022 (in particular: lump-sum 
payments  to  low-income  households  most  vulnerable  to  increased  energy  prices,  the 
general fuel tax reduction and the carbon rate freeze under the fuel tax), and measures 
already  announced  in  2022  but  with  an  impact  on  the  government  balance  in  2023, 
such as the allocation to support the transitional regime for stabilising gas prices paid 
by firms in force throughout the year. The net budgetary cost of the support measures 
is projected in the Commission 2023 spring forecast at 0.8% of GDP in 202317. Most 
of the measures in 2023 do not appear targeted to the most vulnerable households or 
firms, and do not fully preserve the price signal to reduce energy demand and increase 
energy  efficiency.  As  a  result,  the  amount  of  targeted  support  measures,  to  be  taken 
into  account  in  the  assessment  of  compliance  with  the  fiscal  recommendation  for 
2023, is  estimated in the Commission  2023 spring  forecast  at  0.3% of GDP  in  2023 
(compared to 1% of GDP in 2022). Finally, the 2023 government balance is expected 

16 

17 

Other  nationally  financed  capital  expenditure  provided  an  expansionary  of  0.2  percentage  points  of 
GDP.  

The  figure represents the level of annual budgetary cost of those  measures, including current revenue 
and expenditure as well as – where relevant – capital expenditure measures. 

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to benefit from the phasing out of COVID-19 temporary emergency measures of 0.8% 
of GDP. 

(20)  On 12 July 2022, the Council recommended18 that Portugal ensure in 2023 a prudent 
fiscal  policy,  in  particular  by  limiting  the  growth  of  nationally  financed  primary 
current expenditure below medium-term potential output growth19, taking into account 
continued temporary and targeted support to households and firms most vulnerable to 
energy price hikes and to people fleeing Ukraine. At the same time,  Portugal should 
stand  ready  to  adjust  current  spending  to  the  evolving  situation.  Portugal  was  also 
recommended  to  expand  public  investment  for  the  green  and  digital  transitions,  and 
for  energy  security  taking  into  account  the  REPowerEU  initiative,  including  by 
making use of the Recovery and Resilience Facility and other Union funds. 

(21) 

In  2023,  the  fiscal  stance  is  projected  in  the  Commission  2023  spring  forecast  to  be 
expansionary  (-0.7%  of  GDP),  in  a  context  of  high  inflation.  This  follows  an 
expansionary fiscal stance in 2022 (-1.5% of GDP). The growth in nationally financed 
primary  current  expenditure  (net  of  discretionary  revenue  measures)  in  2023  is 
projected to provide a contractionary contribution of 0.3 percentage points to the fiscal 
stance.  Therefore,  the  projected  growth  of  nationally  financed  primary  current 
expenditure  is  in  line  with  the  recommendation  of  the  Council.  The  projected 
contractionary contribution of nationally financed primary current expenditure is due, 
in substance, to the reduced costs of the support measures (targeted and untargeted) to 
households  and  firms  in  response  to  energy  price  hikes  (by  1.1  percentage  points  of 
GDP). The main drivers of growth in nationally financed primary current expenditure 
(net of new revenue measures) are the persistent pressures on public current spending, 
including on public sector wages and pensions,  notably driven by  permanent rises in 
public  sector  wages  and  discretionary  pensions  increases.  Expenditure  financed  by 
Recovery and Resilience Facility grants and other EU funds is projected to amount to 
2.2% of GDP in 2023, while nationally financed investment is projected to provide an 
expansionary  contribution  to  the  fiscal  stance  of  0.3  percentage  points20.  Therefore, 
Portugal plans to finance investment through the Recovery and Resilience Facility and 
other  EU  funds,  and  it  is  projected  to  preserve  nationally  financed  investment.21  It 
plans to finance public investment in the green and digital transitions, and for energy 
security, including through industry decarbonisation projects, production of renewable 
hydrogen and other renewable gases, and the digitalisation of schools, which are partly 
funded by the Recovery and Resilience Facility and other EU funds. 

