COMMISSION STAFF WORKING DOCUMENT 2025 Country Report - Portugal Accompanying the document Recommendation for a COUNCIL RECOMMENDATION on the economic, social, employment, structural and budgetary policies of Portugal
Date: 2025-06-04
Institutions: European Commission, Reform and Investment Task Force
Subjects: Portugal, budget policy, economic policy, economic recovery, economic reform, employment policy, energy policy, housing policy, social policy, stability pact

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 4.6.2025  SWD(2025) 222 final  COMMISSION STAFF WORKING DOCUMENT 2025 Country Report - Portugal Accompanying the document Recommendation for a COUNCIL RECOMMENDATION on the economic, social, employment, structural and budgetary policies of Portugal {COM(2025) 222 final}  
 
 
 
 
 
 
 
 
 
 
 
ECONOMIC DEVELOPMENTS AND KEY POLICY 
CHALLENGES 

years)  remained  high  at  21.6%  in  2024,  up 
from  20.5%  in  2023,  which  was  substantially 
above the EU average and particularly high in 
Madeira and the Azores. Portugal continued to 
report relatively low job vacancy rates, as well 
as  consistent  signs  of  labour  shortages  in 
some sectors, notably construction, healthcare 
and  education,  which  point  to  certain  skills 
country’s 
mismatches 
competitiveness. 

that  hinder 

the 

Graph 1.1: Real GDP growth and selected 
labour market indicators 

Estimates for 2025 and 2026 are from the European 
Commission's Spring 2025 forecast. 
Source: European Commission 

Inflation  is  slowing  down  despite  sticky 
prices in services. Inflation moved broadly in 
line  with  the  EU  average,  decreasing  from 
5.3%  in  2023  to  2.7%  in  2024.  However, 
inflation  in  the  services  sector  was  4.5%, 
mainly due to a continuous rise in the prices of 
tourism-related 
particularly 
accommodation.  Inflation  is  projected  to  slow 
down  further  to  2.1%  in  2025  and  2.0%  in 
2026,  and  continues  to  be  mainly  driven  by 
services,  as  both  domestic  demand  and 
foreign  tourism  are  set  to  keep  pressure  on 
prices. 

services, 

Domestic demand supports 
economic growth 

Since 

2022, 

Portugal 

Portugal’s  economy  remains  resilient  as 
domestic demand increases. Portugal’s GDP 
growth slowed from 2.6% in 2023 to 1.9% in 
2024.  However,  the  growth  rate  picked  up 
again towards the end of the year, thanks to a 
very  strong  rebound  in  private  consumption. 
though  somewhat  decreasing, 
Sustained, 
growth  in  foreign  tourism  also  supported  the 
economy. 
has 
consistently  outperformed  the  EU  average 
growth.  Portugal’s  GDP  growth  is  forecast  at 
1.8%  in  2025  and  2.2%  in  2026,  also  above 
the expected EU average. Domestic demand is 
projected to remain the main growth driver as 
is  boosted  by 
households’  consumption 
employment  and 
income  growth  while 
investments are benefiting from the projected 
peak  within  the  recovery  and  resilience  plan 
cycle.  In  the  longer  term,  a  key  challenge  for 
Portugal  will  be  to  increase  business  capacity 
to  scale  up  and  innovate,  and  to  increase 
productivity  growth  across  all  regions  (see 
Section 2). 

The  labour  market  continues  to  improve, 
helped  by  migration  flows.  Portugal’s 
unemployment rate remained unchanged from 
2023 to 2024, at 6.5% (see Social Scoreboard 
in Annex 13). Employment rose by 1.2% during 
the  year,  implying  a  slight  improvement  in 
labour  productivity  in  terms  of  GDP  per 
employee. The labour force expanded by 1.1%, 
helped  by  increasingly  positive  net  migration 
In  contrast,  the  natural  population 
flows. 
change and internal migration are undermining 
regional  competitiveness.  In  2013-2022,  the 
population  aged  20-64  decreased  faster  than 
the EU average, particularly in Centro, Alentejo 
and Madeira, leading to a shrinking workforce 
in these regions. Youth unemployment (15-24 

2 

-20-15-10-505101520-10-8-6-4-20246810GDP growthEmployment growthUnemployment rate (rhs)y-o-y growth, %% of active population 
 
  
Box 1 

UN Sustainable Development Goals (SDGs) 

Portugal is improving in most SDGs related to environmental sustainability (SDGs 2, 7, 
9, 13 and 14), but is away from the EU average on sustainable cities and communities 
(SDG  11),  due,  for  instance,  to  the  rates  for  recycling  of  municipal  waste  and  circular 
material use that are lower than the EU average. 

Progress is being made in several SDGs related to fairness (especially SDGs 4, 5, 7 and 
8). However, Portugal is moving away from the targets for some other SDGs related to 
fairness (SDGs 3 and 10) because, for instance, many health and well-being indicators 
worsened.  Although  significant  progress  has  been  made,  Portugal  remains  well  below 
the  EU  average  on  industry,  innovation  and  infrastructure  (SDG 9)  due  to  the  low 
research and innovation output (see Annex 15).  

situation 

experiencing 

the  economy  was 

is 
The  macroeconomic 
In  June  2024,  the  European 
improving. 
Commission  concluded  that  Portugal  was  no 
macroeconomic 
longer 
imbalances,  and 
less 
vulnerable  to  shocks  than  before.  Portugal’s 
private  and  public  indebtedness  continues  to 
decrease.  Price  and  cost-competitiveness 
developments  remain  contained.  By  contrast, 
house prices continue to rise very strongly, and 
the  estimated  overvaluation  has  increased. 
threatening  macroeconomic 
This 
household 
stability, 
indebtedness  and  the  appropriate  financial 
sector  regulations,  but  it  is  a  significant 
challenge in terms of housing affordability and 
social policies. 

is  not 
due 

declining 

to 

Public finances are supported by 
windfall revenues 

2023. It is forecast to further decline in 2025 
and 2026, thanks to primary budget surpluses 
and growth in GDP not adjusted for inflation. 

Fiscal  policy  measures  are  expected  to 
increase  net  expenditure.  In  2024,  net 
expenditure(1) in Portugal grew by 12.0% (see 
Annex 1). This is mainly driven by the increase 
in  expenditure,  on  the  back  of  higher  public 
wages and social transfers, and the estimated 
impact  of  revenue-decreasing  fiscal  policy 
measures,  as  the  reduction  in  the  personal 
income  tax  rates.  In  2025,  net  expenditure  is 
forecast  by the Commission  to  grow by 6.1%, 
which  is  above  the  maximum  growth  rate 
recommended  by  the  Council(2).  This  reflects 
the  impact  of  fiscal  policy  measures  that 
increase  public  wages  and  pensions,  and  that 
reduce  revenues  from  direct  taxation,  as  the 
broadening  of  the  youth  personal  income  tax 
scheme.  The  cumulative  growth  rate  of  net 
expenditure in 2024 and 2025 taken together 
is  projected  at  18.8%,  which  is  above  the 
maximum rate recommended by the Council.  

Portugal’s  budget  balance  maintains  a 
surplus  amid  growing  expenditure. 
In 
2024,  the  budget  balance  remained  at  a 
surplus, equal to 0.7% of GDP, 0.5 percentage 
points of GDP below the 2023 level. Revenues 
continued to grow, benefiting from windfall tax 
revenues  from  the  corporate  income  tax,  and 
increased 
contributions. 
Increased  public  wages  and  social  transfers, 
particularly  those  related  to  pensions,  pushed 
up  expenditure.  This  was  partly  compensated 
by  postponed  public  investment.  The  budget 
balance  is  expected  to  shrink  further  in  2025 
and  2026.  Public  debt  reached  94.9%  of GDP 
in  2024,  3  percentage  points  less  than  in 

security 

social 

expenditure, 

(1)  Net expenditure is defined in Article 2(2) of Regulation 
(EU)  2024/1263  as  government  expenditure  net  of  (i) 
revenue 
(ii) 
interest 
measures, (iii) expenditure on programmes of the Union 
fully  matched  by  revenue  from  Union  funds,  (iv) 
national  expenditure  on  co-financing  of  programmes 
(v)  cyclical  elements  of 
funded  by 
unemployment  benefit  expenditure,  and  (vi)  one-off 
and other temporary measures. 

discretionary 

the  Union, 

(2)  Council Recommendation of 21 January 2025 

endorsing the national medium-term fiscal-structural 
plan of Portugal (OJ C, C/2025/641, 10.2.2025, ELI: 
http://data.europa.eu/eli/C/2025/641/oj). 

3 

 
 
 
Rising pension expenditure 
challenges fiscal sustainability 

Graph 1.2: Pension system sustainability 
(2025-2046) 

is  a 

Population  ageing 
continuous 
challenge  for  Portugal’s  pension  and  tax 
systems.  Population  ageing,  alongside  a 
shrinking  working-age  population,  puts  the 
sustainability  of  Portugal’s  pay-as-you-go 
pension  system  under  pressure  (Graph  1.2; 
and  Annex  1).  While  pension  costs  are 
estimated  to  increase  by  three  percentage 
points  of  GDP  by  2046  compared  to  2022, 
there will be fewer contributors supporting this 
expenditure.  While  in  2025  there  are  nearly 
two contributors per pensioner, it is estimated 
that  in  2046  there  will  only  be  around  one 
contributor.  This  will  create  deficits  within  the 
pension system balance, challenging medium-
term fiscal sustainability. Portugal will have to 
resort  to  state  budget  transfers  and  the 
Portuguese  reserve  fund  for  public  pension 
schemes (3) to offset the deficit. Ageing is also 
expected to have an impact on the tax system. 
With  a  lower  number  of  working-age  people, 
revenues from labour taxation could decrease 
(see Annex 2). 

(1) The pension-expenditure-to-GDP ratio is the annual 
difference with 2022 data, which was 12% of GDP. The pension 
system balance is the difference between contributions and 
gross pension expenditure. The old-age support ratio is the 
number of contributors per 100 pensioners in the public pension 
system. 
Source: 2024 Ageing Report (EC/EPC) and own calculations. 

The tax system remains complex, 
hindering competitiveness 

such 

than  500 
tax 

Widespread  tax  expenditures  continue  to 
create  sizeable  revenue  losses.  Portugal’s 
tax 
tax  system  has  more 
expenditures, 
incentives, 
as 
exemptions  and  deductions.  Tax  expenditures 
represented a loss in revenue of around 6% of 
GDP in 2023 (4). While tax expenditures can be 
effective  in  achieving  policy  objectives,  their 
widespread use contributes to the tax system’s 
complexity. 
If  not  compensated  by  other 
mechanisms, tax expenditures could contribute 
to income inequality (see Annex 2). As part of 
the Portuguese recovery and resilience plan, a 
new  tax  policy  unit  on  tax  expenditures  (U-
TAX) was set up in February 2024. In 2025, it 
will  produce  an  assessment  of  existing  tax 
expenditures  to  streamline 
them.  As  an 
additional  source  of  lost  revenue,  Portugal’s 
outstanding tax arrears relative to GDP remain 
one of the highest in the EU. 

(4)  Tax  and  Customs  Authority,  2023  Report  on  Tax 

Expenditures, June 2024. 

4 

(3)  Fundo de Estabilização Financeira da Segurança Social. 
At the cut-off date of the Country Report, this reserve 
fund – benefiting from the 2023 budget surplus and 
positive economic performance – stood at 
EUR 40 billion (14% of GDP), covering two years of 
public pensions. 

100105110115120125130135140145150155160165-1,0-0,50,00,51,01,52,02,53,03,54,02025202620272028202920302031203220332034203520362037203820392040204120422043204420452046Pension expenditure, % of GDP (baseline = 2022)Pension system balance, pps of GDPOld-age support ratio, in % (rhs) 
 
  
 
income  tax  system 

is 
The  corporate 
complex  and  does  not  favour  firms’ 
growth.  The  corporate  income  tax  rate  in 
Portugal  is  composed  of  a  state  tax  and 
municipal  surtaxes.  The  state  tax  depends  on 
the  amount  of  each  firm’s  taxable  profits. On 
top  of  that,  municipalities  can  set  a  surtax  of 
up  to  1.5%.  As  a  result,  the  statutory  rate  of 
the corporate income tax can vary from 12.5% 
to  30.5%,  depending  on  a  firm's  size  and 
location.  This  design  makes  the  tax  system 
complex (5).  It  could  also  disincentivise  firms 
from  scaling  up,  hindering  greater  economies 
of  scale  and  associated  efficiency  gains  (see 
Annex  2).  At  the  same  time,  it  increases  the 
scope for profit shifting within the country. 

Fossil  fuels  are  subsidised,  with  both 
fiscal  and  environmental 
implications. 
Petrol and diesel prices in Portugal are close to 
the EU average. Excise duty on fuel and energy 
products,  the  carbon  tax  and  value  added  tax 
account for more than half of the final price of 
diesel  and  petrol.  The  total  tax  rate  on  these 
products  is  in  line  with  the  EU  average. 
Portugal  has  a  significant  number  of  fossil 
fuel  subsidies  without  a  planned  phase  out 
in 
date  before  2030  and  those 
particular,    (6)  reduced  excise  duty  on  petrol 
and  diesel,  and  exemptions  for  the  use  of 
diesel 
transport  or  by  freight 
in  public 
companies (see Section 3). 

include, 

(5)  Portugal ranks  22 out of the 27 Member States in the 

Tax Complexity Index. 

(6) 

own 

European 

Commission 

calculations. 

The 
denominator  is  based  on  volumes  disclosed  by  the 
Portuguese  authorities  via  2025  national  energy  and 
climate  progress  reporting.  For  all  Member  States,  it 
includes public research and development expenditures 
for  fossil  fuels  as  reported  by  the  International  Energy 
Agency  (energy  technology  research,  development  and 
demonstration 
for 
methodological  consistency,  excise  tax  exemption  on 
kerosene consumed in intra-EU-27 air traffic. 

excludes, 

budgets) 

and 

5 

 
 
Box 2: 

Barriers to private and public investment 

The  investment  rate  of  Portuguese  non-financial  corporations  increased  from  21.8%  in  2014  to 
26.7%  in  2023,  well  above  the  EU-27  average  of  22.8%.  Despite  this  positive  development, 
several  factors  still  hinder  the  capacity  of  Portuguese  firms  to  invest,  innovate  and 
increase their productivity (see Section 2).  In particular, Portuguese firms still report several 
barriers to investment: 

•  Shortages of skilled staff. Some 86% of firms report shortfalls in skilled workers as an 
obstacle to investment, well above the EU-27 average of 77%. Portugal may benefit from 
reducing  skills’  mismatches  and  bridging  the  gap  between  skills  supplied  and  skills 
demanded (see Section 4). 

•  Business regulation. Despite the progress made in shortening and streamlining business 
procedures  and  regulations,  83%  of  firms  still  report  business  regulation  as  a  barrier  to 
investment.  Factors  such  as  lengthy  licensing  and  industrial  permitting  procedures, 
compounded  by  discrepancies  in  the  implementation  of  regulations  across  regions  and 
municipalities, negatively impact firms’ investment decisions. 

•  High operating costs and uncertainty. Most companies (81%) report high energy costs 
as  a  major  obstacle  to  investment  and  this,  together  with  the  higher  financing  costs 
experienced in recent years, reduced firms’ investment capacity. At the same time, rapidly 
changing  international  conditions  increased  businesses’  uncertainty,  and  over  88%  of 
firms report this as an obstacle to investment, as seen in Annex 4. 

•  Portugal’s  public  investment  management  has  improved,  but  there  are  still 
barriers  to  its  efficiency.  The  Portuguese  national  investment  programme  provides 
guidance for public investment allocation over a 10-year period (see Annex 1). It outlines 
three  high-level  strategic  objectives,  based  on  the  framework  of  the  EU  Partnership 
Agreement with Portugal (‘Portugal 2030’). The  plan  covers all available funding sources 
(such as EU funds, national funding and the private sector) and takes account of all users 
such  as  public  authorities,  state-owned  enterprises  and  private  operators  (Belu  Manescu 
C., 2024). 

These challenges also act as a bottleneck to the implementation of EU funds. The implementation 
of Portugal’s RRP is well underway but faces considerable obstacles linked to the above challenges. 
At present, Portugal has fulfilled 33% of the milestones and targets in its RRP.  

It  remains  important  to  accelerate  the  implementation  of  cohesion  policy  programmes.  The  mid-
term  review  offers  opportunities  to  speed  up  progress  and  better  address  EU  strategic  priorities 
related to competitiveness, defence, housing, water resilience and the energy transition. 

While Portugal has signalled interest in leveraging the Strategic Technologies for Europe Platform 
under  cohesion  policy,  Portugal  can  further  support  the  development  or  manufacturing  of  critical 
technologies in the areas of  digital and deep tech, clean  and resource efficient technologies, and 
biotechnologies. 

6 

 
 
INNOVATION, BUSINESS ENVIRONMENT AND 
PRODUCTIVITY 

Fostering productivity by 
strengthening businesses’ ability 
to innovate and grow 

excessive  business  regulation  and  making  the 
justice system more effective. 

Graph 2.1: Labour productivity growth and 
R&D expenditure in Portugal and the EU 
(2012-2023) 

to 

improve 

country’s 

continues 

Portugal 
its 
improve 
its  productivity 
competitiveness,  but 
levels  remain  well  below  those  of  its  EU 
peers. Portugal has experienced strong output 
growth  over  the  past  years  (see  Section  1), 
supported by structural changes and increases 
in  productivity.  Major  structural 
reforms 
implemented  since  the  financial  crisis  have 
fiscal 
the 
helped 
streamline 
sustainability, 
administrative 
processes  and 
regulation  for  businesses, 
increase  the  efficiency  of  the  judicial  and 
innovation, 
financial  sector,  and  support 
reducing  the  competitiveness  gap  between 
Portugal  and  other  EU  countries.  Between 
2019  and  2023,  productivity  per  hour  worked 
increased  by  4.5%,  compared  to  2.7%  at  EU 
level  and  only  2%  in  the  euro  area.  However, 
despite 
in  2023 
Portugal’s  labour  productivity  levels  were  still 
only 80.5% of the EU average. 

improvements, 

these 

factors 

structural 

Several 
explain 
Portugal’s  productivity  lag  compared  to 
the  EU  average.  These  factors  include  (i) 
Portugal’s business fabric being dominated by 
small  and  medium-sized  enterprises  with 
limited  growth  or  innovation  potential;  (ii)  the 
country’s  relatively  high  reliance  on  labour-
intensive  sectors,  such  as  tourism;  and  (iii) 
structural  barriers  to  firms’  capacity  to  scale 
up and innovate. The remaining regulatory and 
administrative barriers are also a detriment to 
the country's productivity growth potential and 
competitiveness. 
to 
These 
productivity  growth  could  be  addressed  by 
incentivising  firms  to  innovate,  easing  their 
access  to  finance  for  scaling  up,  reducing 

challenges 

7 

(1) Labour productivity growth and R&D expenditure in Portugal 
and the EU (2012-2023). 
Source: Eurostat and own calculations. 

Despite the progress made over the past 
years,  Portugal  still  classifies  as  a 
moderate  innovator.  Expenditure  on  R&D 
increased from 1.3% of GDP in 2017 to 1.7% 
in 2023. However, this remains well below the 
2023  EU  average  of  2.22%.  The  increase  in 
R&D  levels  in  Portugal  was  driven  by  higher 
expenditure  from  the  private  sector,  equating 
to  1.1%  of  GDP  in  2023.  The  proportion  of 
public R&D expenditure, on the other hand, has 
stagnated,  remaining  close  to  0.6%  of  GDP 
since  2017,  also  due  to  a  large  increase  in 
Portugal's  the  nominal  GDP  in  Portugal  (see 
Annex  3).  Innovation  investments  continue  to 
be concentrated in a few regions, with modest 
improvements  in  high-technology  exports  and 
new-to-market  innovation  sales  (See  Annex 
17). 

factors 

structural 

hinder 
Several 
innovate.  The 
Portugal’s  capacity  to 
is 
landscape 
Portuguese 
characterised  by  a  large  proportion  of  small 
and  medium-sized  enterprises  with  limited 

business 

0%1%2%3%4%5%6%7%8%9%10%0.0%0.5%1.0%1.5%2.0%2.5%201220132014201520162017201820192020202120222023PT expenditure in R&I (% of GDP)EU-27 expenditure in R&I (% of GDP)EU-27 labour productivity growth (rhs)PT labour productivity growth (rhs) 
 
   
potential. 

Historically, 

both 
innovation 
entrepreneurship  and  the  capacity  of  firms  to 
undertake disruptive innovation have been low, 
and  these  features  were  exacerbated  in  the 
aftermath of the financial crisis. Over the past 
decade, the country has also faced difficulties 
in  retaining  and  valuing  its  young  skilled 
workers.  In  this  respect,  Portugal  has  high 
rates  of  youth  unemployment,  and  a 
significant proportion of its young workers are 
overqualified.  Because  of  these  issues,  many 
well-qualified  young  people  leave  the  country 
looking  for  better  opportunities  abroad.  In 
addition,  low  cooperation  between  businesses 
and  research  institutions  is  not  conducive  to 
productivity-enhancing 
and 
innovation. 

research 

Important policies and programmes are in 
place  to  increase  the  country’s  capacity 
to innovate. A wide set of policies introduced 
in  recent years  has  significantly  improved  the 
country’s  innovation  capacity.  Large  incentive 
schemes  have  been  put  in  place  to  support 
research  and  innovation  in  strategic  sectors. 
The largest of these, the mobilising and green 
agendas  developed  under  the  recovery  and 
resilience plan, are providing EUR 2.9 billion of 
support for the creation of innovative products, 
processes  or  services  by  consortia  between 
incentive 
businesses  and  academia.  Tax 
in 
schemes  also  play  a  significant  role 
supporting  innovation,  with  the  main  one 
(SifiDe)  granting  EUR 947 million  of  tax  relief 
to  firms’  R&D  activities  in  2022.  To  support 
the creation of innovative firms, a wider range 
of  measures,  such  as  a  one-stop-shop  for 
start-ups  promoted  by  Startup  Portugal, 
several  start-up  vouchers  and  a  start-up  visa 
scheme, as well as fiscal incentives, are also in 
place  to  foster  the  creation  of  start-ups  and 
venture firms in strategic areas.  

in 

Business  dynamism  has  been  rising,  but 
start-ups  and  venture  firms  continue  to 
face  funding  difficulties.  There  has  been 
the  number  of  new 
strong  growth 
businesses in Portugal in recent years (second 
highest  growth  in  the  EU  over  the  last  five 
years).  The  number  of  start-ups  in  Portugal 
increased considerably, from 3 700 in 2022 to 
over  4 700  in  2024.  This  thriving  business 
environment  has  been  prompted  by  several 

8 

programmes  to  incentivise  the  creation  of 
start-ups  and  simplify 
their  operations. 
However, start-ups and venture firms still have 
difficulties  in  accessing  financing  and,  at  a 
later stage, scaling up. A number of funds and 
programmes, such as the Deep Tech fund and 
Venture  Capital  fund,  have  been  set  up  to 
support  young  firms  and  the  creation  of 
innovative  companies,  but  their  effectiveness 
will be visible only over time. 

to 

to 

increased, 

innovate  has 

further  progress 

improve 
More 
could  be  done 
innovate  and 
businesses’  capacity  to 
scale  up.  Over  the  past  ten  years,  Portugal’s 
capacity 
the 
workforce has become more educated and the 
turned  more 
business  environment  has 
dynamic.  However, 
is 
warranted  to  boost  research  and  innovation 
and  catch  up  with  the  country’s  EU  peers.  In 
particular,  several  administrative  barriers  still 
hinder 
long 
industrial  licensing  and  permitting  processes, 
tax  disincentives  to  scale  up  and  financing 
constraints). Major benefits can be unlocked by 
removing  them,  especially  for  sectors  with 
high  growth  and  innovation  potential  (see 
Annex  4).  It  would  be  beneficial  to  continue 
increasing  private  investment  in  R&D  and 
stepping  up  cooperation  between  firms  and 
academia,  also  beyond  the  finalisation  of  the 
main  investments  under  the  recovery  and 
resilience plan due in 2026 (see Annex 3). 

the  scale-up  of  firms 

(e.g. 

Improving access to finance for 
start-ups and firms’ scale up 

The  Portuguese  credit  market  is  well 
developed, supported by a sound banking 
sector, but its capital market lags behind 
those  of  its  EU  peers.  The  Portuguese 
banking sector recorded very good profitability 
improved 
over  2023  and  2024,  with 
firms, 
capitalisation 
especially  SMEs,  rely  heavily  on  Portuguese 
banks and on a mature credit market for their 
external  financing.  However,  their  demand  for 
loans  has  been  stagnating  due  to,  among 
other  reasons,  higher  lending  interest  rates 
and  greater  reliance  on  internal  funding.  The 

Portuguese 

levels. 

 
on 

the 

other 

demand  for  loans  started  growing  again  only 
in  the  second  half  of  2024.  Portugal’s  capital 
markets, 
are 
underdeveloped  compared  to  those  of  its  EU 
large  proportion  of  households’ 
peers.  A 
savings  is  held  as  short-term  bank  deposits, 
the 
limiting 
and 
availability  of  equity  financing  for 
local 
corporations (see Annex 5). 

investments 

capital 

hand, 

There  is  not  enough  venture  capital  and 
private  equity.  Local  venture  capital  and 
private  equity  markets  remain  shallow,  with 
venture  capital  representing  only  0.02%  of 
GDP  compared to  an  EU average  of 0.08%  in 
2023.  This  funding  is  concentrated  on  start-
ups, but only a small proportion is allocated to 
later  development  phases  (9.4%  in  Portugal, 
compared  to  48.7%  in  the  EU).  This  hinders 
the  scale-up  of  Portuguese  companies,  the 
most  successful  of  which  often  relocate 
abroad  to  access  more  developed  capital 
markets  and  larger  equity  investments.  Large 
financial instruments have been set up, in the 
recovery  and  resilience  plan  and  beyond,  to 
support  equity  investments  in  venture  firms. 
However,  the  bulk  of  these  investments  are 
expected to take place in 2025 and 2026. 

literacy 

financial 

Improving 
and 
enhancing  the  development  of  capital 
markets  could  remove  some  of  the 
existing  barriers  to 
investment.  Low 
financial  literacy  levels,  coupled  with  a  high 
concentration  of  savings  in  banks’  deposits, 
lead  to  an  inefficient  allocation  of  financial 
resources.  More  productive  investments  could 
be  achieved  by  improving  the  population’s 
financial literacy and awareness of investment 
options. Portugal  also has a low proportion of 
households’  savings  held 
in  pension  or 
insurance  funds,  which  limits  the  available 
financing for venture capital and private equity 
firms. 

Reducing administrative and 
regulatory barriers for businesses 

Portuguese  firms  report  administrative 
and regulatory burden as a major barrier 

In  the  2024  European 
to  investments. 
Investment Bank Investment Survey, 48.8% of 
Portuguese firms reported business regulation 
as  a  key  barrier  to  investment,  compared  to 
32% of EU firms. The assessment of the OECD 
product market regulation indicators for 2023 
and  2024  classifies  Portugal  as  the  ninth 
worst  performer  out  of  38  OECD  countries. 
licensing  and  permitting  procedures 
Long 
remain  a  major  issue.  Despite  the  progress 
made  in  shortening  and  streamlining  these 
processes,  local  authorities  face  difficulties  in 
the  new  procedures  and 
implementing 
practices  differ  significantly  across  regions 
and municipalities.  There are also barriers are 
caused  by  strict  requirements  to  access 
regulated  professions,  as  well  as  outstanding 
barriers  to  the  retail  distribution  sector.  Late 
payments  remain  widespread  in  the  country, 
especially  in  the  autonomous  regions,  despite 
significant  improvements  made  in  reducing 
average  durations  in  recent  years  (see  Annex 
4). 

some 

advanced 

Portugal’s  digital  infrastructure  is  well 
developed,  but  businesses  are  late  to 
adopt 
digital 
technologies.  Portugal’s  internet  coverage 
and capacity are above the EU average. Digital 
public  services  are  also  widely  available  to 
businesses.  Nevertheless,  firms  are  late  to 
adopt  some  key  digital  technologies  (see 
Annexes  3  and  6).  In  2023,  cloud  computing 
had  been  adopted  by  only  32.3%  of 
enterprises  (38.9%  at  EU  level)  and,  in  2024, 
artificial  intelligence  by  8.6%  of  enterprises, 
well  below  the  EU  average  of  13.5%.  The 
Portuguese  information  and  communication 
technology  sector 
is  expanding  extremely 
rapidly.  Between  2021  and  2023  its  turnover 
increased  by  27.8%  and  the  number  of 
in  the  sector  surged  by  24.8%. 
workers 
However, 
further 
development  to  catch  up  with  other  EU 
countries,  and  the  number  of  graduates  in 
computing remains relatively low (0.2% of the 
population aged 24-35, vs 0.36% at EU level). 

is  a  need 

there 

for 

The  regulatory  framework  could  benefit 
from  a  more  extensive  use  of  policy 
evaluations  and  increased  transparency 
of  stakeholder 
involvement.  Portugal 
introduced  ex  ante  impact  assessments  for 

9 

 
many  instances  and  the  length  of  appeals, 
with cases in second-instance courts lasting on 
average  over  1 200  days,  as  of  2023  (see 
Annex  6).  The  judicial  system  also  faces 
difficulties  in  hiring  and  retaining  sufficient 
staff, especially court clerks for administrative 
and  tax  courts.  It  would  be  beneficial  to 
increase  the  attractiveness  of  such 
jobs, 
especially in areas with high costs of living. In 
this  respect,  the 
introduction  of  transfer 
allowances  or  remote-working  arrangements 
could be explored. 

the 

new regulations, as well as instruments for the 
testing  and  experiment  of  new  technologies, 
such  as 
’Technological  Free  Zones’. 
However,  the  use  of  ex post  assessments 
remains  significantly  below  the  EU  average. 
Progress could be made in introducing ex post 
regulatory 
impact  assessments,  to  better 
quantify  the  impact  of  new  regulations  or 
policies,  as  well  as  to  gauge  the  accuracy  of 
the  ex ante  evaluations.  Transparency  in  the 
involvement  of  stakeholders 
in  regulatory 
processes  could  also  be  improved,  especially 
concerning  the  regulation  of  interest  groups. 
Progress could be made by introducing a clear 
regulatory  framework  for  lobbying  activities, 
including the creation of a register of interest 
representatives. 

Graph 2.2: Pending cases in Portuguese courts 
of first instance and share of non-performing 
loans to non-financial corporations (2008-
2024) 

(1) Pending civil enforcement actions and insolvencies in courts 
of first instance are reported as a percentage of their peak 
value (i.e. 1.25 million in 2012 for civil enforcement actions; 
4 842 in 2014 for insolvencies). Non-performing loans are 
reported as the share of domestic banks’ outstanding loans to 
non-financial corporations. 
Source: Direção-Geral da Política de Justiça (Estatísticas da 
Justiça), Bank of Portugal Statistics (BPStat) and own 
calculations. 

Bottlenecks  in  the  judicial  system  affect 
the  business  environment.  Portuguese 
courts  have  made  significant  headway  in 
reducing their backlogs of cases. For example, 
pending civil executive actions in courts of first 
instance declined from 1.25 million in 2012 to 
0.35 million 
positive 
developments,  courts  still  face  backlogs  and 
proceedings  take  a  long  time  (267  days  for 
first-instance  civil  and  commercial  cases  in 
2023).  The  delays  are  exacerbated  by  the 

in  2024.  Despite 

10 

0%2%4%6%8%10%12%14%16%18%20%0%10%20%30%40%50%60%70%80%90%100%20082009201020112012201320142015201620172018201920202021202220232024Civil enforcement actionsInsolvenciesNon Performing Loans to NFCs (%, rhs) 
   
 
 
 
 
 
 
 
DECARBONISATION, ENERGY AFFORDABILITY AND 
SUSTAINABILITY 

Addressing a complex regulatory 
framework for renewables 

renewables 
in 
Portugal's  share  of 
electricity  generation 
is  the  second 
highest  in  the  EU.  In  2024,  87.7%  of  the 
electricity  generated  in  Portugal  came  from 
renewable sources, up by 11 percentage points 
compared  with  2023,  and  well  above  the 
47.4%  at  EU  level.  Hydropower  and  wind 
accounted  for  three  quarters  of  the  total 
electricity  generated  from  renewable  sources 
(42%  and  33%,  respectively).  Solar  was  the 
renewable source that increased  the most,  on 
a  yearly  basis,  by  36%. Despite  this  progress, 
the  share  of  fossil  fuels  in  Portugal’s  energy 
mix  in  2023  remained  considerable,  with  oil 
accounting  for  47.2%  and  natural  gas  for 
16.8%, while renewables and biofuels reached 
only 31.4%. 

the 

renewables 

Portugal's  renewable  energy  ambitions 
are  hindered  by  a  complex  and  lengthy 
permitting  process.  The  complexity  of  the 
legislation  governing  the  country’s  spatial 
planning  at  national,  regional  and  local  levels 
complicates 
permitting 
process.  Moreover,  the  lack  of  clear  and 
leads  to 
standardised  assessment  criteria 
different authorities interpreting the legislation 
in  different  ways,  resulting  in  complex  and 
time-consuming  processes.  For  instance,  the 
implementation  of  Simplex  Ambiental  –  an 
amendment 
legislation  aimed  at 
simplifying  environmental-related  permitting 
procedures – has revealed potential loopholes 
the  application  of 
in  assessments  and 
deadlines. Specifically, for renewables projects, 
such as solar energy, the impact assessments 
are often undertaken in a fragmented manner, 
failing  to  account  for  the  cumulative  effects 
on the surrounding territories. 

the 

to 

are 

authorisation 

communities 

face  difficulties 

facing 
Energy 
implementation bottlenecks. The permitting 
process for collective self-consumption and for 
renewable  energy  community  projects  is  also 
in 
slow.  Public  entities 
becoming  members  of  energy  communities 
due  to  mandatory  requirements,  such  as 
permitting 
public 
procurement,  which  delay  the  process.  At 
present, 400 of 500 registered collective self-
consumption  installations  have  obtained  an 
operating 
ten 
registered energy communities has secured an 
operating licence. Giving preferential status to 
energy  community  projects  in  tenders  and 
priority  access  to  the  grid  would  unlock  the 
potential  of  renewable  energy  communities 
and collective self-consumption. 

licence,  and 

just  one 

and 

in 

Tackling insufficient resources and 
skills gaps among public 
authorities 

lack 

Portugal's 

resources  and 

entities. 
the 

Insufficient 
technical 
issues  with  digital  platforms  cause 
significant  delays  in  the  response  of 
permitting 
public 
authorities 
tools,  such  as  key 
performance  indicators  and  open  databases, 
to continuously monitor the implementation of 
legislation and track the progress of renewable 
their  potential 
including 
energy  plants, 
environmental  impact.  The  multiple  entities 
that  need 
the 
permitting  process,  without  a  single  point  of 
created  delays.  The 
contact,  has  also 
responsible  entities  often  lack  the  necessary 
skills  to  evaluate  renewables  projects. 
In 
communication  and 
addition, 
between 
conflict-resolution 
promoters,  public  authorities  and 
local 
communities  further  slow  down  permitting 

to  be  consulted  during 

inadequate 

channels 

11 

 
 
decisions.  The  planned  digital  one-stop  shop 
for  renewables  projects,  which  is  supposed  to 
be finalised by 2026, is facing delays. 

Fostering long-term contracts to 
provide more stability to electricity 
markets 

Graph 3.1: Electricity generation per energy 
source and day-ahead electricity price in 
Portugal (28.03.2025 - 02.04.2025) 

funding.  Currently,  energy  storage  solutions 
are  currently  limited,  and  Portugal  lacks  a 
stable  support  framework  for 
renewable 
energy  projects.  To  address  price  fluctuations, 
instruments, 
further  developing  risk-based 
such  as  power  purchase  agreements  and 
contracts  for  difference,  should  be  made. 
Promoting storage and demand-side response 
would  reduce  the  risk  of  curtailments  and 
ensure  to  safeguard  the  balance  of  the 
electricity grid. 

Shortcomings in the electricity 
grids 

and 

Sines. 

The  national  grid  capacity 
is  facing 
limitations, making it difficult to connect 
new  renewable  energy  projects.  This 
happens particularly in areas that have seen a 
significant surge in renewable energy projects, 
like 
new 
Reinforcements 
transmission  lines  are  under  construction  or 
expected  to  be  commissioned  soon.  The 
permitting procedure for energy infrastructure 
remains  complex  and  lengthy:  on  average  it 
takes  36  months  and  is  subject  to  both 
environmental  and  sector-specific  legislation 
(see  Annex  8).  Furthermore,  a  significant  part 
of  the  grid  –  approximately  20 GW  of  RES 
capacity to be installed – is currently reserved 
for  project  agreements  (9)  that  have  not  yet 
been  connected.  Although  these  projects  are 
important,  they  are  blocking 
strategically 
that  could  be  used  by  other 
capacity 
developers, 
prolonged 
causing 
connection  queues.  To  mitigate  this  issue, 
effective  monitoring  mechanism  to  ensure 
that these projects do not unnecessarily block 
the grid would be beneficial, allowing for more 
efficient  use  of  existing  capacity  and 
facilitating the connection of new projects. 

thereby 

(1) The above snapshot of a recent week is provided as a 
graphic demonstration of the volatility of Portugal's 
electricity market. 
Source: ENTSO-E and OMIE (REN). 

the 

electricity 

High  volatility  in  the  Iberian  electricity 
market demonstrates the need for fossil-
free  flexibility  solutions  such  as  energy 
storage  and  demand-side  response  to 
balance 
and 
grid 
in  renewables. 
incentivise 
Wholesale  electricity  prices  were  highly 
volatile  in  2024,  fluctuating  between  EUR 0 
and  EUR 157  per  megawatt-hour (7)(8).  This 
volatility,  which  is  still  present  in  the  market 
(Graph  3.1),  creates  uncertainty  and  makes  it 
harder for renewable energy projects to secure 

investment 

(7)  In 2024, there were 1 887 hours when renewable 

energy met all of Portugal’s electricity needs. There 
were even periods when there was so much excess 
renewable energy that prices dropped to zero. 

(8)  OMIE. 

(9)  For larger-scale electricity generation projects (above 
1 MVA), a prior allocation of injection capacity in the 
electrical grid is required. This grants the holder the right 
to use the grid injection point with the allocated 
capacity for the duration of the corresponding operating 
licence (Títulos de Reserva de Capacidade). 

12 

 
 
 
 
still  lack  of  clarity  on  future  actions  and 
support for storage projects(11). 

Providing incentives to spur 
private investment in energy 
efficiency and address energy 
poverty 

improvements  have 
Energy  efficiency 
slowed  down  in recent years,  despite the 
supporting measures in both the recovery 
and  resilience  plan  and  cohesion  policy 
programmes.  Energy  efficiency  could  be 
improved significantly in Portugal, especially in 
the  residential  building  sector,  where  more 
than  three  quarters  of  the  building  stock  has 
an energy performance of category C or lower. 
In  2023,  primary  energy 
consumption 
decreased by 0.3%, marginally  contributing to 
the  11%  reduction  target  to  be  reached  by 
2030 (12).  Portugal  estimates  EUR 110 billion 
of  investment  needs  in  residential  buildings 
and  EUR 33 billion  in  non-residential  buildings 
up  to  2050.  While  both  the  recovery  and 
policy 
and 
resilience 
programmes  include  substantial  renovation 
measures,  the  incentive  schemes  are  mostly 
grant  based,  as  outlined  in  Annex  8.  Private 
investment  in  this  area  is  still  scarce  and  the 
lack  of  financing  schemes  to  leverage  private 
investment  is  a  major  impediment  for  energy 
efficiency renovations, leading to a significant 
investment gap. 

cohesion 

plan 

Portugal’s  high  levels  of  energy  poverty 
persists and there is a need for a radical 
policy  shift  on  energy  efficiency  to 
prioritise  holistic  building  renovations. 
Around  17.5%  of  the  population  struggles  to 
adequately  heat  their  homes.  Despite  efforts 
to  improve  the  situation,  the  current  rate  of 

(11)  Currently, Portugal only has in place a regulatory 

sandbox dedicated to energy for the improvement on 
regulatory framework regarding energy projects – 
Decree-Law No 15/2022 

(12)  The indicator of primary energy consumption of the 

entire building sector had a reduction of 6.5% in relation 
to the baseline year (2019). 

of 

the 

lack 

distribution 

transparency  around 
The 
available  distribution  grid  capacity  and 
expansion  plans  makes  it  difficult  for 
developers  to  plan  and  invest  in  new 
projects. Without clear information  from grid 
operators  on  grid  capacity  and 
future 
expansion  and  modernisation  plans  per  sub-
station 
in  an  accessible  open  platform, 
the 
developers  cannot  be  certain  about 
viability of their projects, because it is unclear 
when  access  to  the  grid  will  be  possible. 
Reinforcing 
and 
improving planning and optimisation would be 
beneficial.  For  example,  further  fostering 
hybrid projects (combining multiple  renewable 
energy  sources  and  storage  technologies  in  a 
single  connection  point)  could  help  maximise 
grid efficiency, beyond the increase of almost 
300  MW  of  power  already  achieved  through 
these  means.  At  present,  promoters  do  not 
have  a  centralised  platform  to  monitor  their 
projects’ progress. This issue is expected to be 
addressed  by  the  upcoming  digital  one-stop 
shop,  which  will  include  a  user-friendly  portal 
for  developers  to  access  the  information  and 
tools they need. 

grids 

Portugal’s  regulatory  framework  hinders 
the  development  of  flexible  resources. 
Portugal  has  so  far  prioritised  reverse  hydro 
storage, with 3.6 GW installed, and most of its 
potential is already exploited. Battery storage, 
on the other hand, could be further increased. 
Certain  flexibility  resources,  such  as  demand-
side  response,  storage  and  aggregators,  are 
in  the 
still  facing  regulatory  restrictions 
provision  of  ancillary  services.  The  recent 
EUR 100  million  tender  to  add  500 MW  of 
battery 
the 
manifestation of interest  exceeded more than 
1  GW,  is  expected  to  drive  growth  for  large-
scale  battery  storage.  On  the  other  hand,  the 
energy  storage  market  for  customers,  like 
homes  and  businesses,  still  faces  expensive 
lack  of  clear 
battery  systems  and  a 
regulations.  Portugal  plans 
to  draft  a 
comprehensive  storage  strategy  by  2026. 
While  Portugal  foresees  a  total  storage 
capacity  in  2030  around  5.9GW  (10),  there  is 

storage,  where 

energy 

(10)  Final National Energy and Climate Plan, 2025 

13 

 
 
 
and 

solid 

zero sectors are solar power and wind (14). The 
country  also  has  significant  manufacturing 
potential 
for  electrolysers,  as  Portugal 
accounts  for  8-9%  of  the  EU's  total  capacity. 
However,  these  projects  still  need  to  be 
implemented 
regulatory 
a 
framework for renewable gases is vital for the 
support 
sector's 
the 
technologies, 
development 
Portugal  has set  up two incentive schemes to 
encourage investments in their production. But 
the 
these 
technologies  remain  the  same  as  those  for 
other industrial processes and are hindered by 
several bottlenecks (see Section 2). 

development. 
of 

To 
net-zero 

procedures 

permitting 

for 

Accelerating decarbonisation of 
transport 

in 

costs 

regulatory 

Investment 
charging 
is  needed 
infrastructure  to  support  the  growth  of 
electric mobility  in  Portugal.  Investment in 
infrastructure  has  been 
electric  charging 
framework 
a 
impaired 
by 
pricing 
by 
characterised 
confusing 
to  complex  billing, 
mechanisms, 
leading 
underinvestment  and  higher 
for 
consumers.  The  proposed  new  framework  for 
to 
electric  charging 
liberalise  the  market  and  boost  transparency 
in 
reducing 
services. 
intermediaries  and  ensuring  clear  invoicing, 
this  model  seeks  to  simplify  the  current 
complex pricing mechanisms. It also introduces 
ad  hoc  charging  with  EU-wide  payment 
methods,  and  it  allows  alternative  energy 
supply methods, fostering a more competitive 
and  user-friendly  environment.  However,  rural 
areas  must  receive  adequate  investment  to 
develop the required charging infrastructure. 

infrastructure  aims 

charging 

By 

Fossil  fuel  subsidies  remain  a  significant 
impediment  to  Portugal  achieving 
its 
goals for decarbonising transport. Portugal 
has  a  substantial  amount  of  relevant  fossil 
fuel  subsidies  without  a  planned  phase-out 

(14)  European 

Commission 
industry 

Report, 

net-zero 
The 
landscape  across  Member 

manufacturing 
States, January 2025. 

progress (0.54% reduction in discomfort hours 
in  2023),  is  not  sufficient  to  meet  the  2030 
target  (26%  by  2030) (13).  Energy  efficiency 
measures are often fragmented  and focus on 
individual solutions rather than addressing the 
building  as  a  whole,  which  would  have  a 
greater impact on improving thermal  comfort. 
Portugal  is  planning  to  launch  a  pilot  project 
programme  (Bairros  Sustentáveis)  that  will 
target  buildings  and  homes  in  energy  poverty 
in  the  two  metropolitan  areas  of  Lisbon  and 
Porto,  with  the  goal  of  addressing  energy 
poverty. 