(22)  According  to  the  Stability  Programme  the  general  government  deficit  is  expected  to 
decline  to  0.2%  of  GDP  in  2024.  The  decrease  in  2024  mainly  reflects  the  planned 
intermediate  consumption, 
containment  of  current  expenditure,  notably 
compensation  of  employees  and  subsidies,  along  with  a  sustained  growth  on  the 

in 

18 

19 

20 

21 

Council  Recommendation  of  12  July  2022  on  the  National  Reform  Programme  of  Portugal  and 
delivering a Council opinion on the 2022 Stability Programme of Portugal, OJ C 334, 1.9.2022, p. 181.  
Based  on  the  Commission  2023  spring  forecast,  the  medium-term  (10-year  average)  potential  output 
growth of Portugal is estimated at 7.6% in nominal terms.  
Other nationally financed capital expenditure is projected to provide a contractionary contribution of 0.3 
percentage  points  of  GDP,  notably  driven  by  the  estimated  reduced  capital  transfers  to  state-owned 
enterprises in 2023. 
Expenditure financed by Recovery and Resilience Facility grants and other EU funds amounted to 2.2% 
of  GDP  in  2023,  while  nationally  financed  investment  provided  an  expansionary  contribution  to  the 
fiscal  stance  of  0.3  percentage  points.  Other  nationally  financed  capital  expenditure  is  projected  to 
provide an expansionary contribution of 0.1 percentage points of GDP.  

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revenue  side.  The  programme  expects  the  general  government  debt-to-GDP  ratio  to 
decrease to 103.0% at the end of 2024. Based on policy measures known at the cut-off 
date  of  the  forecast,  the  Commission  2023  spring  forecast  projects  a  government 
deficit of 0.1% of GDP in 2024. This is slightly lower than the deficit projected in the 
programme, mainly due to more buoyant revenue growth, particularly in taxes, in the 
Commission forecast. The Commission 2023 spring forecast projects a similar general 
government debt-to-GDP ratio, of 103.1% at the end of 2024. 

(23)  The  Stability  Programme  does  not  include  information  on  the  phasing  out  of  energy 
support measures in 2024. The Commission currently assumes the full phasing out of 
energy  support  measures  in  2024.  This  hinges  upon  the  assumption  of  no  renewed 
energy price increases. 

(24)  Council Regulation (EC) No 1466/97 calls for an annual improvement in the structural 
budget balance toward the medium-term objective by 0.5% of GDP as a benchmark.22 
Taking  into  account  fiscal  sustainability  considerations,23  an  improvement  in  the 
structural balance of at least 0.3% of GDP for 2024 would be appropriate. To ensure 
such an improvement, the growth in net nationally financed primary expenditure24 in 
2024 should not exceed 1.8%, as reflected in this recommendation. At the same time, 
the  remaining  energy  support  measures  (currently  estimated  by  the  Commission  at 
0.8%  of  GDP  in  2023)  should  be  phased  out  in  2023,  contingent  on  energy  market 
developments and starting from the least targeted ones, and the related savings should 
be used to reduce the government deficit. Based on Commission estimates, this would 
lead to a growth in net primary expenditure lower than recommended for 2024. 

(25)  Assuming  unchanged  policies,  the  Commission  2023  spring  forecast  projects  net 
nationally financed primary expenditure to grow at 2.8% in 2024, which is above the 
recommended  growth  rate.  The  adjustment  projected  in  the  Commission  forecast  is 
less than the savings from the full phasing out of energy support measures. This is due 
to measures with a projected permanent increasing impact on expenditure, as well as 
revenue-reducing personal income tax reforms. 