Developing a sustainable industrial 
sector in Portugal 

its 

of 

the 

can 

decrease, 

production 

decarbonisation 

Portugal's 
The 
industry 
sector's 
support 
competitiveness.  The  production  of  energy-
intensive industries in Portugal has declined by 
an  average  of  3.7%  since  2021,  with  the 
chemicals  sector  being  a  major  contributor  to 
this 
having 
plummeted  by  47.5%  over  the  same  period. 
Simplified  permitting  procedures,  dedicated 
support  for  decarbonisation,  and  initiatives  to 
improve the circularity of raw materials would 
help create the necessary conditions for these 
industries to thrive (see Annex 7). Furthermore, 
Portugal  is  in  a  privileged  position  in  the  EU, 
due  to  its  high  potential  for  the  extraction  of 
critical and strategic minerals, such as copper, 
tungsten,  feldspar  and 
lithium.  This  also 
presents  business  opportunities  in  areas  such 
as  battery  manufacturing,  with  potential 
positive  spillovers  to  decrease  divergences 
across  regions.  Portugal  has  launched  an 
action  plan  to  develop  the  extraction  and  use 
of  sustainable  raw  materials.  Involving  local 
communities  better  would  ensure  that  these 
projects were implemented more effectively. 

Portugal’s manufacturing capacity across 
all net-zero technologies remains modest 
but  with 
development 
significant 
potential.  Portugal’s  largest  industrial  net-

(13)  National strategy report. 

14 

 
 
 
before 2030, equivalent to 0.69% of Portugal’s 
GDP,  above  the  EU  weighted  average  of 
0.49%.  Scaling  down  and  phasing  out  these 
subsidies  is  in  line  with  EU  commitments  and 
can give the government greater flexibility for 
its spending choices. Fossil fuel subsidies that 
do  not  address  energy  poverty  in  a  targeted 
way,  that  do  not  respond  to  genuine  energy 
security  concerns,  that  hinder  electrification 
and  that  are  not  essential  for  industrial 
competitiveness  could  be  considered  for 
priority  phase-out.  The  following  fossil  fuel 
subsidies  are  particularly  damaging  from  an 
economic  and  environmental  perspective:  tax 
reductions  and  exemptions  for  diesel  used  by 
freight  companies,  railway  locomotives  and 
freight 
For 
public 
companies  receive  tax  reductions  for  diesel, 
allowing  them  to  reimburse  the  difference 
between  domestic  and  minimum  taxation 
levels,  while  public  transport  vehicles  and 
railway  locomotives  enjoy  exemptions  from 
the fuel excise tax. Such measures perpetuate 
reliance  on  fossil  fuels  and  disincentivise  the 
shift to electric vehicles and other sustainable 
solutions.  Nevertheless,  it  is  noted  that,  in 
Portugal,  the  combination  of  national  energy 
and  carbon  taxes  and  EU  emissions  trading 
creates  above-EU-average  disincentives  for 
fossil  fuel  use  in  the  industrial  and  electricity 
sectors (see Annex 8). 

transport. 

instance, 

to 

to 

designed 

opportunity 

Portugal’s 

Key  infrastructure  projects  are  poised  to 
transform 
transportation 
landscape, but close monitoring is needed 
to  ensure  timely  delivery.  Lisbon's  new 
airport, 
accommodate 
40 to 45 million  passengers  a  year,  offers  a 
significant 
incorporate 
sustainable  practices,  including  a  railway  link 
to  the  city  centre.  High-speed  rail  projects 
further demonstrate a commitment to cleaner 
transport  alternatives,  efficiently  connecting 
the  carbon 
urban  centres  and 
footprint.  The  Lisbon-Madrid  cross-border 
high-speed  line,  in  particular,  is  crucial  for 
linking  Portugal  to  the  rest  of  Europe.  Timely 
progress  on  this  project,  along  with 
its 
adaptation  to  the  European  standard  nominal 
track  gauge  of  1 435 mm,  which  will  link 
Lisbon  to  the  rest  of  the  continent,  could 
significantly  boost  Portugal's  competitiveness 
resilience.  Upgrading  and  expanding 
and 

reducing 

railway infrastructure will promote sustainable 
mobility, bridge regional disparities and foster 
social  cohesion,  ultimately  driving  economic 
competitiveness  and  growth  across 
the 
country.  However,  the  delays  in  implementing 
the  Ferrovia  2020  plan  and  the  National 
Investment  Programme  2030  require  these 
plans  should  be  monitored  closely  to  ensure 
timely  delivery.  Improving  rail  infrastructure, 
decarbonising transport, and personal mobility 
are  paramount,  particularly 
in  Portugal’s 
metropolitan  areas,  which  face  significant 
challenges in air quality and traffic congestion 
(see Annex 7). 

Climate adaptation and 
preparedness 

Portugal  is  one  of  the  Member  States 
most affected by climate change. Portugal 
is  particularly  vulnerable 
to  heatwaves, 
droughts  and  wildfires,  which  are  set  to 
intensify  due  to  climate  change.  Natural 
hazards  are  also  expected  to  become  more 
frequent and extreme. 

that  affect 

the  century. 

Portugal  has  already  undertaken  a 
comprehensive analysis of the impacts of 
its  national 
climate  change  through 
roadmap  for  adaptation  2100  study.  This 
study evaluates regional and national impacts 
under different climate scenarios until the end 
It  also  highlights  key 
of 
phenomena 
livelihoods  and 
economic  development  and  should  serve  as 
the  foundation  for  the  2025  review  of  the 
country's  national  adaptation  strategy.  Given 
that many adaptation measures are local, it is 
essential  to  implement  them  in  line  with  the 
national strategy to maximise their impact. At 
the same time, it would be beneficial to better 
incorporate  climate  adaptation  into  sector-
specific  policies,  especially 
like 
agriculture,  energy,  housing,  spatial  planning 
and  infrastructure  development.  One  example 
is  the  special  arrangements  for  small-scale 
biomass  power  plants  in  high-risk  fire  areas, 
aimed  at  addressing  forest  fire  management 
and 
renewable  energy  production.  These 
installations  are  encouraged  to  reduce  fire 
risks  by  using  forest  residues  and  promoting 

in  areas 

15 

 
coastal 

erosion, 

sustainable energy generation. Addressing the 
adverse  effects  of  climate  change  –  such  as 
floods, 
desertification, 
droughts,  heatwaves  and  forest  fires  – 
imperative.  Effectively  managing 
remains 
these  risks  will  not  only  mitigate  their  impact 
but also strengthen Portugal’s water resilience, 
which is an increasingly vital issue in the face 
of  climate  change.  Cohesion  funds  provide 
around  EUR 680 million  and,  together  with  a 
wide  range  of  measures  under  the  recovery 
and resilience plan, have been helping to boost 
Portugal’s  resilience  to  the  effects  of  climate 
change. 

Tackling water management 
inefficiencies 

Portugal  is  among  the  most  drought-
affected countries in the EU. Despite some 
progress  made 
in  recent  years  and  the 
announcement  of  a  national  water  strategy 
(Água que Une) in early March 2025, it would 
be beneficial if water management were made 
more  efficient  and  the  measures  in  the 
strategy  implemented  quickly.  Over  the  past 
20  years,  available  freshwater  has  decreased 
by 20-30% in most river basins. The frequency 
is  forecast  to 
and  severity  of  droughts 
in  Portugal  due  to 
increase  significantly 
climate  change.  For  example, 
the  2022 
drought affected more than 43% of Portugal’s 
total  area.  Water  demand  in  certain  areas 
already exceeds available water resources and 
the pressure is likely to increase in the coming 
years.  Effective  water  management 
in 
Portugal  is  essential  for  ensuring  agricultural 
productivity, 
climate 
change 
infrastructure 
resilience,  while  also  supporting  the  tourism 
the 
and 
implementation  of 
long-term 
strategy,  Portugal  needs  to  strike  the  right 
balance between water use and preserving the 
health  of  its  ecosystems.  At  the  same  time, 
the country would benefit from better planning 
for  long-term  climate  risks,  to  ensure  that  its 
water  management  can  adapt  to  future 
changes in climate, such as droughts or other 
extreme weather patterns. 

sectors. 
its  national 

energy 
adaptation 

production, 
and 

industrial 

With 

local 

in  water  pipelines, 
restoring 

the  water  governance 
Streamlining 
structure  would  improve  coordination  at 
regional  and 
level,  generate 
economies  of  scale  and  boost  overall 
efficiency.  Increasing  water  retention  in  the 
landscape and effecting long-term changes in 
economic  practices  would  be  beneficial. 
Improving  wastewater  management,  reducing 
strengthening 
leaks 
monitoring, 
the  natural  sponge 
function  of  the  landscape  and  minimising 
groundwater  extraction  would  help  address 
water  scarcity.  Rehabilitating  wetlands  and 
rivers (including floodplains) and implementing 
other  nature-based  solutions  can  also  help 
tackle  the  lack  of  water.  Water  pricing  does 
not  reflect  the  scarcity  of  the  resource. 
Addressing this could be an effective demand-
side  tool  but  water  pricing  must  be  designed 
social 
to 
carefully 
vulnerabilities. 

account 

take 

of 

Addressing ineffective waste 
management and gaps in the 
circular economy 

Portugal  is  far  below  the  EU  average  on 
circular economy and waste management 
indicators.  Portugal’s  circular  material  use 
rate  was  2.8%  in  2023,  well  below  the  EU 
average  of  11.8%.  Portugal  is  at  high  risk  of 
missing  the  EU  target  of  recycling  55%  of 
municipal  waste  by  2025  (in  2023  it  was 
30.1%).  Portugal  is  also  behind  on  the  EU 
target  to  recycle  50%  of  plastic  packaging 
waste by 2025 (37.3% in 2022). 

Despite  progress,  Portugal  needs  to  do 
more to improve waste management and 
develop  the  potential  of  the  circular 
economy.  As  mandated  by  the  National 
Waste  Management  Plan  2030,  approved  by 
the government in 2023, the strategic plan for 
municipal  waste and  the  strategic  plan  for 
non-urban  waste were  adopted 
in  2023. 
Municipal action plans for municipal waste set 
out strategies to comply with national targets. 
Of the around 300 municipal action plans, 54 
have  received  conditional  approval  from  the 
Portuguese Environment Agency (APA) and the 

16 

 
from 

contributions 

Regulatory  Authority  for  Water  and  Waste 
Services  (ERSAR),  while  7  municipalities  have 
yet to submit their action plans. To implement 
the  objectives  set  out  in  Portugal’s  National 
Waste  Management  Plan  2030,  a  range  of 
reforms have been introduced in recent years. 
Progress has been achieved through initiatives 
and 
the 
regulatory  measures  such  as 
development  of  a  deposit-refund  system 
(expected  to  be  fully  operational  by  2026), 
increased 
extended 
producer  responsibility 
(EPR)  schemes  for 
packaging,  the  expansion  of  EPR  to  cover 
additional  product  categories,  and  higher  fees 
for  landfill  use  and  incineration.  By  2030,  a 
pay-as-you-throw system will replace flat-rate 
waste tariffs with charges based on the actual 
amount  of  waste  generated  by  each 
household.  While  Portugal  has  made  notable 
progress  regarding  the  regulatory  framework, 
substantial investments will still be needed at 
both  national  and  municipal  levels  to  ensure 
full 
capital 
investment  required  for  Portugal  to  meet  the 
2035  recycling  targets  for  municipal  and 
packaging 
at 
EUR 911 million (15).  Portugal's  recovery  and 
resilience  plan  includes  funding  to  strengthen 
and  improve  waste  collection,  sorting  and 
treatment  capacity.  Portugal  has  not  yet 
updated  its  national  circular  economy  action 
plan. In 2025, Portugal presented a new action 
plan  for  the  waste  sector,  titled  ’TERRA  – 
Efficient  Transformation  of  Waste 
into 
Environmental  Resources’.  The  action  plan 
identifies  the  investments  needed  by  2030, 
while  also  highlighting  the  importance  of 
implementing  the  updated  Circular  Economy 
Action Plan.   and measures, missing a chance 
to  bring  into  in  line  with  the  EU  circular 
economy  action  plan  2020  and  advance  its 
circular economy objectives. 

implementation. 

estimated 

waste 

total 

The 

is 

(15)  European Commission, Study on investment needs in 
the waste sector and on the financing of municipal 
waste management in Member States. 

17 

 
 
SKILLS, QUALITY JOBS AND SOCIAL FAIRNESS 

Addressing skills mismatches, 
labour shortages and youth 
unemployment for a competitive 
future 

Unemployment  levels  remain  low  but 
labour  shortages  persist.  While 
the 
unemployment  rate  in  Portugal  remains  low 
(6.5%  in  2024),  the  country  faces  labour 
shortages  which  persist  in  some  sectors  (see 
Annex  10).  This  does  not  help  Portugal’s  low 
productivity and hampers improvements in the 
country’s  competitiveness.  As  reported  in  late 
2023 (16),  six 
ten  Portuguese 
in  every 
employers have struggled to find workers with 
the  right  skills  in  the  previous  24  months, 
especially 
those  with  specific  vocational 
tertiary 
education 
qualifications.  Employers  identify  this  as  the 
most challenging issue faced by companies in 
many 
construction, 
such 
information  and  communication  technology, 
healthcare  and  renewable  energy.  In  addition, 
it  was  predicted  that  the  demand  for  high-
skilled  labour  would  increase  significantly  in 
the  short  to medium term  (2020-35) (17),  due 
to  the  increase  of  fast-growing  sectors  such 
as, 
and 
for 
renewable 
communication 
energy. 

technology  and 

information 

instance, 

training 

sectors 

and 

and 

as 

Skills  mismatches  aggravate  Portugal’s 
labour  shortages  and  fuel 
sectoral 
structurally  high  youth  unemployment. 
The skills supply (particularly regarding higher 
education)  does  not  appear  to  match  market 
needs. The development of the necessary skills 
is also threatened by the following: i) declining 

(16) 

Flash Eurobarometer. 

adult  participation  in  lifelong  learning  (from 
38% in 2016 to 33.4% in 2022), drifting away 
from the 2030 national  target  of 60%; (ii)  an 
increased  proportion  of  underperformers  in 
maths,  science  and  reading  in  school;  and  (iii) 
more young people leaving school and training 
early  (see  Annex  12).  Together,  these  three 
factors further contribute to the population not 
having the right skills for an evolving economy. 
The  mismatches  also  increase  high  youth 
unemployment,  hindering  social  cohesion. 
Existing  vacancies  often  fail  to  align  with  the 
skills  of  available  young  workers  and  the 
young  unemployed  (see  Annex  10).  A  large 
proportion  of  unemployed  young  people  have 
low skill levels, which makes them less able to 
is 
compete 
increasingly  dominated  by  a  more  educated 
workforce. Although fewer highly skilled young 
people are unemployed, four in ten have little 
chance of finding work (18). 

labour  market 

in  a 

that 

choices  and 

The  lack  of  a  proper  skills  anticipation 
mechanism  has  a  negative  impact  on 
labour  market 
career 
matching.  The  lack  of  a  reliable  forecast  of 
future  market  needs,  to  inform  students  of 
career  prospects  and  to  adapt  the  higher 
labour  market  needs, 
education  offer  to 
results 
in  many  qualified  young  people 
remaining  unemployed  for  a  long  time  or 
simply  seeking  better  opportunities  abroad. 
The proportion of migrant youth registered as 
unemployed  has  also  increased  significantly 
from 2022 to 2023 and nearly half of migrant 
workers  with 
are 
higher 
overqualified  for  the  jobs  they  occupy.  This 
further  aggravates  skills  mismatches  and 
destabilises labour market dynamics. 

education 

Portugal  has  successfully  addressed 
labour 
overall  segmentation  of  the 

(17)  Portugal- 2023 Skills forecast | European Centre for the 

(18)  Jovens à procura de emprego inscritos no IEFP: 

Development of Vocational Training. 

Características, trajetórias e colocações 

18 

 
 
 
 
market. It restricted the use of fixed-term and 
temporary  work  agency  contracts,  compared 
with  the  OECD  average (19).  Despite  these 
improvements, 
face 
precarious  employment  conditions,  which 
determine  their  career  possibilities,  further 
education  pathways  and  chances  of  starting 
an independent life. 

young  people 

still 

focusing 

on 
and 

education, 

skills 
By 
development 
labour  market 
integration,  public  policies  could  reduce 
skills  mismatches  and  boost  Portugal’s 
competitiveness.  Portugal’s  recovery  and 
resilience  plan  is  supporting  the  creation  of 
tertiary education options and the participation 
of  people  in  courses  and  programmes  for 
adult  learning.  However,  further  incentives 
could  get  more  people  and  businesses 
engaged  in  lifelong  training  for  upskilling  and 
reskilling.  It  would  be  easier  to  include  young 
people  in  the  labour  market  and  tackle  youth 
unemployment  if  concrete  and  sustainable 
reforms  were  made, 
partnership-based 
alongside  agreements  between  decision 
makers, social partners and stakeholders. More 
policy  efforts  could  help  integrate  migrant 
youth  into  the  labour  market.  This  would 
promote social cohesion and help mitigate the 
ageing  of  the  Portuguese  workforce  and 
labour shortages. 

Public sector labour shortages could have 
a negative impact on the quality of public 
services.  First,  in  the  national  health  service, 
the  country  faces  a  heavy  emigration  of 
nurses  (e.g.,  in  2023,  60%  of  the  graduates 
that registered in the professional  association 
to  emigrate(20)  and 
of  nurses 
between  2020  and  2024  only  about  half  of 
the  positions  opened  to  recruit  doctors  were 
filled (see Annex 14). Although Portugal has a 
high  prevalence  of  mental  health  disorders 
with  an  impact  on  the  well-being  of  its 
population  and 
significant 
productivity  losses (21),  the  national  health 

consequently 

intended 

(19)  OECD Data Explorer. 

(20)  60% dos enfermeiros portugueses pediram declaração 

para emigrar em 2023 - CNN Portugal  

service does not have enough professionals to 
provide accessible mental health care. Second, 
there  are  too  few  teachers  and  the  gap  is 
expected to get worse in the near future. This 
is  due  to  several  factors,  including  the  fact 
there  are  fewer  new  teachers  graduating  and 
that half of current teachers are over 50 years 
old, with only a small fraction under the age of 
30 (22).  The  career’s  lack  of  attractiveness  is 
one of the reasons why fewer people want to 
become teachers. Third, the tax authorities are 
facing a similar situation, with more than half 
of  their  employees  expected  to  retire  in  the 
coming years. Lastly, Portugal’s justice system 
also  has  too  few  court  clerks,  who  are 
essential for it to operate properly. 

Portugal would benefit from closing these 
public sector labour shortages. It would be 
beneficial  to  simplify  recruitment  procedures 
to  enable  the  timely  recruitment  of  the 
necessary staff, and to continue promoting the 
attractiveness  of  public  sector  careers  for the 
profiles  where  shortages  are  most  severe, 
following efforts of recent years. Furthermore, 
to  tackle  teacher  shortages,  the  number  of 
people choosing to study teaching would need 
to  increase.  This  could  be  done  by  improving 
career  prospects  for  the  profession  and  by 
this  professional  path  among 
promoting 
students  before  university. 
In  addition, 
providing  more  flexible  working  conditions 
could  be  explored  as  a  way  of  encouraging 
young  people  to  join  the  profession  and  of 
incentivising 
less 
populated areas. 

to  work 

teachers 

in 

Tackling housing affordability and 
accessibility 

areas 

tourism 

Higher housing demand in large cities and 
popular 
aggravates 
shortages  of  affordable  housing  and 
undermines  social  cohesion.  Among  the 
more  affected  groups  are  young  people,  low- 
and 
and 

middle-income 

families 

(21)  https://www.oecd.org/en/publications/portugal-country-

(22)  Estado da Educação 2023 - Conselho Nacional de 

health-profile-2023_069af7b1-en.html. 

Educação. 

19 

 
 
 
interest 

disadvantaged persons. They face rising rental 
prices  and  are  unable  to  buy  property  due  to 
high 
rates  and  housing  prices. 
Between  2015  and  2023,  housing  prices  in 
Portugal increased by 105.8% (compared with 
48.1%  in  the  EU) (23).  High  housing  prices 
relative  to  income  contribute  to  the  fact  that 
Portuguese  young  people  leave  their  parents’ 
home  later  than  EU  average.  Middle-income 
families find it increasingly difficult to save up 
for  and  purchase  homes,  increasing  their  risk 
of  falling  into  poverty  (see  Annex  11).  This 
impacts  on  labour  availability  and  negatively 
affects  competitiveness,  since  higher  housing 
costs  limit  the  possibilities  of  businesses  and 
public  bodies  to  attract  and  retain  qualified 
workers.  In  addition,  higher  housing  costs 
weigh  on  households’  budgets,  savings  and 
their capacity to invest. 

Graph 4.1: House price index (2015=100) 

pressure on social services. A higher proportion 
of  people  struggle  to  keep  their  homes 
adequately  warm  in  Portugal  than  the  EU 
average 
(see  Annex  11).  Measures  and 
investments  for  housing  and  buildings  to  be 
financed  under  the  European  Social  Climate 
Fund  can  target  the  most  vulnerable  groups 
and  help  cushion  the  impact  of  the  green 
transition’s costs on these groups. 

Portugal  could  benefit  from  further 
action to alleviate housing cost pressures 
on  households,  particularly  by  increasing 
affordable  and  social  housing  stock,  including 
in  the  Azores  and  Madeira.  A  comprehensive 
review  of  existing  housing  policies  and  their 
efficiency would  help identify what is  working 
and  where  shortcomings  remain.  Bringing 
vacant  dwellings  back  onto 
the  market, 
together with renovating those not ready to be 
immediately inhabited, could help increase the 
supply  of  affordable  housing,  especially  in 
constrained  areas.  Linked  to  the  previous 
section,  promoting  more  efficient  public 
transport  and  improving  the  public  transport 
network  would  make  it  easier  for  people  to 
commute  from  suburban  and  rural  areas, 
increase the attractiveness of other areas and 
reduce pressure on major urban centres. 

to 

due 

poverty 
the 

Social  pressures  go  beyond  housing 
levels 
affordability,  with 
persisting 
limited 
effectiveness  of  the  social  protection 
system.  Compared 
the  EU  average, 
to 
lower  percentage  of  the 
Portugal  has  a 
population 
in  severe  material  and  social 
deprivation (4.3%, against 6.4% in the EU) (24), 
and  at  risk  of  poverty  and  social  exclusion 
(19.7%,  against  21%  in  the  EU) (25).  However, 
social  benefits 
(excluding  pensions)  have 
limited  effectiveness  in  reducing  poverty,  and 
high  housing  costs  add  pressure  to  the  2030 
poverty  reduction  target  under  the  European 
pillar of social rights action plan. The efficiency 
of the social benefits system is undermined by 
the  same 
overlapping  benefits 

targeting 

(24)  Living conditions in Europe - material deprivation and 

economic strain - Statistics Explained. 

Source: Eurostat 

The current social and affordable housing 
stock  is  insufficient  to  meet  demand. 
Despite efforts under the Portuguese recovery 
and  resilience  plan  and  cohesion  policy,  along 
with  other  government  investments  expected 
to increase the housing stock by 2030, there is 
not enough social and affordable housing (see 
Annex  11).  Affordable  housing  shortages  and 
rising 
increased 
homelessness,  which  has  put  additional 

rental  prices  have  also 

(23)  Housing in Europe – 2023 edition - Interactive 

(25)  Living conditions in Europe - poverty and social 

publications - Eurostat 

exclusion - Statistics Explained. 

20 

100120140160180200220201520162017201820192020202120222023EUPortugal 
 
  
 
 
objective.  The  single  social  benefit  reform 
included 
in  the  Portuguese  recovery  and 
resilience  plan  still  needs  to  be  implemented 
but  is  then  expected  to  improve  the  current 
situation. At the same time, workers with non-
standard contracts, such as very short-term or 
hourly  contracts,  do  not  have  access  to  some 
social  benefits,  including  benefits  related  to 
unemployment  and  occupational  illness.  In 
addition,  the  adequacy  of  the  minimum 
income scheme is still limited (see Annex 11). 

Preparedness for a rapidly ageing 
population 

improved 

investment 

long-term 

A rapidly ageing population threatens the 
sustainability of the pensions system and 
care 
requires 
solutions. Almost a quarter of the Portuguese 
population  is  aged  65  or  over,  which  could 
impact  the  sustainability  of  the  pensions 
system  (see  Section  1  for  an  analysis  of  the 
impact  of  ageing  on  public 
finances 
sustainability).  At  the  same  time,  there  is  a 
need  to  improve  long-term  care  services  to 
the  needs  of  older  people. 
provide  for 
Portugal's  per-capita  public 
in 
long-term  care  is  three  times  lower  than  the 
EU  average  and  Portugal  is  below  the  EU 
average  for  the  number  of  years  of  healthy 
life  of  its  population.  Access  to  home  care 
remained  at  around  half  the  EU  average  in 
2022.  Despite  improvements,  coverage  rates 
in 
low  across  all 
regions,  with  even  greater  disparities  in  rural 
and remote areas, as well as in the Azores and 
Madeira.  The  number  of  carers  has increased, 
but 
is  still 
insufficient  to  cope  with  the  growing  demand 
for  care,  resulting  in  a  strong  reliance  on 
informal  carers  (see  Annex  11).  Implementing 
the  action  plan  for  the  national  strategy  for 
long-term  care  would  help  meet  the  growing 
demand  for  services  and  address  staff 
shortages.  Portugal  could  also  benefit  from 
improving the coverage of the independent life 
support  model  (MAVI),  a  scheme  co-financed 
by  the  European  Social  Fund  Plus  to  promote 
the 
living  of  people  with 
disabilities  and  incapacity  so  that  they  can 
lead an independent, self-determined life. 

long-term  care  remain 

the  workforce 

the  size  of 

independent 

21 

 
KEY FINDINGS 

To  foster  competitiveness,  sustainability  and 
social fairness, Portugal would benefit from: 

swiftly 

•  accelerating  the  implementation 
of the RRP, including the REPowerEU 
implementing 
chapter; 
cohesion  policy,  taking  advantage  of 
the  opportunities  under  the  mid-term 
review; and making optimal use of EU 
instruments,  including  InvestEU  and 
STEP, to improve competitiveness;  

• 

• 

• 

of 

ageing 

taking  action  to  mitigate  the 
on 
impact 
the 
sustainability  of 
the  pension 
system  and  the  provision  of  long-
term care; 

investments 

fostering  a  business  environment 
that is conducive to the growth of 
innovative and disruptive firms by 
supporting 
in 
productivity-enhancing  research  and 
innovation, 
net-zero 
technologies,  promoting  access  to 
venture capital  and private equity for 
firms,  and  removing  barriers  and 
disincentives  to  business  expansion 
and scale-up; 

including 

 simplifying  administrative  and 
regulatory barriers for businesses 
by  streamlining    administrative  and 
regulatory  requirements,  simplifying 
and  shortening  industrial  permitting 
and  licensing  procedures,  deploying 
evidence-based  policy  evaluations, 
increasing 
and 
improving 
transparency 
stakeholders’ 
of 
involvement  in  policy  making,  further 
reducing  late  payments  and  further 
improving the efficiency of the justice 
system; 

•  strengthening the capacity of the 
and 

transmission 

electricity 

distribution  grid  by  simplifying  the 
grid’s permitting framework, releasing 
unused  capacity  and  increasing  grid 
transparency 
incentivise 
investments in the national network; 

to 

•  making  further  progress  towards 
decarbonisation  by  fostering  the 
deployment  of  renewables  by 
simplifying  the  licensing  process  and 
training 
permitting 
procedures,  and  making  the  cost  of 
renewable  energy  more  stable  and 
predictable;  

staff 

in 

• 

• 

• 

taking  concrete  steps  to  phase 
out  fossil  fuel  subsidies  and 
reducing 
reliance  on  fossil  fuels 
particularly in the transport sector; 

strategy 

improving  water  governance  to 
strengthen  climate  adaptation  by 
implementing 
for 
a 
integrated  and  sustainable  water 
management,  improving  monitoring, 
reducing  leaks,  tackling  waste-water 
collection  and  treatment  and  water 
re-use; 

tackling  skill  mismatches  by 
investing  in  skills  development  and 
lifelong  learning  and  making  them 
more  relevant  to  the  needs  of  the 
labour  market,  and  by  providing 
young 
quality 
employment conditions; 

people 

with 

•  addressing  labour  shortages  in 
critical  public 
sector  areas, 
including  healthcare,  education  and 
the  justice  system,  by  simplifying 
recruitment 
and 
promoting the attractiveness of these 
careers; 

procedures 

22 

 
 
• 

by 

areas 

improving  housing  affordability 
and  accessibility  by 
targeting 
vacant  and  derelict  buildings  in  high-
demand 
addressing 
shortages  of  social  and  affordable 
housing  and  by  promoting  efficient 
public 
that 
transport  connections 
improve  the  attractiveness  of  other 
territories  and  reduce  the  pressure  in 
high demand areas. 

23 

 
 
ANNEXES 

 
 
 
 
LIST OF ANNEXES 

Fiscal 

A1.  Fiscal surveillance and debt sustainability 

A2.  Taxation 

Productivity 

A3. 

Innovation to business 

A4.  Making business easier 

A5.  Capital markets, financial stability and access to finance 

A6.  Effective institutional framework 

Sustainability 

A7.  Clean industry and climate mitigation 

A8.  Affordable energy transition 

A9.  Climate adaptation, preparedness and environment 

Fairness 

A10.  Labour market 

A11.  Social policies 

A12.  Education and skills 

A13.  Social Scoreboard 

A14.  Health and health systems 

Horizontal 

A15.  Sustainable development goals 

A16.  CSR progress and EU funds implementation 

A17.  Competitive regions 

LIST OF TABLES 

General government balance and debt 
Net expenditure growth 
Net expenditure (outturn and forecast), annual and cumulated deviations vis-à-vis the recommendation 
Defence expenditure and the national escape clause 

A1.1. 
A1.2. 
A1.3. 
A1.4. 
A1.5.  Macroeconomic developments and forecasts 
A1.6. 
A1.7. 
A1.8. 
A1.9. 

General government budgetary position 
Debt developments 
RRF – Grants 
RRF - Loans 

27 

29 

29 

36 

40 

40 

45 

50 

57 

62 

62 

68 

74 

80 

80 

84 

89 

93 

94 

97 

97 

100 

108 

30 
30 
31 
31 
32 
32 
33 
33 
34 

 
 
 
A1.10.  Projected change in age-related expenditure in 2024-2040 and 2024-2070 
A1.11.  Fiscal Governance Database Indicators 
A2.1. 
Taxation indicators 
A3.1. 
Key innovation indicators 
A4.1.  Making Business Easier: indicators. 
A5.1. 
A6.1. 
A6.2. 
A7.1. 
A8.1. 
A8.2. 
A9.1. 
A13.1.  Social Scoreboard for Portugal 
A14.1.  Key health indicators 
A16.1.  Selected EU funds with adopted allocations - summary data (million EUR) 
A16.2.  Summary table on 2019-2024 CSRs 
A17.1.  Selection of indicators at regional level (NUTS 2024) in Portugal 

Financial indicators 
Portugal. Selected indicators on administrative burden reduction and simplification 
Digital Decade targets monitored through the Digital Economy and Society Index 
Key clean industry and climate mitigation indicators: Portugal 
Retail energy price components for household and non-household consumers, 2024 
Key Energy Indicators 
Key indicators tracking progress on climate adaptation, resilience and environment 

LIST OF GRAPHS 

Greenhouse gas emissions in the effort sharing sectors, 2005 and 2023 

Tax revenue shares in 2023 
Tax wedge for single and second earners as a % of total labour costs, 2024 
Percentage change in mean disposable income from PIT tax expenditures, by income decile (2023) 
Public expenditure on R&D as a percentage of GDP 
Patent applications filed under the PCT per billion GPD (in PPS €) in 2022 

A2.1. 
A2.2. 
A2.3. 
A3.1. 
A3.2. 
A4.1.  Making Business Easier: selected indicators. 
A5.1. 
Net savings-investment balance 
A5.2. 
International investment position 
A5.3. 
Capital markets and financial intermediaries 
A5.4. 
Composition of NFC funding as % of GDP 
A5.5. 
Composition of household financial assets per capita and as % of GDP 
A6.1. 
Trust in justice, regional / local authorities and in government 
A6.2. 
Indicators of Regulatory Policy and Governance (iREG) 
A7.1. 
GHG emission intensity of manu-facturing and energy-intensive sectors, 2022 
A7.2.  Manufacturing industry output: total and selected sectors, index (2021 = 100), 2017-2023 
A7.3. 
A8.1.  Monthly average day-ahead wholesale electricity prices and European benchmark natural gas prices (Dutch TTF) 
A8.2. 
A9.1. 
A9.2. 
A10.1.  Key labour market indicators 
A10.2.  Labour market outcomes of young people 
A11.1. 
Impact of social benefits (excluding pensions) on poverty reduction 
A12.1.  Underachievement rates by field, PISA 2012, 2018 and 2022 (%) 
A12.2.  Employment rate of recent graduates by educational attainment (annual) 
A14.1.  Life expectancy at birth, years 
A14.2.  Treatable mortality 
A15.1.  Progress towards the SDGs in Portugal 
A16.1.  Distribution of RRF funding in Portugal by policy field 
A16.2.  Distribution of cohesion policy funding across policy objectives in Portugal 
A17.1.  Access to healthcare and primary education in rural areas 
A17.2.  Greenhouse gas emissions per capita 

Portugal's installed renewable capacity (left) and electricity generation mix (right) 
Direct dependency (1) on ecosystem services (2) of the gross value added generated by economic sector in 2022 
Investment needs and gaps in EUR million, in 2022 constant prices 

35 
35 
37 
44 
49 
56 
58 
59 
67 
68 
73 
79 
93 
95 
103 
104 
109 

36 
38 
39 
40 
41 
46 
50 
51 
51 
53 
54 
57 
58 
64 
65 
65 
68 
71 
76 
77 
80 
81 
84 
89 
90 
94 
94 
97 
101 
101 
111 
112 

28 

 
 
 
 
 
FISCAL 
ANNEX 1: FISCAL SURVEILLANCE AND DEBT SUSTAINABILITY 

This  Annex  contains  a series  of tables relevant  for the  assessment of the  fiscal  situation in 
Portugal,  including  how  Portugal  is  responding  to  Council  recommendations  issued  under  the 
reformed Economic Governance Framework. 

The  reformed  framework,  which  entered  into  force  on  30  April  2024(26),  aims  to  strengthen 
debt  sustainability  and  promote  sustainable  and  inclusive  growth  through  growth-enhancing 
reforms  and  priority  investments.  The  medium-term  fiscal-structural  plans  (hereinafter,  MTPs  or 
plans) constitute the cornerstone of the framework, setting the budgetary commitment of Member States 
over  the  medium  term.  The  latter  is  defined  in  terms  of  net  expenditure  growth,  which  is  the  single 
operational indicator for fiscal surveillance.  

Portugal submitted its plan on 11 October 2024. The plan covers the period until 2028, presenting a 
fiscal  adjustment  over  four  years.  On  21  January  2025,  the  Council  adopted  the  Recommendation 
endorsing Portugal’s plan.(27) 

The  assessment  of  the  implementation  of  the  Council  Recommendation  endorsing  Portugal’s 
plan  is  carried  out  on  the  basis  of  outturn  data  from  Eurostat  and  the  Commission  Spring 
2025  Forecast  and  taking  into  account  the  Annual  Progress  Report  (APR),  that  Portugal 
submitted  on  30  April  2025.  Furthermore,  given  Portugal’s  request  to  activate  the  National  Escape 
Clause  (28)  following  the  Commission  Communication  of  19  March  2025(29),  the  assessment  also 
considers, as appropriate, the projected increase in defence expenditure based on the Commission Spring 
2025 Forecast.  

The  Annex  is  organised  as  follows.  First,  developments  in  government  deficit  and  debt  are 
presented based on the figures reported in Table A1.1. Then, the assessment of the implementation of 
the Council Recommendation endorsing the plan follows, based on the relevant figures presented in 
Tables A1.2 to A1.9, including data on defence expenditure. 

The Annex also provides information on the cost of ageing and the national fiscal framework. 
Fiscal sustainability risks are discussed in the Debt Sustainability Monitor 2024.(30) 

Developments in government deficit and debt  

Portugal’s  government  surplus  amounted  to  0.7%  of  GDP  in  2024.  Based  on  the  Commission 
Spring 2025 Forecast, it is projected to decrease to 0.1% of GDP in 2025. The government debt-to-GDP 
ratio amounted to 94.9% at the end of 2024 and, according to the Commission, is projected to decrease 

(26)  Regulation (EU) 2024/1263 of the European Parliament and of the Council (EU) on the effective coordination of economic policies 
and on multilateral budgetary surveillance, together with the amended Regulation (EC) No 1467/97 on the implementation of the 
excessive deficit procedure, and the amended Council Directive 2011/85/EU on the budgetary frameworks of Member States are the 
core elements of the reformed EU economic governance framework. 

(27)  OJ C, C/2025/641, 10.02.2025, ELI: http://data.europa.eu/eli/C/2025/641/oj  

(28)  On 30 April 2025, Portugal requested to the Commission and to the Council the activation of the National Escape Clause. On this 
basis, the Commission adopted a Recommendation for a Council Recommendation allowing Portugal to deviate from, and exceed, 
the net expenditure path set by the Council COM(2025) 612. 

(29)  Communication  from  the  Commission  accommodating  increased  defence  expenditure  within  the  Stability  and  Growth  Pact of  19 

March 2025, C(2025) 2000 final. 

(30)  Commission (2025) ‘Debt Sustainability Monitor 2024,’ European Economy-Institutional Papers 306. 

29 

 
 
 
 
 
to 91.7% end-2025. The debt ratio has declined by almost 40 pps. of GDP since its 2020 historical peak 
on the back of favourable interest-growth-rate differentials and primary surpluses. 

Table A1.1:  General government balance and debt 

Source : Commission Spring 2025 Forecast (COM), Annual Progress Report (APR) 

Developments in net expenditure  

The  net  expenditure(31)  growth  of  Portugal  in  2025  is  forecast  by  the  Commission(32)  to  be 
above  the  recommended  maximum,  corresponding  to  a  deviation  of  0.4%  of  GDP.  Considering 
2024  and  2025  together,  the  cumulative  growth  rate  of  net  expenditure  is  also  projected  above  the 
recommended maximum cumulative growth rate, corresponding to a deviation of 0.5% of GDP. According 
to  Portugal’s  APR,  the  net  expenditure  growth,  for  both  2025  and  cumulative  for  2024  and  2025,  is 
forecast  to  be  above  the  recommended  maximum.  The  differences  are  explained  by  the  Commission's 
forecast of lower expenditure funded by transfers from the EU in 2025. Another driver of the differences 
is the higher negative impact of discretionary revenue measures estimated by the Commission forecast in 
2024, particularly measures related to the personal income tax. 

Table A1.2:  Net expenditure growth 

* The cumulative growth rates in the APR are calculated by reference to the base year of 2023.  
Source: Council Recommendation endorsing the national medium-term fiscal-structural plan of Portugal (Rec), Annual Progress 
Report (APR) and Commission's calculation based on Commission Spring 2025 Forecast (COM). 

The  assessment  of  the  net  expenditure  growth  and  in  particular  the  comparison  with  the 
recommended  net  expenditure  path  considers  that  Portugal  has  requested  the  activation  of 
the national escape clause to facilitate transitioning to a higher level of defence expenditure. 
General government defence expenditure in Portugal remained stable at 0.8% of GDP between 2021 and 
2023(33). According to the Commission 2025 Spring Forecast, expenditure on defence is projected at 0.8% 
of  GDP  in  2024  and  2025.  The  projected  cumulated  deviation  after  taking  into  account  the  flexibility 
provided by the national escape clause for defence spending is below the threshold of 0.6% of GDP. 

(31)  Net expenditure is defined in Article 2(2) of Regulation (EU) 2024/1263 as government expenditure net of (i) interest expenditure, 
(ii) discretionary revenue measures, (iii) expenditure on programmes of the Union fully matched by revenue from Union funds,  (iv) 
national  expenditure  on  co-financing  of  programmes  funded  by  the  Union,  (v)  cyclical  elements  of  unemployment  benefit 
expenditure, and (vi) one-off and other temporary measures.  

(32)  Commission Spring 2025 Forecast, European Economy-Institutional paper 318, May 2025. 

(33) Eurostat, government expenditure by classification of functions of government (COFOG).  

30 

2024OutturnAPRCOMAPRCOM1General government balance% GDP0,70,30,1n.a.-0,62General government gross debt% GDP94,991,591,7n.a.89,7Variables20252026RECAPRCOMRECAPRCOM2024n.a.11,6%12,0%n.a.n.a.n.a.20255,0%3,4%6,1%17,4%15,3%18,8%20265,1%n.a.6,3%23,4%n.a.26,3%AnnualCumulative*Growth rates 
 
                                     
 
 
 
 
 
 
 
 
                                     
 
 
Table A1.3:  Net expenditure (outturn and forecast), annual and cumulated deviations vis-à-vis the 
recommendation 

* The growth rate for 2024 is not a recommendation but serves to anchor the base, as the latest year with outturn data when 
setting the net expenditure path is year 2023.  
Source: Commission Spring 2025 Forecast and Commission's calculation 

Table A1.4:  Defence expenditure and the national escape clause 

Source:  Eurostat (COFOG), Commission Spring 2025 Forecast and Commission's calculation 

31 

2023202420252026OutturnOutturnCOMCOM1Total expenditurebn NAC113,4122,0131,8140,82Interest expenditurebn NAC5,55,96,47,03Cyclical unemployment expenditurebn NAC0,10,10,10,14Expenditure funded by transfers from the EUbn NAC3,73,06,27,95National co-financing of EU programmesbn NAC0,60,40,50,56One-off expenditure (levels, excl. EU funded)bn NAC1,30,00,00,07=1-2-3-4-5-6Net nationally financed primary expenditure (before discretionary revenue measures, DRM)bn NAC102,1112,6118,5125,48Change in net nationally financed primary expenditure (before DRM)bn NAC10,45,96,99DRM (excl. one-off revenue, incremental impact)bn NAC-1,8-0,9-0,510=8-9Change in net nationally financed primary expenditure (after DRM) bn NAC12,36,87,411Outturn / forecast net expenditure growth% change12,02%6,1%6,3%12Recommended net expenditure growth*% change11,8%5,0%5,1%13=(11-12) x 7Annual deviationbn NAC0,21,21,414 (cumulated from 13)Cumulated deviationbn NAC0,21,42,815=13/17Annual balance% GDP0,10,40,416=14/17Cumulated balance% GDP0,10,50,917p.m. Nominal GDP  bn NAC267,9285,2299,2312,8Variables2021202220232024202520261Total defence expenditure% GDP0,80,80,80,80,80,82of which: gross fixed capital formation% GDP0,10,10,10,10,10,13Flexibility from increases in defence expenditure% GDP0,00,04Cumulated balance after flexibility% GDP0,50,9 
 
 
                                     
 
 
 
   
 
 
Table A1.5:  Macroeconomic developments and forecasts 

Source: Commission Spring 2025 Forecast (COM), Annual Progress Report (APR) 

Table A1.6:  General government budgetary position 

Source: Commission Spring 2025 Forecast (COM), Annual Progress Report (APR) 

32 

2024OutturnAPRCOMAPRCOM1=7+8+9Real GDP% change1,92,41,8n.a.2,22Private consumption% change3,22,43,2n.a.2,83Government consumption expenditure% change1,11,71,2n.a.1,24Gross fixed capital formation% change3,04,43,5n.a.4,35Exports of goods and services% change3,42,21,7n.a.2,86Imports of goods and services% change4,92,84,3n.a.4,1Contributions to real GDP growth 7- Final domestic demandpps2,72,72,9n.a.2,88- Change in inventoriespps-0,10,00,0n.a.0,09- Net exportspps-0,7-0,3-1,1n.a.-0,510Output gap% pot GDP0,70,60,2n.a.0,411Employment % change1,60,61,0n.a.0,912Unemployment rate%6,56,46,4n.a.6,313Labour productivity% change0,31,80,7n.a.1,314HICP % change2,72,42,1n.a.2,015GDP deflator% change4,42,73,1n.a.2,216Compensation of employees per head% change8,04,94,9n.a.4,017Net lending/borrowing vis-à-vis the rest of the world% GDP2,9n.a.2,4n.a.2,020252026Variables2024OutturnAPRCOMAPRCOM1=2+3+4+5Revenue43,544,444,2n.a.44,4of which:2- Taxes on production and imports14,614,614,7n.a.14,73- Current taxes on income, wealth, etc.10,39,79,9n.a.9,84- Social contributions12,612,712,7n.a.12,75- Other (residual)6,07,46,9n.a.7,38=9+16Expenditure 42,844,144,0n.a.45,0of which:9- Primary expenditure40,741,941,9n.a.42,8of which:10- Compensation of employees 10,610,710,8n.a.10,811- Intermediate consumption5,25,45,2n.a.5,212- Social payments18,217,918,2n.a.18,413- Subsidies0,80,60,6n.a.0,614- Gross fixed capital formation2,73,53,7n.a.4,215- Other3,23,83,4n.a.3,516- Interest expenditure2,12,22,1n.a.2,218=1-8General government balance0,70,30,1n.a.-0,619=1-9Primary balance2,82,42,3n.a.1,720Cyclically adjusted balance0,3n.a.0,0n.a.-0,821One-offs0,0-0,10,0n.a.0,022=20-21Structural balance0,30,10,0n.a.-0,823=22+16Structural primary balance2,42,32,1n.a.1,4Variables (% GDP)20252026 
 