(26)  According  to  the  programme,  government  investment  is  expected  to  increase  from 
3.2% of GDP in 2023 to 3.4% of GDP in 2024. The higher investment reflects higher 
nationally  financed  investment  and  investment  financed  by  the  EU,  namely  through 
the  Recovery  and  Resilience  Facility.  The  programme  refers  to  reforms  and 
investments, that are expected to contribute to fiscal sustainability and sustainable and 
inclusive growth. These include measures to modernise and simplify public financial 
management  and  to  upgrade  public  financial  management  information  systems,  such 
as the development of a model for monitoring the budgetary and financial execution of 
general  government, the operationalisation of the State Accounting Entity, as well as 

22 

23 

24 

Cf. Article 5 of Council Regulation (EC) No 1466/97, which also requires an adjustment of  more than 
0.5%  of  GDP  for  Member  States  with  a  government  debt  exceeding  60%  of  GDP,  or  with  more 
pronounced debt sustainability risks. 
The  Commission  estimated  that  Portugal  would  need  an  average  annual  increase  in  the  structural 
primary balance as a share of GDP of 0.3 percentage points to achieve a plausible debt reduction. This 
estimate was based on the Commission autumn 2022 forecast. The starting point for this estimate  was 
the  projected  government  deficit  and  debt  for  2024  which  assumed  the  withdrawal  of  energy  support 
measures in 2024.  
Net  primary  expenditure  is  defined  as  nationally  financed  expenditure  net  of  discretionary  revenues 
measures and excluding interest expenditure as well as cyclical unemployment expenditure. 

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the integration of programme budgeting and spending reviews in the regular budgetary 
process, which are part of the Recovery and Resilience Plan. 

(27)  The Stability Programme outlines a medium-term fiscal path until 2027. According to 
the  programme,  the  general  government  deficit  is  expected  to  gradually  decline  to 
0.1% of GDP in 2025, achieving a balanced budgetary position in 2026, to later reach 
a small surplus of 0.1% of GDP in 2027. The general government deficit is therefore 
planned to remain below 3% of GDP over the programme horizon.  According to the 
programme,  the  general  government  debt-to-GDP  ratio  is  expected  to  decrease  from 
103.0%  at  the  end  of  2024  to  92.0%  by  the  end  of  2027.A  more  growth-friendly 
composition  of  public  finances,  on  both  the  revenue  and  expenditure  sides  of  the 
public  budget,  would  strengthen  Portugal’s  long-term  fiscal  sustainability  while 
improving  the  business  environment  and  contributing  to  sustainable  and  inclusive 
growth. Tax benefits are widely used in the Portuguese tax system, with more than 500 
tax  benefits  spread  over  more  than  60  legal  texts25.  This  increases  complexity  and 
diminishes  the  system’s  transparency  while  at  the  same  time  representing  foregone 
revenue.  The  cost  efficiency  of  existing  tax  benefits  would  benefit  from  being 
systematically  monitored and assessed, allowing for significant  improvements in  this 
area.  Furthermore,  the  corporate  income  tax  system  is  complicated  by  state  and 
municipal surcharges, creating an additional burden for both the tax administration and 
businesses. The efficiency of Portugal’s revenue administration could be strengthened 
to encourage voluntary  compliance, while helping reduce tax evasion and fraud. The 
administrative cost of tax collection is high and has further increased in  recent  years 
(by  approximately  5%  from  2018  to  2020).  At  the  same  time,  the  time  taken  to  pay 
taxes in  Portugal  appears  to be  longer than in  other EU  Member States. The already 
high  outstanding  tax  arrears  continued  to  increase  (they  stood  at  45.9%  of  total 
revenue by the end of 2020, well above the EU average). 

(28)  On  Portugal’s  social  protection  system,  the  capacity  of  social  benefits  for  reducing 
poverty  is  low  and  decreased  further  in  2021,  while  the  evolution  of  the  share  of 
people at risk of poverty was among the worst in the EU (increasing by 2.4%), against 
a backdrop of general stability across most Member States. The adequacy of minimum 
income  remains  low  and  is  well  below  the  poverty  threshold.  These  figures  raise 
doubts about Portugal’s capacity to attain the poverty reduction goals in the European 
Pillar  of  Social  Rights  Action  Plan.  At  the  same  time,  the  social  protection  system 
remains complex, as various types of social benefits appear to serve similar objectives. 
The ensuing complexity and fragmentation results in relatively low take-up rates and a 
lack of effective focus on people who are most in need, hampering the coverage and 
ultimately  the  adequacy  of  social  benefits.  The  simplification  of  existing  benefits 
together with a timely implementation of the National Strategy to Combat Poverty will 
increase Portugal's capacity to face future social challenges. 