                                     
 
 
 
                                     
 
 
 
Table A1.7:  Debt developments 

* End of period. 
** The 'snow-ball' effect captures the impact of interest expenditure on accumulated general government debt, as well as the 
impact of real GDP growth and inflation on the general government debt-to-GDP ratio (through the denominator). The stock-flow 
adjustment includes differences in cash and accrual accounting (including leads and lags in Recovery and Resilience Facility grant 
disbursements), accumulation of financial assets, and valuation and other residual effects. 
Source: Commission Spring 2025 Forecast and Commission's calculation (COM), Annual Progress Report (APR) 

Table A1.8:  RRF – Grants 

Source: Annual Progress Report 

33 

2024OutturnAPRCOMAPRCOM1Gross debt ratio* (% of GDP)94,991,591,7n.a.89,72=3+4+8Change in the ratio (pps. of GDP)-2,8-3,4-3,2n.a.-2,1Contributions**3Primary balance-2,8-2,4-2,3n.a.-1,74≈5+6+7'Snow-ball' effect-3,9-2,4-2,3n.a.-1,7of which:5- Interest expenditure2,12,22,1n.a.2,26- Real growth effect-1,8-2,2-1,6n.a.-2,07- Inflation effect-4,1-2,4-2,9n.a.-2,08'Stock-flow' adjustment3,81,41,4n.a.1,320252026VariablesRevenue from RRF grants (% of GDP)20202021202220232024202520261RRF grants as included in the revenue projectionsn.a.0,00,20,60,72,31,72Cash disbursements of RRF grants from EUn.a.0,80,21,40,81,31,220202021202220232024202520263Total current expenditure0,00,00,10,10,20,80,64Gross fixed capital formation0,00,00,10,10,20,90,75Capital transfers0,00,00,00,30,30,50,46=4+5Total capital expenditure0,00,00,10,50,51,41,120202021202220232024202520267Reduction in tax revenue0,00,00,00,00,00,00,08Other costs with impact on revenue0,00,00,00,00,00,00,09Financial transactions0,00,00,00,00,00,00,0Expenditure financed by RRF grants (% of GDP)Other costs financed by RRF grants (% of GDP) 
 
                                     
 
 
 
 
 
 
 
 
 
 
 
 
                                     
 
 
Table A1.9:  RRF - Loans 

Source: Annual Progress Report 

Cost of ageing 

Total  age-related  spending  in  Portugal  is  projected  to  rise  from  a  little  over  23%  of  GDP  in 
2024  to  about  26.5%  in  2040,  followed  by  a  decline  to  just  below  23%  in  2070  (see  Table 
A1.10). The small overall decline by 2070 is due to pension expenditure, with spending on long-term care 
and, especially, healthcare expected to rise.  

Public  pension  spending  is  projected  to  increase  in  the  medium  term  but  to  start  declining 
steadily thereafter. Starting with a projected 12.7% of GDP in 2024, between 2024 and 2040, pension 
expenditure is expected to rise by 2 pps of GDP, peaking in 2046 at 2.5 pps above the current level. In the 
longer term, spending would fall again, though, with a projected decrease of 2.3 pps by 2070 compared to 
the 2024 level. 

Public healthcare (34) expenditure is projected at 5.9% of GDP in 2024 (below the EU average 
of 6.6%) and is expected to increase by 0.8 pps by 2040 and by a further 0.5 pps by 2070. This 
increase  in  healthcare  expenditure  contributes  significantly  to  fiscal  risks.  The  Portuguese  RRP  includes 
reforms and investments that aim to improve the cost-effectiveness of the health system. For example, 
the new performance-based management contract template for managers in state-owned enterprises in 
the  National  Health  System  (NHS)  aims  to  tackle  persistent  budgetary  overspends.  Also,  a  new  referral 
mechanism has been set up to direct inappropriate or avoidable cases from emergency services in NHS 
hospitals to primary healthcare services.  

Public  expenditure on  long-term  care (35)  is  projected at 0.5% of  GDP  in  2024  (below  the  EU 
average  of  1.7%)  and  is  expected  to  increase  by  0.3 pps  of  GDP  by  2040  and  by  a  further 
0.1 pp of GDP by 2070.  

(34)  Key performance characteristics, recent reforms and investments are discussed in Annex 11 ‘Health and health systems’.   

(35)  The quality and the accessibility of the long-term care system are covered in Annex 9 ‘Social policies’. 

34 

Cash flow from RRF loans projected in the Plan (% of GDP)20202021202220232024202520261Disbursements of RRF loans from EUn.a.0,20,20,30,40,40,62Repayments of RRF loans to EUn.a.0,00,00,00,00,00,020202021202220232024202520263Total current expenditure0,00,00,00,00,00,00,04Gross fixed capital formation0,00,00,00,00,00,10,45Capital transfers0,00,00,00,00,10,20,56=4+5Total capital expenditure0,00,00,00,00,10,30,920202021202220232024202520267Reduction in tax revenue0,00,00,00,00,00,00,08Other costs with impact on revenue0,00,00,00,00,00,00,09Financial transactions0,00,00,10,00,10,20,1Expenditure financed by RRF loans (% of GDP)Other costs financed by RRF loans (% of GDP) 
 
                                     
 
 
Table A1.10:Projected change in age-related expenditure in 2024-2040 and 2024-2070 

Source: 2024 Ageing Report (EC/EPC). 

National fiscal framework 

The  Portuguese  Public Finance Council  (CFP)  is  a  relatively well-resourced independent fiscal 
institution  with  a  fairly  wide  mandate.  The  CFP  has  access  to  information  governed  by  MoUs  and 
pursues a communication strategy. While the funding level currently is sufficient, hiring decisions need to 
be pre-authorized by the Ministry of Finance whenever it leads to an increase in the total number of staff 
of the CFP, which is a provision restraining CFP autonomy.  

The planning of public investment has recently improved, but good practices are still limited to 
a few sectors.  The national  investment programme provides guidance for public investment allocation 
over a 10-year period covering all financing sources (EU, national and others). Ongoing efforts to integrate 
this  10-year  investment  plan,  which  includes  the  EU  Partnership  Agreement  with  Portugal  (‘Portugal 
2030’),  into  the  medium-term  budgetary  framework  are  critical  for  its  effectiveness.  A  common 
methodology  for  project  assessment  is  currently  only  used  for  a  limited  number  of  sectors  (e.g.  public 
order and safety, agriculture). These sectors also benefit from central support for training on development 
and implementation of assessment methodologies, which could be shared with other sectors. Only a few 
sectors  (e.g.  tertiary  education)  benefit  from  an  independent  review  of  the  quality  and  objectivity  of 
assessments. 

Table A1.11:Fiscal Governance Database Indicators 

The Country Fiscal Rule Strength Index (C-FRSI) shows the strength of national fiscal rules aggregated at the country level based 
on i) the legal base, ii) how binding the rule is, iii) monitoring bodies, iv) correction mechanisms, and v) resilience to shocks. The 
Medium-Term Budgetary Framework Index (MTBFI) shows the strength of the national MTBF based on i) coverage of the 
targets/ceilings included in the national medium-term fiscal plans; ii) connectedness between these targets/ceilings and the 
annual budgets; iii) involvement of the national parliament in the preparation of the plans; iv) involvement of independent fiscal 
institutions in their preparation; and v) their level of detail. A higher score is associated with higher rule and MTBF strength. 
Source: Fiscal Governance Database 

35 

PT23.32.00.80.30.03.126.4PTEU24.30.50.30.4-0.30.925.2EUPT23.3-2.31.30.40.1-0.422.8PTEU24.30.20.60.8-0.41.325.6EUage-related expenditure 2024 (% GDP)change in 2024-2040 (pps GDP) due to:age-related expenditure 2040 (%GDP)pensionshealthcarelong-term careeducationtotalage-related expenditure 2024 (% GDP)change in 2024-2070 (pps GDP) due to:age-related expenditure 2070 (%GDP)pensionshealthcarelong-term careeducationtotal2023PortugalEU AverageCountry Fiscal Rule Strength Index (C-FRSI)17,4014,52Medium-Term Budgetary Framework Index (MTBFI)0,720,73 
 
  
 
 
     
 
ANNEX 2: TAXATION 

This  annex  provides  an 
indicator-based 
overview of Portugal’s tax system.  It includes 
information on: (i) the tax mix; (ii) competitiveness 
and  fairness  aspects  of  the  tax  system;  and  (iii) 
tax collection and compliance. 

revenues from recurrent immovable property taxes 
remain  comparatively  low  (equivalent  to  0.6%  of 
GDP in 2023, against 0.9% in the EU-27). 

Graph A2.1: Tax revenue shares in 2023 

The  weight  of  consumption  taxes  in  the 
Portuguese  tax  mix  has  decreased  since  the 
COVID-19 pandemic. In 2023, Portugal obtained 
34.1% of its tax revenues from consumption taxes 
(Graph  A2.1),  2.4  pps  less  than  in  2019.  This 
decrease 
is  largely  explained  by  government 
support  measures  in  the  context  of  the  energy 
crisis,  which  have  been  gradually  phased-out  in 
the  last  two  years.  The  relatively  high  VAT 
actionable  policy  gap  (22.2%  in  2022,  3.2  pps 
above  the  EU  average)  reflects  the  extended  use 
of  reduced  rates  and  exemptions  in  the  VAT 
system  (36).  Capital  taxes  amounted  to  21.0%  of 
total  tax  revenues,  broadly  stable  compared  with 
recent  years.  Conversely,  the  share  of  labour-tax 
revenues  has  increased  significantly  (rising  from 
42.8% of the total in 2019 to 44.8% in 2023), on 
the back of strong job creation. Despite this rapid 
increase  in  labour-tax  revenues,  when  compared 
with  the  EU-27  average,  labour-tax  revenues  in 
Portugal are still low when expressed as a share of 
GDP  (16.0%  of  GDP,  4.0  pps  below  the  EU 
average).  Portugal  has  a  comparatively 
low 
implicit tax rate on labour (30.5% in 2023, 6.5 pps 
below 
the 
including 
prominence  of 
preferential  regimes,  in  personal  income  taxation 
(see further below).  

the  EU  average)(37), 
tax 

expenditures, 

reflecting 

Revenues  from  environmental  and  property 
taxes  are  falling.  Portugal’s  revenues  from 
environmental  taxes  have  decreased  from  the 
equivalent  of  2.6%  of  GDP  in  2019  to  2.0%  in 
2023. Despite this decrease, the share remains in 
line  with  the  EU  aggregate.  Revenues  from 
pollution and resources taxes are increasing (from 
0.7%  of  total  revenues  from  environmental  taxes 
remain 
in  2019 
comparatively low as a share of GDP. Property tax 
revenues  decreased  slightly  between  2019  and 
2023, falling from the equivalent of 2.2% of GDP 
to 2.1%, and are in line with the EU-27. However, 

in  2023)  but 

to  1.9% 

Source: Taxation Trends Data, DG TAXUD 

(for 

from  12.5% 

The  complexity  of  the  corporate  income  tax 
(CIT)  structure  may  be  hampering  Portugal’s 
competitiveness.  The  CIT  rate  of  a  company  in 
Portugal  can  vary 
legal 
recognised  startups  that  invest  in  R&D  activities) 
to  30.5%  of  its  taxable  income  depending  on  its 
size  and  location.  The  latter  rate  is  the  second 
highest  top  rate  of  CIT  in  the  EU-27,  despite  its 
recent reduction by one percentage point. This high 
variability  is  the  result  of  the  confluence  of  state 
and  municipal  surcharges,  and 
it  could  be 
influencing  businesses’  decisions  on  location  and 
growth  while  hindering  economies  of  scale. 
Portugal  has  a  comparatively  high  effective 
average  CIT  rate  (23.9%  in  2023,  5.0  pps  above 
the  EU-27  average).  Portugal  ranks  22  out  of  the 
27 Member States in the tax complexity index (38), 
which  suggests  that  there  may  be  areas  for 
improvement  both  in  the  structure  of  the  tax 
regulations, and in the way that tax processes are 
carried out by the tax authorities. 

(36)  VAT Gap in the EU, 2024 Report. In 2022, the VAT policy gap 
remained  stable,  but  its  structure  followed  the  pattern 
observed  in  many  other  countries,  with  an  increasing  VAT 
rate gap and a decreasing VAT exemption gap. 

(37)  Implicit tax rate [tax_itr], Taxation Trends Data 2025. 

(38)  Global  MNC  Tax  Complexity  Project.  The  ‘tax  complexity 
index’  measures  the  complexity  of  a  country’s  corporate 
income tax system as faced by multinational corporations. 

36 

51,226,921,944,834,121,0Tax revenue shares in 2023, Portugal (outer ring) and EU (inner ring)Taxes on labourTaxes on consumptionTaxes on capital 
 
 
       
 
 
Table A2.1:  Taxation indicators 

(1) Forward-looking effective tax rate (KPMG).       
(2) A higher value indicates a stronger redistributive impact of taxation. 
(*) EU-27 simple average. 
(**) Forecast value for 2023. For more details on the VAT gap, see European Commission, Directorate-General for Taxation and 
Customs Union, VAT gap in the EU - 2024 report,  https://data.europa.eu/doi/10.2778/2476549  
For more data on tax revenues as well as the methodology applied, see the Data on Taxation webpage, 
https://ec.europa.eu/taxation_customs/taxation-1/economic-analysis-taxation/data-taxation_en. 
Source: European Commission, OECD 

Portugal ranks high in public support for R&D 
on the back of very generous tax incentives. 
In  2021  (last  available  data),  public  support  for 
R&D  was  the  equivalent  of  0.3%  of  GDP,  well 
above  the  EU-27  average  of  0.2%  of  GDP.  This 
support  was  mainly  indirect,  with  tax  incentives 
contributing  the  equivalent  of  0.3%  of  GDP  and 
direct  public 
financing  of  business  R&D 
expenditure equivalent to 0.1% of GDP. Portugal’s 
tax  credit  regime  for  R&D-related  investments 
(‘SIFIDE  II’)  provides  generous  credits  that  lead to 
an  implied  tax-subsidy  rate  on  R&D  expenditures 
of  35%,  the  highest  in  the  EU-27  and  more  than 
In 
twice  the  EU-27  average  (source:  OECD). 
addition,  the  country’s  revamped  ‘patent  box’ 
regime  provides  up to  an  85%  tax  exemption  (up 
from  a  50%  exemption  in  place  until  2022)  to 
income  derived  from  the  use  of  various  forms  of 
intellectual  property.  Despite  both  preferential 
schemes,  total  R&D  expenditure 
in  Portugal 
remains below the EU average. 

Portugal’s  labour-tax  rates  are  somewhat 
more progressive than the EU average. Graph 
A2.2  shows  that  the  labour-tax  wedge(39)  for 

(39)  The  tax  wedge  is  defined  as  the  sum  of  personal  income 
social-security 

taxes  and  employee  and  employer 

(i.e. 

Portugal  in  2024  was  slightly  lower  than  the  EU 
average  at  67%  and  100%  of  the  average  wage. 
Also, it was more pronouncedly lower than the EU 
average  at  50%  of  average  wage,  while  being 
higher  than  the  EU  average  for  high-income 
earners at 167% of the average wage. This means 
that  the  statutory  rates  were  somewhat  more 
progressive 
increasing  more  at  higher 
incomes)  than  for  the  EU  average.  Accordingly, 
Portugal’s  tax  and  benefit  system  helped  reduce 
inequality  (as  measured  by  the  difference  in  Gini 
coefficients  before  and  after  taxes  and  benefits, 
see  Table  A2.1)  by  slightly  more  than  the  EU 
average  in  2023  (a  reduction  of  8.0  points  in 
Portugal compared to a reduction of 7.7 points for 
the  EU  average).  Despite  this,  Portugal  remains 
one of the EU countries with the highest inequality 
after redistribution, as measured by the Gini index 
(see  Annex  9  for  further  details).  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  practically  equal 
to  the  EU  average.  The  tax  wedge  for  second 
earners in Portugal was clearly higher than the one 

contributions  net  of  family  allowances,  expressed  as  a 
percentage of total labour costs (the sum of the gross wage 
and social-security contributions paid by the employer). 

37 

PTMedian (EU-27)2010202120222023202420102021202220232024Tax structureTotal taxes (including compulsory actual social contributions) (% of GDP)30,435,135,935,737,840,239,739,0Taxes on labour (% of GDP)12,516,015,816,019,820,520,120,0of which, social security contributions (SSC, % of GDP)8,610,410,210,412,913,012,712,7Taxes on consumption (% of GDP)11,312,412,512,210,911,210,910,5of which, value added taxes (VAT, % of GDP)7,68,99,49,06,87,37,47,1Taxes on capital (% of GDP)6,56,77,67,57,18,58,78,5Personal income taxes (PIT, % of GDP)5,46,96,96,98,69,69,49,3Corporate income taxes (CIT, % of GDP)2,72,43,33,42,22,93,23,2Total property taxes (% of GDP)1,72,32,32,11,92,22,11,9Recurrent taxes on immovable property (% of GDP)0,60,70,70,61,11,11,00,9Environmental taxes (% of GDP)2,42,31,92,02,52,42,12,0Effective carbon rate in EUR per tonne of CO2 equivalentsNA85,7NA80,3NA86,0NA84,8Tax wedge at 50% of average wage (single person) (*)28,128,128,129,829,733,931,831,531,531,8Tax wedge at 100% of average wage (single person) (*)36,440,740,941,139,440,939,939,940,240,3Corporate income tax - effective average tax rates (1) (*)28,423,923,923,921,319,319,118,9Difference in Gini coefficient before and after taxes and cash social transfers (pensions excluded from social transfers) (2) (*)8,48,48,38,08,68,27,97,7Outstanding tax arrears: total year-end tax debt (including debt considered not collectable) / total revenue (in %) (*)45,641,835,532,6VAT gap (% of VAT total tax liability, VTTL) (**)4,11,32,46,67,0PortugalEU-27Progressivity & fairnessTax administration & complianceBy tax baseSome tax types 
 
 
 
 
   
 
for  single  people  at  the  same  wage  level,  but 
again  this  difference  corresponded  to  the  EU 
average difference.  

Graph A2.2: Tax wedge for single and second 
earners as a % of total labour costs, 2024 

(1) The second earner tax wedge assumes a 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 

the  proliferation  of 

Portugal’s ability to increase tax revenues is 
tax 
hindered  by 
expenditures  that  are  not  always  socially 
and  economically  effective.  Tax  revenues  in 
Portugal  expressed  as  a  percentage  of  GDP  have 
stabilised at nearly 36%, which is still more than 3 
pps below the EU average (Table A2.1). Despite the 
substantial  reduction  of  this  gap  during  the  last 
decade, the revenue raising-capacity  of Portugal’s 
tax  system  faces  significant  challenges  due  to 
rapid population ageing and the widespread use of 
tax  expenditures.  The  projected  shrinking  of  the 
labour  force  (by  10%  between  2024  and  2038, 
according  to  the  Commission’s  Ageing  Report 
2024) 
labour  and 
consumption  tax  bases  in  the  coming  years. 
Moreover,  pension  spending  is  set  to  increase  by 
1.9  pps  of  GDP  in  the  same  period.  Foregone 
revenues from tax expenditures were estimated at 
6.4%  of  GDP  in  2023  (40).  The  planned  reform  in 
the recovery and resilience plan to streamline tax 
expenditures  could  help  to  rationalise  the  tax 
system,  make  it  more  resilient,  and  increase  tax 
receipts. A dedicated tax policy unit (U-TAX) in the 
Portuguese  civil  service  has  been  working  on  this 
reform since February 2024. 

is  expected 

to  erode 

(40)  Global Tax Expenditure Database (GTED). 

38 

Portugal has two preferential tax regimes in 
the  area  of  personal  income  tax  (PIT)  that 
have  been  recently  amended.  More  restrictive 
rules apply to the ‘inpatriate’ regime (a scheme to 
encourage  people  to  move  to  Portugal)  since  the 
2024  state  budget,  with  the  aim  of  attracting 
entrepreneurs  and  high  qualified  workers 
correcting some of the distortions prompted by the 
previous  inpatriate  regime  (including  the  former 
regime’s  side  effects  on  the  housing  market). 
Meanwhile, the 2025 State budget has broadened 
the eligibility of the preferential regime for young 
workers ‘IRS Jovem’. In particular, it has extended 
its duration and age limit, and it has increased the 
income exemption limit that it confers. EUROMOD 
simulations  conducted  by  the  JRC  show  that  this 
reform boosts disposable income by an average of 
0.6%,  with  the  highest  gains  concentrated  in 
higher-income deciles.  

in 

tax 

expenditures 

PIT 
Some 
disproportionately  benefit  higher-income 
households  and  increase  income  inequality. 
According  to  EUROMOD  simulations  conducted  by 
the  JRC,  the  five  top  deciles  in  the  income 
distribution  are  estimated 
to  experience  an 
increase in their mean disposable income by more 
than  5%  thanks  to  PIT  tax  expenditures  (Graph 
A2.3)  in  force.  By  contrast,  gains  for  the  two 
lowest  deciles  from  these  tax  expenditures  are 
below 1%, although low-income taxpayers benefit 
from  other measures that  are  not  counted  as  tax 
expenditures 
rather 
considered to be part of the basic tax structure. (41) 
Work-related tax  expenditures (tax allowances for 
employees  and  the  self-employed)  are  the  most 
regressive,  followed  by  pensioner  tax  allowances 
and  the  general-household-expenses  tax  credit 
(the ‘Other’ category in Graph A2.3). This suggests 
the need to carry out a comprehensive evaluation 
of tax expenditures as part of the ongoing reform 
under the recovery and resilience plan. 

this  study  but  are 

in 

(41)  For  a  discussion  of  issues  related  to  the  definition  of  tax 
expenditures,  and  some  estimations  of  tax  expenditures  for 
all  EU  Member  States  see  Turrini,  A.  et  al.  (2024):  “Tax 
Expenditures  in  the  EU:  Recent  Trends  and  New  Policy 
Challenges”,  European  Commission,  European  Economy 
Discussion Paper 212. Results for Portugal presented in this 
Annex  differ  from  those  in  the  note,  among  other  reasons, 
due  to  a  partial  (not  full)  inclusion  of  the  social  security 
contribution  deduction  as  a  work-related  tax  expenditure, 
thus allowing cross-country comparability of results. 

29,736,139,445,239,32025303540455050100150Tax wedge, % of total labour costsEarnings as % of the average wageSingle earner - PTSingle earner - EU averageSecond earner -  PTSecond earner -  EU average 
   
 
 
ratio 

Despite  recent  improvements,  the  cost-of-
tax-collection ratio in Portugal remains high. 
Despite  having  decreased  significantly  in  recent 
years  (from  1.1%  in  2020  to  0.9%  in  2022), 
Portugal’s  cost-of-tax-collection 
remains 
slightly above the unweighted  EU average (0.8%). 
Salary  costs  as  a  share  of  total  tax-collection 
costs  remained  comparatively  high  while  ICT 
operating  costs  as  a  share  of  total  tax-collection 
costs  remained  low.  Some  improvements  in  this 
area could be made to bring Portugal into line with 
best  practices  across  the  EU,  for  example,  by 
tax 
digitalisation 
increasing 
administration  and  working  with  other  Member 
States to collect unpaid fines. 

the 

the 

of 

The relatively old age of workers is an acute 
challenge  for  the  tax  administration.  In  early 
2024, the average age of workers in Portugal’s tax 
administration was one of the highest in the world. 
53.0% of the administration’s staff are older than 
54  and  only  8.2%  is  under  45,  with  an  average 
age  of  54.9.  Only  0.8%  of  the  staff  have  fewer 
than 5 years of service, and staff turnover is only 
2.1% per year. The lack of replacement of workers 
and the expected retirement of half of all workers 
over  the  coming  decade  are  a  challenge  to  the 
effectiveness of the tax administration.  

a 

is 

out 

rolling 

Portugal 
digital 
transformation strategy. Portugal is following a 
strategy  for  the  digital  transformation  of  its  tax 
administration.  The  ongoing  implementation  of 
different  measures  as  part  of  the  recovery  and 
resilience  plan 
the 
is  expected 
performance  of  Portugal’s  tax  administration. 
Taxpayers  in  Portugal  spend  less  time  and  effort 
complying  with  their  tax  obligations  than  they 
used to thanks to e-filing of tax returns. All CIT, PIT 
and  VAT  returns  are  e-filed.  If  needed,  taxpayers 
can  go  to  public  offices  that  provide  help  and  in 
the case of PIT it is possible to use the tax returns 
pre-filled automatically by the tax authorities.  

improve 

to 

Graph A2.3: Percentage change in mean disposable 
income from PIT tax expenditures, by income 
decile (2023) 

Source: Estimations performed by the European Commission, 
Joint Research Centre, with the EUROMOD tax-benefit 
microsimulation model. 
Note: Tax expenditures are categorised into six groups. The 
‘other’ group includes tax expenditures not related to any of 
the other categories. The percentage change is calculated with 
a baseline without tax expenditures. The impact of the 
inpatriate regime, which is not included in the simulations due 
to technical constrains of EUROMOD, would likely have a 
significant impact on high income deciles, given the 
quantitative importance of this tax expenditure (above EUR 
1.5 billion in 2023, equivalent of 8% of PIT revenue). 

The  VAT  compliance  gap 
in  Portugal 
substantially  improved  in  2022  resulting  in 
one of the lowest gaps in the EU. Portugal had 
an estimated VAT compliance gap of 1.3% of VAT 
total tax liability in 2022, approximately 3 pps less 
than  in  2021.  It  was  well-below  the  EU-27 
average of 7.0% in 2022, which itself had slightly 
increased from an average of 6.6% in 2021.  

The percentage of outstanding tax arrears in 
Portugal  remains  high.  At  41.8%,  outstanding 
tax arrears remained among the highest in the EU-
27  at  the  end  of  2022,  despite  a  slight  reduction 
from  45.6%  in  2021.  This  rate  is  above  the  EU 
average  of  32.6%  and  remains  above  the  pre-
COVID-19  values.  In  addition,  the  percentage  of 
tax  arrears  that  is  still  considered  collectable  at 
the end of the year is quite low (29.5.% in 2022). 
This  is  explained  by  several  legal  and  procedural 
constraints, including the fact that 45% of the tax-
enforcement  processes  are  related  to  debts 
managed by external entities. 

39 

0,0%1,0%2,0%3,0%4,0%5,0%6,0%7,0%8,0%D1D2D3D4D5D6D7D8D9D10WorkFamilyEducationHealthHousingOther 
      
 
PRODUCTIVITY 
ANNEX 3: INNOVATION TO BUSINESS  

struggles 

to  maximise 

Portugal 
its 
innovation  potential  despite  growing  private 
sector  investment  and  public  support  for 
R&D  activities.  According  to  the  European 
Innovation  Scoreboard (42),  Portugal  remains  a 
moderate  innovator.  Its  research  and  innovation 
performance stood at 83.5% of the EU average in 
2024,  which  is  below  the  moderate  innovators’ 
average  (84.8%).  Portugal’s  total  R&D  intensity 
has  been  steadily  increasing,  reaching  1.69%  in 
2023, against the EU average of 2.24%. However, 
the country is still far from reaching its own target 
of 2.4% by 2025, set in its 2021-2030 public R&D 
investment  programme  (43).  The  growth  in  total 
R&D  spending  is  driven  by  increasing  private 
sector  investment,  while  public  expenditure  has 
been  stagnant,  thus  limiting  improvements  in  the 
public  science  base.  In  addition,  despite  growing 
public  support  for  business  innovation,  innovation 
output  remains  weak.  Innovation  performance  is 
hindered by modest science-business linkages, and 
access to finance for innovative firms remains an 
issue.  Moreover,  due  to  the  limited  uptake  of 
technologies  by  enterprises 
advanced  digital 
these 
overall, 
the 
technologies 
remain 
unexploited. 

of 
to  business  processes 

potential 

benefits 

Science for innovative ecosystem 

Portugal  has  a  strong  public  research  base, 
but  limited  public  investment  holds  back 
excellence.  Public  expenditure  on  R&D  has  been 
on  a  declining  trend  over  the  last  decade  and 
settled  at  0.59%  in  2023,  below  the  EU  average. 
This trend can be observed especially in the share 
of R&D investment in the Higher Education Sector 
as  %  of  GDP,  which,  despite  rates  above  the  EU 
the  past  15 years,  has  been 
average 
decreasing since 2020. This affects the excellence 
of  the  Portuguese  public  research  system,  as 
evidenced by the decreasing share of the country’s 
scientific  publications  within  the  top  10%  most-

for 

(8.1%  of 

last  decade,  Portugal's 

cited  publications  worldwide 
total 
publications  in  2021,  against  the  EU  average  of 
9.6%).  In  addition,  despite  progressive  increase  in 
international  co-
the 
publications  as  a  percentage  of  the  total  number 
of  publications  are  at  53.2%  in  2023,  below  the 
EU  average  of  55.9%.  This  suggests  that  there  is 
still  room  to  expand  and  strengthen  international 
activities in the public research system.  

Graph A3.1: Public expenditure on R&D as a 
percentage of GDP 

Source: Eurostat 

The  Portuguese  R&I  system  is  characterised 
by significant differences in R&D investment 
among the seven Portuguese regions (see also 
Annex 17). Three regions are emerging innovators 
(Algarve  and  the  Autonomous  regions  of  Azores 
and  Madeira),  three  are  moderate  innovators 
(North,  Centre  and  Alentejo),  while  Lisbon  is  the 
only  ‘moderate  innovator  +’,  with  a  performance 
very  close  to  that  of  the  EU average (44).  Also, 
beneficiaries of the ‘mobilising and green agendas 
for  business 
innovation’  measures  under  the 
recovery  and  resilience  plan,  aimed  at  developing 
new  products,  processes  or  services  in  relevant 
strategic areas, are mainly located in coastal areas 
in  central  and  northern  Portugal,  i.e.  areas  where 
overall R&D expenditure is already higher (45). This 
likely  to  remain 
suggests  that 
concentrated in those areas, possibly accentuating 
the  difference  in  innovation  performance  among 
the regions. 

innovation 

is 

(42)  2024 edition of the European Innovation Scoreboard (EIS), 
Country profile: Portugal. 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). 

(43)  Adopted by Council of Ministers Resolution 186/2021. 

(44)  2023 Regional Innovation Scoreboard, Country Profile: 

Portugal . 

(45)  Marques Santos, A. and Conte, A., Applicants and 

beneficiaries of innovation-related actions under the 
Portuguese RRP, European Commission, 2023, JRC132061 

40 

0.550.600.650.700.750.80201220172020202120222023PortugalEU 
 
 
 
       
 
 
Business innovation 

Graph A3.2: Patent applications filed under the PCT 
per billion GPD (in PPS €) in 2022 

to 

filed  under 

the  EU  average 

The  Portuguese  economy  is  characterised  by 
a  predominance  of  micro  and  small 
companies  with  limited  innovation  capacity, 
but  a  promising  start-up  ecosystem 
is 
developing.  Overall  business  R&D  spending  is 
increasing, growing from 0.63% of GDP in 2013 to 
1.06%  of  GDP  in  2023,  but  innovation  output 
remains  limited.  Patenting  activity,  measured  as 
the  Patent 
patent  applications 
Cooperation Treaty per billion GDP, remains rather 
modest  compared 
(0.9 
compared  to  2.8  in  2022).  Patents  in  the  green 
sector, where numbers align with the EU average, 
are  an  exception.  Internationalisation  levels  of 
Portuguese  companies  are  also  relatively  weak, 
with  a  substantially  lower  proportion  of  medium-
to-high  and  high-tech  exports  than  the  EU 
average (46).  The  size  of  the  overall  ICT  sector  is 
below  the  EU  average  (4.5%  vs  5.5%  in  gross 
value  added  in  2021),  and  its  R&D  business 
expenditure  amounts  to  23.5%  of  total  R&D 
expenditure (47). As 
start-up 
ecosystem, on the other hand, Portugal’s business 
birth  rate  is  higher  than  the  EU  average (48),  and 
seven  unicorn  companies (49)  (start-ups  valued  at 
over  USD 1 billion)  have  been  founded  in  the 
country  to  date,  although  only  one  is  currently 
headquartered in Portugal (50). 

regards 

the 

Source: Patstat 

from 

income 

Portugal's  public  policy  addresses  R&I 
challenges  by  providing  strong  support  for 
business  innovation,  primarily  through  tax 
incentives,  but  direct  public  support  for 
business  R&D 
is  limited.  The  government 
provides  increasing  public  support  for  business 
R&D, mainly in the form of R&D tax incentives. The 
proportion  of  GDP  spent  on  public  support  for 
business  expenditure  on  R&D  more  than  doubled 
over  the  last  decade,  from  0.159%  in  2013  to 
0.487% in 2022. A specific patent box tax regime 
is  in  place,  which  aims  to reduce  taxation  on 
intellectual  property,  such  as 
income 
copyright 
from  computer  programs, 
patents,  industrial  models  and  drawings.  Despite 
the strong R&D tax incentives, direct public support 
for  business  R&D  remains  low (51);  it  could  be 
further  explored  as  R&D  grants  tend  to  favour 
young  and  innovative  firms  with  limited  financial 
capacity.  As 
the  creation  of  new 
companies,  different  initiatives  are  in  place  to 
foster the growth of start-ups and help them scale 
up.  These  include  the  reinforcement  of  Startup 
Portugal’s  (52)  structure  through  its  recovery  and 
resilience plan (RRP) funds, which has allowed the 
creation  and  strengthening  of  new  programmes 
and  initiatives,  specifically  designed  to  better 
support 
and 
investors. 

incentivise entrepreneurs 

regards 

and 

(46)  Competitive industrial performance Index, World Bank Group 

(47)  Eurostat, ICT sector size and R&D in ICT sector, all data from 

2021. 

(48)  2024 European Innovation Scoreboard, Country profile: 

Portugal https://ec.europa.eu/assets/rtd/eis/2024/ec_rtd_eis-
country-profile-pt.pdf. 

(49)  Unicorns | Dealroom.co 

(50)  Digital Decade Country Report - Portugal 

A  broader  diffusion  of  digital  technologies 
could  make  business  processes  more 
effective  and  boost  overall  competitiveness. 

(51)  OECD (2023), OECD Economic Surveys: Portugal 2023, OECD 
Publishing, Paris, https://doi.org/10.1787/2b8ee40a-en. 

(52)  Startup Portugal is a non-profit organisation dedicated to 
promoting entrepreneurship and innovation in the country. 

41 

012345678SEFIDKDENLATFREU averageBESIITLUIEESHUMTLVPTCZCYEEELHRSKPLLTBGRO 
 
      
 
Portugal is slightly above the EU average in terms 
intensity  of  SMEs.  However, 
of  basic  digital 
according  to  the  OECD  2023  Economy  Survey (53), 
Portuguese firms, notably smaller ones, lag behind 
in  the  use  of  information  and  communication 
technologies, especially those that are well-suited 
to small firms, such as cloud computing. Although 
Portugal’s  communication  infrastructure  is  well 
developed  with  fast  and  ultrafast  broadband 
connectivity  in  most  areas  (see  also  Annex  4), 
insufficient  training  of  both  managers  and  staff, 
together  with  poor  knowledge  of  support 
mechanisms,  act  as  a  barrier  to  the  adoption  of 
digital  technologies  by  small  businesses.  As 
regards 
take-up  of  advanced  digital 
technologies,  38.6%  of  enterprises  use  data 
analytics, which is above the EU average of 33.2%. 
Nevertheless,  the  country  lags  behind  in  other 
areas, with only a minority of enterprises (roughly 
a  third)  using  cloud  computing  and  a  mere  8.6% 
harnessing  artificial  intelligence,  falling  short  of 
the EU average in both cases. 

the 

of 

scientific 

Despite several ongoing initiatives and slight 
academia-business 
improvements, 
cooperation  remains  relatively  weak.  The 
proportion 
co-
public-private 
publications remains below the EU average (6.4% 
compared  to  7.7%  in  2023),  despite  a  steady 
increase  over  the  past  years.  In  addition,  the 
proportion  of  public  expenditure  on  R&D  financed 
by  businesses  has  been  on  a  declining trend  over 
the  last  years  (representing  0.013%  of  GDP  in 
2023,  compared  to  an  EU  average  of  0.050%), 
indicating  a  low  propensity  of  businesses  to 
engage in research activities with public labs. The 
number  of  researchers  employed  by  the  private 
sector  also  remains  modest (54),  although  it  more 
than doubled in the past decade, a promising sign 
that the initiatives in place are giving some results. 
Portugal  is  dedicating  significant  resources  to 
fostering  knowledge  valorisation 
its 
recovery  and  resilience  plan  (RRP)  (for  example 
through  measures  such  as  the  accreditation  of 
new  ‘collaborative  laboratories’  (COLABs) (55)  and 
‘mobilising  and  green  agendas  for  business 

through 

innovation (56)). Also, in 2023 a PhD studentship in 
a  non-academic  environment  was  launched  to 
encourage mobility of researchers from the public 
to the private sector. 

Financing innovation 

Venture capital financing in Portugal remains 
very  low.  In  2024  Portuguese  start-ups  raised 
EUR 886  million,  55%  more  than  in  2023 (57). 
Despite  this  jump,  the  amount  was  significantly 
lower  than  in  record years  2021  and  2022,  when 
start-ups  managed  to  raise  EUR 1.6  billion  and 
EUR 1.1  billion,  respectively.  The  availability  of 
funds  for  scaling  up  activities  is  limited  overall. 
Venture  capital  as  a  percentage  of  GDP  is  one  of 
the  lowest  in  Europe  –  reaching  0.018%  in  2023, 
against the EU average of 0.078% – which is even 
lower  than  in  previous  years.  This  highlights  a 
persistent financing gap for early-stage innovative 
firms in Portugal. In addition, there is a significant 
gap  in  the  availability  of  funds  between  early-
stage and later-stage start-ups. This gap which is 
significantly  larger  in  Portugal  than  in  other 
European  countries  and  reflects  a  lack  of  later-
stage  financing  options  for  start-ups  looking  to 
scale up (58). 

Innovative talent 

Portugal’s  productivity  capacity  is  affected 
by  a  considerable brain  drain, due in part to 
unattractive  salary  conditions.  To  address 
this,  the  government  is  taking  steps  to 
research  careers  and  attract 
stabilise 
foreign entrepreneurs. Retaining talent is a key 
challenge  and  a  priority  for  Portugal,  and  its 
education  system manages  to  attract  and  form  a 
in  science, 
high  number  of  graduates  also 
technology,  engineering  and  mathematics.  The 
country  has  one  of  the  highest  numbers  of  new 
graduates in science and engineering per thousand 

(53)  OECD (2023), OECD Economic Surveys: Portugal 2023, OECD 
Publishing, Paris, https://doi.org/10.1787/2b8ee40a-en. 

(54)  5.2 per thousand active population in 2022, compared to a 

EU average of 5.6. 

(56)  Big consortia between companies, scientific and 

technological institutions. 

(57)  TTR Database. 

(55)  Entities which bring together relevant partners from the 

public and the private sector. 

(58)  OECD (2023), OECD Economic Surveys: Portugal 2023, OECD 
Publishing, Paris, https://doi.org/10.1787/2b8ee40a-en. 

42 

 
 
 
population  aged  24-35  (20.5  in  2022,  compared 
to the EU average of 17.6). In contrast, the number 
of graduates in the field of computing is relatively 
modest  compared  to  the  EU  average.  Moreover, 
the  public  sector  can  count  on  a  good  number  of 
researchers, as Portugal performs well in terms of 
public  sector  researchers  per  thousand  active 
population (6.4 in 2023, against the EU average of 
4.2).  Specific  programmes  aimed  at  stabilising 
researcher careers and make them more attractive 
are  in  place.  The  Tenure  programme,  run  by  the 
Foundation  for  Science  and  Technology,  supports 
the  hiring  of  doctoral  researchers  for  permanent 
positions  in  the  national  science  and  technology 
system. A  ‘start-up  visa’  programme  is  also  in 
place as part of ongoing efforts to attract foreign 
investment.  This  programme  welcomes  foreign 
entrepreneurs  who  intend  to  develop  projects 
capable  of  generating  start-ups  based  on  new 
ideas and business models (59). In addition, in 2025 
Portugal initiated a new tax benefit which aims to 
attract  foreign  entrepreneurs  and  high  qualified 
employees (60).  

is 

levels. 

education 

is  a  mandatory  part  of 

well 
Entrepreneurship 
the  Portugal  education 
integrated 
into 
system  across  all  education 
It 
constitutes  a  segment  of  citizenship  education, 
the  school 
which 
curriculum. Higher education institutions have also 
expanded 
entrepreneurship 
education  through  initiatives,  incubators  and  by 
creating  a  greater  connection  to  the  business 
world.  Nevertheless, 
improve 
entrepreneurship  education  in  Portugal,  a  greater 
emphasis on practical, project-based learning, and 
the  implementation  of  continuous  monitoring  of 
existing initiatives are needed. 

further 

offer 

their 

of 

to 

(59)  Startup Visa - Visa. 

(60)  Regulation of the tax incentive scheme for scientific research 
and innovation, as provided for in Article 58-A of the Statute 
of Tax Benefits. Ordinance No. 352/2024/1 

43 

 
 
 
 
 
 
 
 
 
Table A3.1:  Key innovation indicators 

(1) EU average for the last available year or the year with the highest number of country data. 
Source: Eurostat, DG JRC, OECD, Science-Metrix (Scopus database), Invest Europe, European Innovation Scoreboard 

44 

R&D intensity (gross domestic expenditure on R&D as % of GDP)1.381.321.611.671.691.69:2.243.45Public expenditure on R&D as % of GDP0.570.630.660.640.60.59:0.720.64Scientific publications of the country within the top 10% most cited publications worldwide as % of total publications of the country 10.29.18.58.1:::9.612.3Researchers (FTEs) employed by public sector (Gov+HEI) per thousand active population5.25.96.26.26.36.4:4.2:International co-publications as % of total number of publications4752.954.253.253.453.2:55.939.3Business enterprise expenditure on R&D (BERD) as % of GDP0.680.670.920.991.051.06:1.492.7Business enterprise expenditure on R&D (BERD) performed by SMEs as % of GDP0.270.310.460.50.510.53:0.40.3Researchers employed by business per thousand active population2.43.14.555.35.5:5.7:Patent applications filed under the Patent Cooperation Treaty per billion GDP (in PPS €)0.7111.10.9::2.8:Employment share of high-growth enterprises measured in employment (%)12.5723.07:::::12.51:SMEs with at least a basic level of digital intensity% SMEs (EU Digital Decade target by 2030: 90%)::::70.37:74.2672.91:Data analytics adoption% enterprises (EU Digital Decade target by 2030: 75%):::::38.56:33.17:Cloud adoption% enterprises (EU Digital Decade target by 2030: 75%):::28.14:32.29:38.86:Artificial intelligence adoption% enterprises (EU Digital Decade target by 2030: 75%):::7.2:7.868.6313.48:Public-private scientific co-publications as % of total number of publications4.65.45.766.46.4:7.78.9Public expenditure on R&D financed by business enterprise (national) as % of GDP0.0070.0140.0160.0140.0130.013:0.050.02Total public sector support for BERD as % of GDP0.1440.1740.4350.3960.487::0.2040.251R&D tax incentives: foregone revenues as % of GDP0.0870.1220.3540.2960.387::0.1020.141BERD financed by the public sector (national and abroad) as % of GDP0.0570.0520.0810.1000.1000.120:0.1000.110Venture capital (market statistics) as % of GDP, total (calculated as a 3-year moving average)0.0070.0160.0180.0210.0230.018:0.078:Seed stage funding share (% of total venture capital)4.710.91717.926.927.2:7.3:Start-up stage funding share (as % of total venture capital)81.281.970.773.76363.4:44:Later stage funding share (as % of total venture capital)14.17.212.48.310.19.4:48.7:New graduates in science and engineering per thousand population aged 25-34171819.520.820.5::17.6:Graduates in the field of computing per thousand population aged 25-3411.322.12::3.6:2023EU average (1)USA2024Headline indicatorScience and innovative ecosystemsR&D investment & researchers employed in businessPublic support for business innovationInnovation outputsDigitalisation of businessesAcademia-business collaborationFinancing innovationInnovative talent20222021Portugal201220172020 
 
        
 
ANNEX 4: MAKING BUSINESS EASIER 

Portugal  has  made  progress  in  becoming 
more  competitive  and  making  business 
easier.  However,  challenges  persist  and  the 
country  has  room  to  further  improve  its 
lies  on 
business  environment.  The  focus 
reducing  administrative  and  regulatory  burden, 
late  payments,  and  barriers  to  entry  and  to 
competition  for  some  regulated  professions  and 
the  retail  sector.  Further  trade  integration  in 
services, improving the governance of state-owned 
enterprises  and 
the  duration  of 
reducing 
insolvency proceedings could also boost Portugal’s 
competitiveness. 