(29) 

In accordance with Article 19(3), point (b) and Annex V, criterion 2.2 of Regulation 
(EU) 2021/241, the recovery and resilience plan includes an extensive set of mutually 
reinforcing reforms and investments to be implemented by 2026. The implementation 
of  Portugal’s  recovery  and  resilience  plan  is  underway,  however  with  risk  of  some 
delays.  Portugal  submitted  2  payment  requests,  corresponding  to  58  milestones  and 
targets in the plan and resulting in an overall disbursement of EUR 2.98 billion. The 
Portuguese  RRP  is  ambitious  and  complex  in  nature.  Strong  governance  and 

25 

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

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continuous  monitoring  of  the  plan  are  essential  to  minimise  the  risk  of  delays.    The 
swift inclusion of the new REPowerEU chapter in the recovery and resilience plan will 
allow  additional  reforms  and  investments  to  be  financed  in  support  of  Portugal’s 
strategic objectives in the field of energy and the green transition. The systematic and 
effective  involvement  of  local  and  regional  authorities,  social  partners  and  other 
relevant  stakeholders  remains  important  for  the  successful  implementation  of  the 
recovery  and  resilience  plan,  as  well  as  other  economic  and  employment  policies 
going  beyond  the  plan,  to  ensure  broad  ownership  of  the  overall  policy  agenda.  The 
Portuguese plan is expected to be revised with new measures, including a REPowerEU 
chapter, and will take into account the increased maximum financial contribution26. In 
accordance  with  Article  14(6)  of  Regulation  (EU)  2021/241,  Portugal  expressed  its 
intention  to  also  request  additional  loan  support  under  the  Recovery  and  Resilience 
Facility.  

(30)  The Commission approved all of Portugal’s cohesion policy programming documents 
in 2022. Proceeding with the swift implementation of the cohesion policy programmes 
in  complementarity  and  synergy  with  the  recovery  and  resilience  plan,  including  the 
REPowerEU  chapter,  is  key  to  achieving  the  green  and  digital  transition,  increasing 
economic and social resilience, as well as achieving balanced territorial development 
in Portugal. 

(31)  Beyond the economic and social challenges addressed by the recovery and resilience 
plan, Portugal faces a number of additional challenges related to the circular economy, 
energy and the green transition. 

(32)  Portugal is far below the EU average in making progress towards a circular economy, 
as well as resource productivity in industries and waste management indicators, with 
marked regional differences. The average municipal recycling rate is particularly low 
(30.5%  in  2021,  far  from  the  EU  target  of  50%  by  2020)  and  varies  by  region. 
Achieving  the  EU  targets  for  the  next  decade,  including  reaching  55%  recycling  of 
municipal waste by 2025, will require significant effort. Improvements are needed to 
increase  the  prevention,  minimisation,  sorting,  reuse  and  recycling  of  waste,  thereby 
diverting waste away from landfills and incinerators, and to modernise waste recycling 
and treatment facilities, in line with the higher steps in the waste hierarchy. Examples 
of  how  to  better  achieve  these  objectives  include  increasing  landfill  and  incineration 
charges, introducing a residual waste tax and raising charges on municipalities that fail 
to  meet  recycling  targets.  In  addition,  the  process  could  be  accelerated  by  extending 
the separate collection of waste and further developing schemes such as ‘pay-as-you-
throw’, ‘deposit return’ and Extended Producer Responsibility. 

(33)  Despite  the  progress  made  also  in  the  context  of  the  energy  crisis,  Portugal  remains 
highly dependent on imported fossil fuels, with oil and gas making up 45% and 23% 
respectively of its energy mix in 2021. In addition, the country’s high dependency on 
gas  for  electricity  production  poses  risks  in  terms  of  security  of  supply,  especially 
considering  the  scarcity  of  hydroelectric  power  due  to  more  frequent  droughts.  To 
accelerate the decarbonisation efforts, a number of measures could be further pursued 
that  build  on  and  go  beyond  the  investment  and  reforms  that  are  part  of  Portugal’s 
recovery and resilience plan. To accelerate the take-up of renewables, Portugal could 
follow  up  on  the  progress  it  made  last  year  on  streamlining  its  permitting  process, 

26 

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). 