Economic framework conditions 

Portugal’s  supply  chains  have  recovered 
from the tensions in 2023 and are now more 
resilient  than  the  EU  average.  Portugal 
experienced a significant improvement in material 
shortages in 2024 (61) as only 5.2% of Portuguese 
businesses have reported constraints, compared to 
9.2% in 2023 and 16% in 2022. This puts Portugal 
in fourth place among its EU  peers, as the  EU-27 
average  for  2024  stood  at  10%.  This  shows  a 
clear  recovery  from  the  consequences  of  supply 
chain  disruptions  in  previous  years  that  were 
experienced not only in Portugal but across the EU. 

Labour shortages are limited and continue to 
diminish.  Portugal  has  continued  to  improve  in 
2024  with  9.5%  of  firms  reporting  labour  supply 
constraints (10.9% in 2023, 11.5% in 2022), well 
below  the  EU  average  (20.2%  in  2024).  Similarly, 
Portugal’s  vacancy  rates (62)  continued  along  the 
path towards pre-2022 levels, recording a decline 
to a 1.7% vacancy rate in 2024, down from 2% in 
2022.  Moreover,  Portugal’s  vacancy  rate  has 
always remained below the EU average (2.36% in 
2024). 

is 

solid 

infrastructure 

Digital 
and 
continuously  improving,  in  line  with  the 
Digital  Decade  targets.  Portugal  has  made 
considerable  progress,  especially  on  connectivity, 
and  business  awareness  of  cybersecurity 
is 
increasing.  Fibre  to  the  premises  (FTTP)  coverage 

stood  at  92.3%  in  2023,  significantly  higher  than 
the  EU  average  of  64%.  FTTP  coverage  in  rural 
areas also increased considerably, reaching 68.7% 
against  an  EU  average  of  53%.  For  mobile 
connections, overall 5G coverage increased to 98% 
(EU  average,  89%).  However,  major  challenges 
persist  in  improving  basic  and  advanced  skills 
across  the  population  (see  Annex  12).  Meanwhile, 
SME  use  of  digital  tools  lags  behind  the  EU 
average (see Annex 3). 

of 

the 

incidents 

resilience 

ICT  security 

Cybersecurity  awareness  in  businesses  is 
digital 
increasing 
infrastructure.  The  number  of  enterprises  that 
experienced 
leading  to 
unavailability  of  ICT  services  due  to  attack  from 
outside (e.g. ransomware attacks, denial of service 
attacks)  slightly  increased  in  Portugal,  from  2.5% 
in  2022  to  3.1%  in  2024.  However,  it  remains 
below  the  EU  average 
ICT  security 
measures were deployed by 95.6% of enterprises 
(above  the  EU  average  of  92.8%)  and  65.6%  of 
enterprises  made  their  employees  aware  of  their 
obligations  for  ICT  security  related  issues,  again 
above the EU average (60%). 

(3.4%). 

Portugal  can  benefit  from  improving  its 
logistics  infrastructure.  The  2023  Logistics 
Performance Index (LPI) issued by the World Bank 
(63)  ranked  Portugal  in  18th  position  among  the 
EU-27  (38th  worldwide).  This  almost  places  the 
country  in  the  lowest  third  of  EU  countries.  Its 
poorest scores are in international  shipments (3.1 
out  of  5),  customs  (3.2),  and  tracking  and  tracing 
(3.2). 

firms 

stated 

Portugal’s  infrastructure  is  an  increasing 
obstacle  for  investment.  In  2024,  17.4%  of 
transport 
Portuguese 
for 
infrastructure  was  a  major  obstacle 
investment, an increase from 15.5% in 2023 that 
kept  Portugal  above  the  EU  average  (13.4%). 
Furthermore,  looking  at  the  five-year  average, 
Portugal has worsened slightly over time (Portugal 
15.5% vs EU average 14.4%) (64). 

that 

(61)  EC, ECFIN BCS. 

(62)  EC, ECFIN BCS. 

(63)  2023 Logistics Performance Index (LPI) of the World Bank 

(64)  EIBIS 2024 - Portugal 

45 

 
 
 
 
 
Graph A4.1: Making Business Easier: selected 
indicators. 

Share of (1) enterprises, (2) average intra-EU exports and 
imports in GDP, (3) firms, (4) SMEs. 
*Q4 data on trade integration is not yet available. 
Sources: (1) EIB IS, (2) Eurostat, (3) ECFIN BCS, (4) SAFE 
survey.  

Late  payments  are  a  prominent  issue  for 
Portuguese  SMEs.  Only  19.7%  of  Portuguese 
companies  pay  on time.  The  payment  gap  is  over 
two  weeks  in  both  business-to-business  (B2B) 
(14.64 days) and public administration-to-business 
(G2B)  (15.01  days).  Although  in  2024  Portugal 
performed slightly better than the EU average, this 
situation  has  persisted  over  time.  The  five-year 
average for the B2B payment gap was 15.03 days 
compared  to  the  13.9-day  EU  average.  For  the 
G2B  payment  gap,  the  five-year  average  was 
15.73  days,  while  for  the  EU-27  it  was  14.61 
days (65)(66). 

Portugal’s  payment  performance  is  amongst 
the  worst  in  the  EU (67).  In  July  2024,  the 
European  Court  of  Justice  concluded 
that 
Portuguese  public  authorities  have  not  complied 
with  their  obligations  to  pay  on  time  in  G2B 

In  B2B 

transactions,  thus  infringing  the  Late  Payment 
Directive (68). 
transactions,  Portugal 
recorded  some  of  the  lowest  rates  of  on-time 
payments in the EU: the best performing sector is 
wholesale  with  on-time  payments  reaching  21%, 
lowest 
while  transport  and 
performers  with  barely  13%  of  payments  made 
within  the  agreed  contractual  term.  Portugal  also 
has  the  largest  difference  in  on-time  payments 
between  micro  and  large  enterprises,  where  only 
21% and 5% pay on time, respectively. 

logistics  are  the 

Portugal  is  a  prime  attractor  of  foreign 
direct investment (FDI) within the EU. Portugal 
ranked  fourth  in  the  EU  with  248  projects (69)  in 
2022,  an  increase  of  57%  on  2019.  Its  main 
investors  are  Germany  (14.5%),  USA  (14.1%)  and 
France (10.1%), and 73.4% of total FDI projects in 
Portugal  are  from  EU  countries.  The  sectors 
attracting  the  most  projects  are  software  and  IT 
services (40%), business and professional services 
(14%),  and  transportation  manufacturers  and 
suppliers (8%). 

Regulatory and administrative 
barriers 

The  general  regulatory  framework  has  large 
room  for  improvement.  According  to  the  EIB 
Investment  Survey (70),  48.8%  of  Portugal’s  firms 
said  regulations  were  a  major  obstacle 
to 
investment in 2024, a slight increase from 48.6% 
in 2023. This ranks Portugal fourth in the EU, well 
above  the  EU  average  (24.5%).  Looking  at  the 
five-year 
slowly 
deteriorated  over  time  (Portugal  47.5%  vs  EU 
average  23.6%).  Similarly,  the  level  of  regulation 
of professions is higher than the EU average. 

average, 

Portugal 

has 

in  to 

Portugal is making some progress in bringing 
improve  the 
regulatory  changes 
business  environment,  but  further  progress 
would  benefit  the  economy.  Portugal  has  a 
score of 1.57 (out of 6) for the overall OECD PMR 
indicator (71)(72),  meaning  it  performs  worse  than 

(65)  Informa DB 

(66)  Intrum and EC, ECFIN BCS. 

(68)  ECJ ruling in Case C-487/23 

(69)  EY Attractiveness Survey Portugal 2023 

(70)  EIBIS 2024 - Portugal 

(67)  EU Payment Observatory. Annual Report 2024 

(71)  2023 OECD Product Market Regulation (PMR) Report 

46 

42.713.75.231.548.847.916.61041.624.50102030405060from private entitiesfrom public entitiesMaterial shortages as afactor limiting productionEU Trade IntegrationRegulation as a majorobstacle to investment(4) Late payments(3) Shortages(2) SingleMarket(1) RegulatoryburdenShare (%)EU27PT 
     
 
 
in 

by 

the 

regulatory 

the  average  OECD  economy  (1.35),  despite  some 
progress  since  2018.  The  performance  could  be 
improved 
administrative 
simplifying 
requirements  for  starting  new  firms,  as  well  as 
assessing  the  regulatory  impact  of  new  and 
existing  laws  on  competition,  and  better  involving 
stakeholders 
consultation 
process,  while  improving  lobbying  activities  and 
interaction  transparency.  Further  efforts  can  be 
made  to  ensure  a  level  playing  field  between 
state-owned  enterprises (SOEs)  and  private  firms. 
Under  component  18  of  the  RRP  (recovery  and 
resilience  plan),  the  measure  on  the  removal  of 
barriers  to  licensing  could  also  help  improve 
Portugal’s  business  environment.  Portugal  has 
carried  out  two  key  reforms  to  increase  the 
efficiency of the administrative and tax courts. On 
digital  markets,  Portugal  has  introduced  a  law  to 
regulate  platform  work  to  address  the  new 
challenges  created  by  atypical  labour  relations 
(see Annex 10). 

For  many  professions,  regulatory  barriers  to 
entry  and  competition  remain  high 
in 
Portugal.  There  are  253  specific  regulated 
professions  in  Portugal,  ranking  it  seventh  in  the 
EU (73).  Many  professions  present  very  high 
barriers  to  entry  and  to  competition,  such  as  civil 
engineers (2.5 in Portugal vs 1.39 EU average) and 
accountants  (2.14  vs  0.74  EU  average).  In  2024, 
Portugal  underwent  some  reforms  to  reduce 
regulatory barriers for some regulated professions 
related  to  construction, 
legal  and  accounting 
services (74).  Given  their  recent  introduction,  the 
effects are yet to be reflected in Portugal’s OECD 
PMR  scores,  which  are  expected  to  improve. 
According to the OECD STRI, Portugal (0.048) ranks 
in 2024 below the EU average (0.050) (75). 

Portugal’s  retail  sector  also  presents  high 
barriers  to  entry  and  to  competition.  This  is 
especially significant in retail distribution (score of 

2.29  in  Portugal  vs  1.17  EU  average (76))  and  the 
retail sale of medicines (3.38 vs 2.96 EU average). 
On  the  other  hand,  Portugal  has  a  lower  Retail 
Restrictiveness 
(1.51)  than  the  EU 
median (1.70) (77).  

Indicator 

procedures, 

particularly 

Portugal  has  made  significant  progress  in 
insolvency 
by 
implementing  new  insolvency  arrangements. 
However,  there  is  a  large  backlog  in  insolvency 
cases  in  courts (78).  The  average  time  needed  to 
resolve civil and commercial cases at first instance 
has increased (267 days in 2023), worsening from 
previous  year’s  numbers  (238  days  in  2022) (79). 
Portugal’s  RRP  includes  plans  to  create  digital 
platforms  to  digitalise  judicial  processes  and 
reduce  the  administrative  burden,  as  well  as  to 
review  the  insolvency  arrangements  overall  (see 
Annex 6). 

insolvency 
The  estimated  duration  of 
proceedings  remains  well  above  the  OECD 
average and the efficiency of administrative 
and tax courts could further improve. Further 
include  the  full  rolling  out  of 
steps  might 
specialised  courts,  as  currently  6  out  of  23  first 
instance courts do not have specialised chambers. 
The use of voluntary out-of-court procedures could 
also  be  further  encouraged  to  prevent  court 
congestion and speed up procedures. Despite new 
procedures  since  2019  and  temporary  pandemic-
specific  arrangements,  their  take-up  remains  low 
overall,  and 
process 
administrative data to draw conclusions and adjust 
the  regulations  of  each  instrument  (80).  Portugal 
has significantly improved over time in the number 
of  pending  insolvency  cases  with  1 190  in  the 
third quarter of 2024, coming down from 1 225 in 
the  same  period  of  2023  and  continuing  a 
constant  positive  trend  that  dates  back  to  2014, 
when  it  had  reached  a  peak  of  4 842  pending 
insolvency  cases  in  the  aftermath  of  the  2008 
Financial Crisis. (81) 

essential 

to 

is 

it 

(72)  Portugal country note 

(73)  EC, Regulated Professions Database. 

(74)  EC, Communication on updating the reform 

recommendations for regulation in professional services, 
COM(2021) 385. 9/7/2021; OECD, Product Market Regulation 
(PMR) indicators: How does Portugal compare? OECD, 2024; 
OECD Services Trade Restrictiveness Index (STRI) 2024 - 
Portugal 

(75)  OECD Services Trade Restrictiveness Index (STRI) 2024 - 

Portugal 

(76)  EU average (without Romania, due to lack of data). 

(77)  EC, Retail restrictiveness indicator (2022). 

(78)  OECD Economic Surveys: Portugal 2023 

(79)  EC, 2025 EU Justice Scoreboard. 

(80)  Currently, there is no out-of-court available data to analyse 

the evolution of the instruments. 

(81)  Destaque  Estatístico  Trimestral  nº132,  Janeiro  2025. 
Direçao-Geral da Politica de Justiça, República Portuguesa. 

47 

 
 
 
In  2024,  Portugal  had  the  fourth  highest 
growth  rate  of  business  registrations  in  the 
EU,  and  the  12th  highest  number  of 
bankruptcy  declarations,  which  indicates  a 
good business dynamism. With a 22.6% growth 
rate,  Portugal  had  the  fourth  highest  level  of 
business registrations in 2024 in the EU, which has 
an overall average of 3%. Furthermore, looking at 
the  five-year  average,  Portugal  had  the  second 
highest growth rate in the EU at 10.6% (1.4%, EU-
27) (82).  The 
in  business  bankruptcy 
declarations  in  Portugal  in  2024  stood  at  5.6%, 
well  below  the  EU  average  of  43.1%.  Looking  at 
the  five-year  average,  Portugal’s  bankruptcy  rate 
remained  unchanged,  while  the  EU  average 
increased by 22.5% (83). 

increase 

Single market 

Portugal is well integrated in trade of goods 
in the single market, but it can still improve 
in  trade  of  services.  Portugal  intra-EU  imports 
and exports in goods stood at 24.8% of its GDP in 
2023,  while  the  EU  average  stood  at  23.81%. 
17.72%  of  Portuguese  SMEs  in  the  industrial 
sector exported goods to other EU Member States 
in  2022,  while  the  EU  average  was  13.08%.  In 
contrast,  Portugal’s  intra-EU  imports  and  exports 
in  services  represented  4.4%  of  its  GDP  in  2023, 
while the EU average was 7.57% (84). 

The  conformity  of  single  market  directive 
(85)  case 
transposition  and  the  SOLVIT 
resolution  rate  have  somewhat  improved. 
Portugal  has  continued  to  improve  its  conformity 
deficit  in  2024.  It  had  just  0.7%  (vs  the  0.9%  EU 
average)  of  single  market  directives  transposed 
incorrectly,  while  in  2023  it  was  0.8%.  The 
transposition  deficit  has  increased  to  1%,  placing 
Portugal  slightly  above  the  EU  average  (0.8%). 
However, the duration of infringement proceedings 

(82)  EC, ECFIN BCS. (Index 2021 = base 100). 

(83)  EC, ECFIN BCS. (Index 2021 = base 100). 

(84)  EC, ECFIN BCS. 

(85)  SOLVIT  is  an  online  service  aimed  at  helping  citizens  and 
businesses  that  believe  their  EU  rights  have  been  breached 
by public authorities in another EU country and have not (yet) 
taken  their  case  to  court.  It  is  provided  by  the  national 
administration 
Iceland, 
Liechtenstein and Norway. 

in  each  EU  country  and 

in 

is  much  shorter  than  the  EU  average.  Portugal 
resolved 89.3% of SOLVIT cases it handled as lead 
centre  in  2024 (vs  EU  average  84.9%),  improving 
on  its  2023  result  (86.9%) (86).  As  of  December 
2024,  Portugal  has  27  pending  infringement 
proceedings, slightly above the EU average of 24. 
This ranks Portugal 16th in the EU (87). 

Public procurement 

Although  public  procurement  indicators  are 
better  than  the  EU  average  (see  table  of 
indicators), 
public 
competition 
procurement  could  be  improved.  According  to 
the OECD PMR, Portugal is considered slightly less 
competition friendly than the EU average (0.67 vs 
0.50  for  the  EU).  However,  the  indicator  value 
remained unchanged between 2018 and 2023. 

in 

Portugal  has  taken  steps 
to  promote 
sustainable  procurement.  Although  a  majority 
of awarded contracts were based on price criteria 
alone (72%), Portugal is advancing in transforming 
the  decision  process (88).  As  part  of  its  RRP,  in 
2023  Portugal  revised  its  national  strategy  for 
green  public  procurement,  adding  mandatory 
ecological criteria for the procurement of services 
and  products  (notably  in  the  construction  sector) 
that  integrated  sustainable  bio-based  products. 
is  a  crucial 
Sustainable  public  procurement 
approach  for  transforming  public  purchases  in 
Portugal. 
of 
the 
sustainable  public  procurement,  the  Portuguese 
government  can  reduce  its  environmental  impact 
and foster innovation and competitiveness. 

implementation 

Through 

responsible  public  procurement 
Socially 
(SRPP) in Portugal usually focuses on gender 
equality,  non-discrimination  and  promotion 
of  dignified  work. Cases  of  good  SRPP  practice 
levels, 
are  found  at  different  administrative 
although  further  awareness-raising  campaigns 
and  capacity  buildings  programmes  would  be 
beneficial.  Additionally,  encouraging  broader 
support  and  participation  of  social  economy 
entities in these processes would also be valuable.

(86)  EC, ECFIN BCS. 

(87)  EC, 2025 Single Market and Competitiveness Scoreboard. 

(88) EC. 2025 Single Market and Competitiveness Scoreboard 

48 

 
 
 
Table A4.1:  Making Business Easier: indicators. 

*Change in methodology in 2024: reporting late payments from public and private entities separately. 
**The 2024 data on single bids is provisional and subject to revision. Please note that approximately 35% of the total data is 
currently missing, which may impact the accuracy and completeness of the information. Due to missing data, the EU average of 
direct awards data is calculated without Romania. 
Source: (1) ECFIN BCS, (2) Eurostat, (3) EIB IS, (4) Digital Decade Country reports, (5) Intrum Payment Report, (6) SAFE survey, (7) 
OECD, (8) up to 2023: Single Market and Competitiveness Scoreboard, 2024: Public procurement data space (PPDS). 

49 

POLICY AREA20202021202220232024EU-27 average4.87.915.89.25.210.06.68.511.510.99.520.20.91.42.01.81.72.311.216.017.315.517.413.4-90.593.094.2-78.8-87.690.892.3-64.0-0.070.198.1-89.3Regulatory environment48.145.846.348.648.824.519.811.813.615.414.615.624.511.910.416.815.015.1from public or private entities in the last 6 months41.638.141.837.3--from private entities in the previous or current quarter----42.747.9from public entities in the previous or current quarter----13.716.627.130.234.032.131.541.60.0440.0440.0440.0430.0480.0500.11.41.30.41.00.81.31.11.30.80.70.998.794.093.287.089.384.937.028.032.025.027.024.42420242138-7751017.0PortugalINDICATOR NAMEInvestment climateShortagesMaterial shortage, firms facing constraints, %1Labour shortage, firms facing constraints, %1Vacancy rate, vacant posts as a % of all available ones (vacant + occupied)2InfrastructureTransport infrastructure as an obstacle to investment, % of firms reporting it as a major obstacle3VHCN coverage, %4FTTP coverage, %45G coverage, %4Reduction of regulatory and administrative barriersImpact of regulation on long-term investment, % firms reporting business regulation as a major obstacle3Late paymentsPayment gap - corporates B2B, difference in days between offered and actual payment5Payment gap - public sector, difference in days between offered and actual payment5Share of SMEs experiencing late payments, %*6Single MarketIntegrationEU trade integration, % (Average intra-EU imports + average intra EU exports)/GDP2EEA Services Trade Restrictiveness Index7ComplianceTransposition deficit, % of all directives not transposed8Conformity deficit, % of all directives transposed incorrectly8SOLVIT, % resolution rate per country8Number of pending infringement proceedings8Competition and transparency in public procurementSingle bids, % of total contractors**8Direct awards, %**8Public procurement 
 
 
      
 
 
ANNEX 5: CAPITAL MARKETS, FINANCIAL STABILITY AND ACCESS TO FINANCE 

pandemic.  This  imbalance  has  resulted  in  net 
borrowing from abroad averaging a negative 1.1% 
of  GDP  over  2014-2023.  Consequently,  domestic 
savings  are  predominantly  channelled  into  local 
projects  and  foreign  capital  needs  to  step  in  only 
to fill an occasional financing gap. 