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including  by  increasing  the  capacity  of  the  administration  dealing  with  permitting, 
increasing  digitalisation  in  renewables  production  and  introducing  more  favourable 
spatial  planning  arrangements  for  offshore  wind  (the  potential  for  which  remains 
under-exploited). Further action to promote self-consumption (including rooftop solar) 
and  renewable  energy  communities  would  also  be  beneficial.  The  number  of 
renewable energy communities in Portugal is still low, and there is scope to facilitate 
their licensing and create incentives schemes.  

(34)  As  more  renewables  are  integrated,  further  investment  to  expand  the  storage  and 
network  capacity  will  be  essential  to  safeguard  the  balance  of  the  electricity  grid. 
Portugal  could  benefit  from  strengthening  its  electricity  interconnections,  as  the 
interconnection level with Spain is still low compared to its 2030 targets. The status of 
the  transmission  and  distribution  grid  could  be  improved  through  internal  grid 
reinforcement, additional investment in electricity storage and further digitalisation of 
the  grid.  The  relatively  low  roll-out  of  smart  meters  hampers  the  development  of  a 
decentralised  system  of  renewable  energy  production.  To  address  its  high  degree  of 
reliance on fossil fuels in buildings and reduce energy consumption, Portugal needs to 
accelerate  its  efforts  on  energy  efficiency  beyond  what  is  set  out  in  the  Portuguese 
recovery and resilience plan. Further measures should also contribute to addressing the 
high  share  of  the  Portuguese  population  experiencing  energy  poverty.  Stepping  up 
efforts to incentivise deep renovations, including by delivering technical assistance to 
applicants,  could  accelerate  the  take-up  of  renovation  projects.  In  addition,  Portugal 
could benefit from a strengthened framework for financial schemes to leverage private 
investment  for  energy-efficient  renovation.  By  doing  so,  Portugal  could  target  more 
grant-based resources towards households in need. Portugal’s consumption of natural 
gas  has  dropped  by  16%  in  the  period  between  August  2022  and  March  2023, 
compared with the average gas consumption over the same period in the preceding  5 
years,  beyond  the  15%  reduction  target.  Portugal  could  keep  pursuing  efforts  to 
temporarily reduce gas demand until 31 March 202427. 

(35)  Labour  and  skills  shortages  in  sectors  and  occupations  key  for  the  green  transition, 
including  manufacturing,  deployment  and  maintenance  of  net-zero  technologies,  are 
creating  bottlenecks  in  the  transition  to  a  net-zero  economy.  High-quality  education 
and  training  systems  that  respond  to  changing  labour  market  needs  and  targeted 
upskilling and reskilling measures are key to reducing skills shortages and promoting 
labour inclusion and reallocation.  To unlock untapped labour supply,  these measures 
need  to  be  accessible,  in  particular  for  individuals  and  in  sectors  and  regions  most 
affected by the green transition. Portugal is facing green skills shortages in particular 
in  the  construction  and  manufacturing  sectors.  It  would  benefit  from  strengthening 
policies for upskilling and reskilling linked to the green transition.  

(36) 

(37) 

In light of the Commission’s assessment, the Council has examined the 2023 Stability 
Programme and its opinion28 is reflected in recommendation (1) below.  

In view of the close interlinkages between the economies of euro area Member States 
and  their  collective  contribution  to  the  functioning  of  the  Economic  and  Monetary 
Union, the Council recommended that euro area Member States take action, including 
through  their  recovery  and  resilience  plans,  to  (i)  preserve  debt  sustainability  and 
refrain  from  broad-based  support  to  aggregate  demand  in  2023,  better  target  fiscal 

27 
28 

Council Regulation (EU) 2022/1369 and Council Regulation (EU) 2023/706. 
Under Articles 5(2) and 9(2) of Council Regulation (EC) No 1466/97. 

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measures taken to mitigate the impact of high energy prices and reflect on appropriate 
ways to wind down support as energy price pressures diminish; (ii) sustain high public 
investment and promote private investment to support the green and digital transition; 
(iii)  support  wage  developments  that  mitigate  the  loss  in  purchasing  power  while 
limiting  second-round  effects  on  inflation,  further  improve  active  labour  market 
policies  and  address  skills  shortages;  (iv)  improve  the  business  environment  and 
ensure that energy support to companies is cost-effective, temporary, targeted to viable 
firms  and  that  it  maintains  incentives  for  the  green  transition;  and  (v)  preserve 
macro-financial  stability  and  monitor  risks  while  continuing  to  work  on  completing 
the Banking Union. For Portugal, recommendations (1), (2) and (4) contribute to the 
implementation of the first, second and third euro area recommendations.  

In  light  of  the  Commission’s  in-depth  review  and  this  assessment,  the  Council  has 
examined  the  2023  National  Reform  Programme  and  the  2023  Stability  Programme. 
Its recommendations under Article 6 of Regulation (EU)  No 1176/2011  are reflected 
in recommendation (1) below. Policies referred to in recommendation (1) help address 
vulnerabilities  linked  to  government  debt.  Recommendation  (2)  contributes  to 
addressing recommendation (1). Policies referred to in recommendation (1) contribute 
to  both  addressing  imbalances  and  implementing  the  recommendations  for  the  euro 
area, in line with recital 37. 

(38) 

HEREBY RECOMMENDS that Portugal take action in 2023 and 2024 to:  

1. 

Wind  down  the  energy  support  measures  in  force  by  the  end  of  2023,  using  the 
related  savings  to  reduce  the  government  deficit.  Should  renewed  energy  price 
increases  necessitate  support  measures,  ensure  that  these  are  targeted  at  protecting 
vulnerable  households  and  firms,  fiscally  affordable,  and  preserve  incentives  for 
energy savings.  

Ensure  prudent  fiscal  policy,  in  particular  by  limiting  the  nominal  increase  in 
nationally financed net primary expenditure in 2024 to not more than 1.8%. 

Preserve nationally financed public investment and ensure the effective absorption of 
RRF grants and other EU funds, in particular to foster the green and digital transitions. 

For  the  period  beyond  2024,  continue  to  pursue  a  medium-term  fiscal  strategy  of 
gradual  and  sustainable  consolidation,  combined  with  investments  and  reforms 
conducive  to  higher  sustainable  growth,  to  achieve  a  prudent  medium-term  fiscal 
position. 

Improve  the  effectiveness  of  the  tax  and  social  protection  systems,  in  particular  by 
prioritising the simplification of both frameworks, strengthening the efficiency of their 
respective administrations, and reducing the associated administrative burden. 

Accelerate  the  implementation  of  its  recovery  and  resilience  plan,  also  by  ensuring 
an  adequate  administrative  capacity,  and  swiftly  finalise  the  REPowerEU  chapter, 
with  a  view  to  rapidly  starting  its  implementation.  Proceed  with  the  speedy 
implementation  of  cohesion  policy  programmes,  in  close  complementarity  and 
synergy with the recovery and resilience plan.  

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

Reduce  overall  reliance  on  fossil  fuels.  Further  accelerate  the  deployment  of 
renewables by further simplifying and digitalising permitting to allow for additional 

2. 

3. 

4. 

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wind particularly offshore and solar electricity production, as well as promoting self-
consumption and renewable energy communities. Increase electricity interconnection 
capacity  and  upgrade  the  electricity  transmission  and  distribution  grids,  enabling 
investment  in  electricity  storage  and  digitalisation  of  the  grid,  including  the  faster 
roll-out  of  smart  meters.  Accelerate  investment  in  energy  efficiency  by  promoting 
financial  schemes  to  attract  private  investment  and  supporting  households  in  need 
Step up policy efforts aimed at the provision and acquisition of the skills needed for 
the green transition.  

Done at Brussels, 

For the Council 
The President 

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