Graph A5.1: Net savings-investment balance 

Source: AMECO 

Portugal’s  economy  remains  a  net  debtor  to 
the  global  financial  system.  Nevertheless, 
Portugal’s  NIIP  despite  remaining  deeply  negative 
is  reflecting  a  gradual  improvement.  As  of  Q3 
2024, 
total  Portuguese  assets  held  abroad 
including  reserves  reached  157.2%  of  GDP,  while 
liabilities  to  foreigners  stood  at  219.9%  of  GDP, 
resulting  in  an  NIIP  of  negative  62.7%  of  GDP 
(graph  A3.2).  Foreign  direct  investment  liabilities, 
at  close  to  80%  of  GDP,  significantly  outpace 
assets  at  34%  of  GDP,  highlighting  the  country’s 
dependence  on  foreign  capital  inflows.  Portfolio 
investment  liabilities,  worth  half  the  GDP,  stood 
below  the  portfolio  assets  worth  close  to  67%  of 
the  GDP,  while  official  reserve  assets  remain 
modest  at  just  13.4%  of  GDP.  Other  investment 
liabilities, at 91.1% of the GDP, dwarf assets (43% 
of GDP), contributing to the persistent NIIP deficit. 
This 
the  Portuguese 
economy’s  extensive  integration  into  international 
capital  flows,  primarily  as  a  recipient  of  foreign 
investment.  Though,  when  taking  a  step  back, the 
its  NIIP 
country 
performance  and 
less 
dependent from the global financial flows. 

is  gradually  becoming 

structure  underscores 

improving  on 

clearly 

is 

Portugal  lacks  abundant  domestic  savings 
and  deep  capital  markets.  While  the  country 
remains a net borrower from the rest of the world, 
its net international investment position (NIIP) has 
shifted  significantly  over  the  recent  years.  It 
moved  from  deep  deficits  towards  a  more 
balanced  stance  as  borrowing  from  abroad 
declined,  exports  grew,  and  recapitalised  banks 
managed  to  cut  off  some  of  their  reliance  on 
foreign  funds.  Local  firms  are  mostly  small  with 
an  overwhelming  majority  of  micro-enterprises. 
Unsurprisingly,  close  to  three  quarters  of  firm’s 
investment  needs  are  financed  from  internal 
resources.  External  financing  is  dominated  by 
owners’  equity,  bank  loans.  and,  in  the  case  of 
large  firms,  by  credit  from  the  rest  of  the  world. 
in  financing 
Banks  still  play  a  pivotal  role 
Portuguese  non-financial  corporations 
(NFCs). 
Retail  participation  in  capital  markets  is  low, 
despite  some  progress  being  made.  Listed  shares 
jointly with bonds are equivalent to just 16.5% of 
investment  policies  of 
Portugal’s  GDP.  The 
domestic 
quite 
institutional 
conservative,  and  investment  funds  are  heavily 
invested  in  real  estate,  with  over  40%  of  assets 
under  management 
this 
segment.  Portugal  continues  to  lag  on  innovation, 
hampered  by  limited  capital  market  engagement, 
low financial literacy, high taxation, and structural 
barriers  that  impede  the  retention  of  high-growth 
companies. 

investors 

invested 

(AUM) 

are 

in 

Availability and use of domestic 
savings 

ratio,  net  of 

reserves  amid 

Net  savings  are  outpaced  by  domestic 
financing  needs  leading  to  a  reliance  on 
external  borrowing.  Over  the  past  decade,  the 
private  savings 
fixed  capital 
consumption,  has  averaged  around  2.6%  of  GDP, 
surging to 3.9% in 2020 and 2021 as households 
bolstered 
the  Covid-induced 
uncertainty 
(graph  A3.1).  The  net  private 
investment  ratio,  a  key  gauge  of  the  private 
to  capital  growth,  has 
sector’s  contribution 
averaged a negative 0.9% of GDP with significant 
volatility  around  the  pandemic  period  and  a  spike 
to  1% 
in  2022,  reflecting  a  post-pandemic 
investment surge. Lending to the government has 
fluctuated 
2017-2023, 
averaging  1.6%  of  GDP  but  soaring  to  5.8%  in 
2020  driven  by  the  fiscal  stimulus  during  the 

significantly 

over 

50 

-505101520252017201820192020202120222023% of GDPPrivate investment, netLending to the governmentPrivate saving, netPrivate saving, grossBorrowing from the rest of the world 
 
   
 
 
Graph A5.2: International investment position 

Graph A5.3: Capital markets and financial 
intermediaries 

Source: ECB 

Structure of the capital markets and 
size of the financial sector 

is  modest 

The  domestic  capital  market  is  modern  but 
compact.  The  main  stock  exchange,  Euronext 
Lisbon, 
size,  with  market 
in 
capitalisation standing at approximately 24.4% of 
GDP, significantly below the EU average of 67.6%. 
Trading volumes are also limited, reflecting on the 
one  hand  the  market's  small  scale,  and  on  the 
other  hand  the  low  retail  investors’  participation. 
Non-financial  corporations  account  for  over  90% 
of  this  capitalisation,  underscoring  the  market’s 
role 
local 
manufacturing. The outstanding volume of private 
sector  debt  securities  stood  at  40%  of  GDP  in 
2023,  with  monetary  financial  institutions  (MFIs) 
contributing  around  half  of  the  total.  General 
government  bonds  have  remained  the  most 
significant  part  of  the  fixed  income  market  at 
62.4%  of  GDP,  bolstered  by  public  investment  in 
infrastructure and post-pandemic recovery.  

in  supporting  key  sectors 

like 

Source: ECB, EIOPA, AMECO 

The  financial  sector  in  Portugal  remains 
heavily  bank  centric.  With  assets  worth  about 
159.1%  of  GDP  in  2023,  the  banking  sector 
dwarfs all other parts of the local financial sector. 
Nevertheless,  in  relative  size  it  is  still  far  below 
EU’s  average  of  247.2%  of  GDP.  The  banking 
system  is  characterised  by  a  high  degree  of 
concentration, with a few large lenders dominating 
over 80% of the market. Foreign direct ownership, 
predominantly  Spanish,  stands  at  over  a  third  of 
total  banking  sector  assets.  The  insurance  sector, 
with  total  assets  reaching  some  20%  of  GDP  at 
end-2023,  plays  a  growing  role  in  non-bank 
intermediation  and  demonstrated  recently  robust 
growth  data,  with  direct  insurance  production 
surging over 20% y/y in Q3 2024. Similarly, to the 
local  banking  sector,  insurance  market  dynamics 
reveal  a  concentrated  landscape.  Pension  funds 
and  investment  funds  account  respectively  for 
6.1%  and  17.6%  of  GDP  in  2023,  supported  by 
slowly increasing retail participation. 

Resilience of the banking sector 

The 
local  banking  system  demonstrated 
remarkable  resilience  over  the  past  decade. 
There are only a few traces of the sovereign debt 
crisis  in  the  balance  sheets  of  local  banks.  The 
sector is now boasting solid liquidity, capital (CET1 
ratio  at  17.8%  surpassing  the  EU  average  of 
16.7%  and  reflecting  a  focus  on  high-quality 
capital), and good profitability metrics with an ROE 
of  13.8%  in  2023  and  over  16%  in  2024.  This 
that  Portuguese  businesses 
stability  ensures 

51 

-400-300-200-100010020030020172018201920202021202220232024-Q3% of GDPForeign Direct Investment, AssetsPortfolio Investment, AssetsOther investment, AssetsOfficial reserve assetsForeign Direct Investment, LiabilitiesPortfolio Investment, LiabilitiesOther investment, LiabilitiesNIIPNon-financial corporationsFinancial corporationsNon-financial corporationsMFIsInsurance  and pension fundsOther financialsGovernmentMFIsPension fundsInsurance corporationsInvestment funds020406080100120140160180     Listed equity                Bonds                        Assets by sector% of GDP 
   
  
Resilience of the non-bank financial 
intermediaries 

of 

for 

the 

ratios 

solvency 

non-bank 

Portugal’s  insurance  sector  is  a  growing 
component 
financial 
intermediation. In the third quarter of 2024, the 
top  three  insurers  occupied  around  59.2%  of  the 
market  share  in  premiums,  whereas  the  top  ten 
insurers took close to 90% of the market. The local 
insurers maintain overall solid solvency levels with 
capital 
coverage 
requirement 
(SCR)  and  the  minimum  capital 
requirement  (MCR)  in  Q3  2024  at  219%  and 
579%, 
ratios  substantially 
increased (by a respective 15 pp and 40 pp) when 
compared  with  end-2023  data.  The  sector  is 
overall  gaining  traction.  For 
instance,  health 
insurance  premia,  have  more  than  doubled  over 
the past 12 years. Insurers have also increasingly 
diversified their investment portfolio searching for 
better yields, shifting toward equities and variable-
income assets in recent years. The total assets of 
the 
domestic 
Portuguese GDP in 2023 and grew by about 4.5% 
over the volatile period between 2020-2023. 

insurers  equalled  a 

respectively.  Both 

fifth  of 

in 

supervisor, 

There  are  no  material  weaknesses  in  the 
insurance  sector’s  risk  profile.  Portugal’s 
insurance 
coordination  with 
European  Insurance  and  Occupational  Pensions 
Authority  (EIOPA),  conducted  stress  tests  in  2023 
on  some  of  the  main  insurers  in  the  country 
confirming  resilience  to  market  and  climate 
shocks. However, exposure to natural disaster risks 
continues  to  warrant  close  monitoring.  According 
to the dashboard for the insurance protection gap 
for  natural  catastrophes  published  by  EIOPA, 
Portugal  has  the  sixth-worst  protection  gap  in 
Europe.    EIOPA’s  dashboard  highlights  Portugal’s 
high wildfire risk and medium flood exposure, and 
a  relatively  low  levels  of  insurance  penetration 
across all risks, at 6.8% of GDP in 2023, below the 
EU  average  of  7.8%.  This  also  implies  possible 
systemic repercussions for Portugal in the event of 
an  earthquake.  Currently,  merely  20%  of 
Portugal’s  total  housing  stock  is  covered  by 
seismic risk insurance. Enhancing financial literacy 
initiatives 
insurance  penetration 
remains therefore a critical priority in this regard. 

increase 

to 

continue to enjoy access to reliable and affordable 
bank  loans.  Major  banks  have  successfully  met 
EU-wide  stress  test  requirements,  demonstrating 
resilience  despite  the  economic  challenges  of  the 
past  years.  The  aggregate  Minimum  Requirement 
for  Own  Funds  and  Eligible  Liabilities  (MREL)  rate 
stood  at  26.1%  of  risk-weighted  assets  by  end-
2023,  exceeding 
thresholds  and 
regulatory 
signalling  preparedness  for  potential  shocks.  A 
ongoing 
local 
deleveraging  effort  that  has  been  a  long-term 
trend that started during the financial crisis. 

specificity 

sector’s 

the 

is 

Asset  quality  of  Portuguese  lenders  has 
improved  dramatically.  The  sector’s  aggregate 
NPL ratio dropped to 2.6% in Q4 2024 (from high 
teens  back  in  2016-2017),  still  above  the  EU 
average  of  1.9%,  but  reflecting  the  substantial 
progress  undertaken  in  reducing  legacy  financial 
crisis  NPLs.  Household  NPLs  stood  at  2.5%,  while 
non-financial corporation (NFC) NPLs were slightly 
higher at 4.9%. With nine out of ten mortgages at 
variable  rates,  rising  interest  rates  have  posed 
some  risks,  but  asset  quality  has  been  preserved 
through  an  array  of  government  and  banking 
sector  measures.  The  NPL  coverage  ratio  rose  to 
55.7%  in  Q4  2024,  exceeding  the  EU  average  of 
42.6%  by  a 
indicating  robust 
provisioning for potential losses. A notable feature 
is the sector’s exposure to tourism-related lending, 
which has recovered post-pandemic. 

large  margin, 

Portuguese  banks  maintain  robust  liquidity 
profiles, underpinned by a solid funding base 
and a prudent strategy toward debt issuance. 
Local lenders exhibit low liquidity funding risk, with 
the  aggregate  liquidity  coverage  ratio  (LCR)  at 
around the 270% mark and the net stable funding 
ratio  (NSFR)  in  the  130-140%  bracket  for  most 
in  2024,  both  well  above  regulatory 
banks 
minimums.  The  loan-to-deposit  ratio  of  70.4%  is 
far  below  the  EU  average  of  93%,  reflecting  the 
economy’s  deleveraging  effort  over  the  past 
in  deposits.  Banks 
increase 
decade  and  the 
continue to hold in 2023 on average around 14% 
of  their total  assets in  government  debt,  which is 
slightly above the EU average just shy of the 10% 
mark. Debt issuance has been modest, with banks 
issuing below EUR 5 bn in debt instruments both in 
2023  and  2024,  mostly  to  refinance  maturing 
obligations and maintain MREL buffers. 

52 

 
Sources of business funding and the 
role of banks 

Portuguese firms’ financing structure differs 
from the European average. Bank loans remain 
the  backbone  of  corporate  funding  in  Portugal, 
totalling  approximately  27.6%  of  all  financing  for 
domestic  NFCs,  which  is  slightly  above  the  EU 
average  of  27.2%.  However,  reliance  on  capital 
markets  is  notably  lower,  with  listed  shares  and 
bonds accounting for 16.6% of corporate funding, 
compared  to  the  EU  average  of  almost  23.7%. 
This  disparity  highlights  a  significant  reliance  on 
owners’  equity  and  traditional  banking  channels 
is  not 
over  market-based 
surprising  given  the  predominance  of  small  and 
micro-enterprises  in  Portugal.  As  a  percentage  of 
GDP,  corporate  funding  in  Portugal  stands  at 
around  205%,  which  is  below  the  EU  average  of 
230%.  This 
level  of  overall  corporate 
funding 
to  GDP  underscores  some 
challenges  Portuguese  firms  face  in  accessing 
diverse  financing  sources,  potentially  impacting 
their growth and innovation capabilities. 

financing,  which 

relative 

lower 

Graph A5.4: Composition of NFC funding as % of 
GDP 

The sum of NFC liabilities only reflects the total for the NFC 
liabilities considered. Reference period 2023. 
Source: Eurostat 

Portuguese 
through 

Reliance  on  internally  generated  funding  is 
key. According to the 2024 EIB Investment Survey, 
firms' 
of 
approximately  70% 
investment  needs  are  met 
internal 
funding,  a  few  percentage  points  higher  than  the 
EU  average  of  66%.  This  reliance  on  internal 
resources reflects, on the one hand, the small size 
of  local  firms,  a  feature  that  makes  accessing 
external  funding  more  difficult,  and,  on  the  other 
hand,  a  broader  trend  of  financial  conservatism, 

53 

driven  by  historical  challenges 
in  accessing 
external  finance.  Despite  this,  a  large  majority 
(83%)  of  Portuguese  firms  reported  that  their 
investment  activities  over  the  past  three  years 
were  adequate.  While  funding  generally  is  not 
perceived to be an issue, there remains a potential 
funding  gap  for  some  SMEs  and  start-ups  that 
may lack substantial internal reserves. 

Corporate  credit  demand  is  showing  some 
early signs of recovery. Corporate credit growth 
has  been  on  a  downward  trajectory  since  early 
2021, and began to recover gradually with modest 
positive  growth  observed from  July  2024.  In  fact, 
the year-on-year growth of credit to NFCs was still 
in  negative  territory  in  the  first  half  2024  but 
showing  signs  of  stabilisation  as  monetary 
conditions became more accommodative. Demand 
for corporate loans for long-term investments was 
strengthening in the fourth quarter of 2024, driven 
by  improved  economic  conditions  and  a  more 
favourable  interest  rate  environment.  In  parallel, 
the  number  of  firms  experiencing  payment 
difficulties  also  slightly  decreased 
(the  non-
performing loans (NPL) ratio in the corporate loans 
segment dropped by 10 basis points between end-
2023  and  mid-2024),  reflecting  better  liquidity 
management and improved financial health within 
the corporate sector. 

Capital markets and the participation 
of retail investors 

The  Portuguese  capital  market  is  a  market 
for  just  a  few  large  firms.  The  use  of  listed 
equity  financing  among  domestic  small  and 
medium-sized  enterprises  (SMEs)  is  notoriously 
low, with just 2.3% of SMEs indicating that equity 
is a relevant source of funding, compared to an EU 
average  of  10.1%(89).  Despite  the  introduction  of 
initiatives  aimed  at  boosting  market  participation, 
such  as  the  SME  Growth  Market,  initial  public 
offerings  (IPOs)  remain  occasional  and  small  in 
scale.  Overall,  while  there  are  efforts  to  improve 
infrastructure,  significant 
the  capital  market 
challenges  remain  in  achieving  a  more  dynamic 
market environment. The domestic bond market is 
predominantly composed of Portuguese sovereign 

(89)  European Commission, Survey on the Access to Finance of 

Enterprises, 2023.. 

050100150200250PTEU% of GDPLoansTrade credit and advancesBondsListed sharesUnlisted sharesOther equity 
   
 
fixed 

bonds accounting for around three quarters of the 
income  market.  Regarding 
domestic 
corporate bonds, only a handful are actively traded 
from some of the biggest Portuguese corporations. 
The Portuguese recovery and resilience plan (RRP) 
outlines  key  measures  to  strengthen  capital 
markets,  including  the  establishment  of  a  new 
legal framework to simplify IPOs and initiatives to 
promote green bonds.  

levels 

investment 

in  Portugal 
Corporate 
appear  adequate  but 
rarely  focus  on 
innovation. Most Portuguese SMEs do not appear 
to face significant financing barriers to investment. 
According  to  the  2024  EIB  Investment  Survey, 
83%  of  Portuguese  firms  reported  that  their 
investment activities in the past three years were 
adequate,  slightly  above  the  EU  average  of  80%. 
However,  the  same  survey  reveals  that  Portugal 
has one of the lowest shares of firms investing in 
the  development  of  new  products  and  services 
within  the  EU,  while  it  ranks  second  highest  in 
terms  of  firms  focusing  on  replacing  existing 
capacity,  such  as buildings,  machinery,  equipment 
and IT. Despite the expected increased momentum 
of  investment  in  2025-2026,  the  growth  in  gross 
fixed capital formation is expected to be primarily 
driven  by  public  investment,  with  the  private 
sector’s  focus  remaining  on  replacing  physical 
capital,  which  does  not  necessarily  correspond  to 
productive  growth (90).  There 
is  potential  for 
Portuguese  companies,  particularly  start-ups,  to 
increase 
the  share  of  capital-market-related 
funding of their financing mix. 

Low  financial  wealth  drives  Portuguese 
households  to  favour  deposits  over  capital 
markets. Households’ financial assets in Portugal 
are  notably  modest  compared  to  the  EU  average, 
both in terms of per capita financial wealth and as 
a  percentage  of GDP.  This  partly  explains the  low 
equity  investments  culture  among  Portuguese 
retail  investors.  Households  with  lower  financial 
likely  to  allocate  significant 
wealth  are 
portions  of  their  savings  to  capital  markets, 
favouring  safer  options  like  deposits  or  sovereign 
bonds.  Consequently,  only  2.9%  of  households’ 
financial  wealth  in  Portugal  is  invested  in  listed 
shares,  compared  to  the  EU  average  of  10.1%. 
Portugal  also  has  the  lowest  share  of  household 
investments  in  bonds  and  shares  relative  to  the 
combined volume of cash holdings and deposits in 

less 

the  EU (91).  In  fact,  household  deposits  in  banks 
have grown substantially, increasing by 7.6% year-
on-year  as  of  November  2024.  Nevertheless,  the 
successful  issuance  and  allocation  of  savings 
certificates  –  a  long-term  government  fixed-debt 
instrument  –  demonstrates  the  public  appetite  in 
Portugal  for  low-risk,  easily  accessible  capital 
market  instruments.  By  December  2024,  the 
outstanding  monthly  stock  of  these  certificates 
exceeded 
investors 
among 
EUR 34 billion, highlighting their popularity. 

retail 

had 

Graph A5.5: Composition of household financial 
assets per capita and as % of GDP 

The sum of household assets only reflects the total for the HH 
assets considered. Reference period 2023. 
Source: Eurostat 

The role of domestic institutional 
investors 

Portugal’s investment fund industry still lags 
behind  its  European  peers  despite  recent 
dynamic  growth.  The  Portuguese  investment 
fund industry  has experienced robust  growth over 
the past two years, with assets increasing by 31% 
from  Q3 2022  to  Q3 2024  (92).  However,  the 
sector  remains  relatively  small  compared  to  its 
European counterparts, accounting for only 0.25% 
of  total  assets  held  by  investment  funds  in  the 
euro  area.  This  limited  scale  can  be  attributed  to 
retail 
several 

including  Portuguese 

factors, 

(91)  Commission staff working document: Monitoring progress 
towards a Capital Markets Union: a toolkit of indicators 
SWD(2021) 544, Overview of CMU Indicators – 2024 
update. 

(90)  Banco de Portugal, Economic Bulletin - October 2024. 

(92)  Source: ECB, Assets and liabilities of investment funds. 

54 

0501001502002500102030405060708090PTEUPTEUper capita (000 EUR) (lhs)% of GDP GDP (rhs)Currency and depositsInsurance and pension fundsInvestment fundsBondsListed sharesUnlisted sharesOther equityHH Debt (liability) 
 
   
 
increase  compared  to  2023.  Despite  this  growth, 
the  amount  raised  remains  far  from  the  record 
levels of 2021 and 2022, when start-ups secured 
EUR 1.6 billion  and  EUR 1.1 billion,  respectively. 
Portugal  Ventures,  the  state-owned  VC  company 
and part of Banco Português de  Fomento, led the 
Portuguese  VC  sector  in  2024  in  terms  of  the 
number  of  transactions,  completing  20  deals 
worth  a  total  of  EUR 30.4 million.  However,  the 
average  value  of  annual  private  equity  and  VC 
investment  relative  to  nominal  GDP  is  still  very 
modest  in  Portugal  at  0.2%  in  2023  (vs  the  EU 
average of 0.4% of GDP) and has decreased since 
the  peak 
in  2020  of  0.6%  of  GDP.  This 
underdeveloped  venture  and  growth  capital 
market  points  to  a  financing  gap  for  early-stage 
innovative firms in need of capital throughout their 
life cycle (see Annex 3). 

for 

ratios 

participation. 

(TERs) 
collective 

investors’  strong  preference  for  bank  deposits,  a 
relatively  low  saving  rate,  and  historically  high 
for  Portuguese 
total  expense 
undertakings 
in 
investment 
transferable  securities  (UCITS).  According  to  the 
European  Securities  and  Markets  Authority’s 
(ESMA)  2024  cost  and  performance  report,  funds 
domiciled in Portugal consistently rank among the 
most  expensive  in  the  EU (93),  which  likely  deters 
notable 
broader 
characteristic  of  the  Portuguese  investment  fund 
market is the significant dominance of real estate 
investment  funds  (REITs).  As  reported  by  the 
Portuguese  Association  of  Investment  Funds(94), 
out 
under 
management as of October 2024, EUR 15.3 billion 
(43%)  are  held  by  REITs.  This  substantial  share 
aligns with the dramatic rise in Portuguese house 
prices,  which  have  increased  by  an  astonishing 
113%  between  2010  and  Q3 2024,  reflecting 
strong demand for real estate as an asset class. 

EUR 35.3 billion 

Another 

assets 

of 

in 

Private  pension  funds  play  a  limited  role. 
Pension funds are not a major player in the capital 
markets and manage about EUR 40 billion at end-
2023. Pension funds do not play any major role in 
the overall Portuguese pension system, with most 
retirement benefits provided by the public pension 
system.  Occupational  pension  plans  cover  only  a 
small  fraction  of  the  workforce  and  private 
pensions serve mainly as a supplementary option. 
Encouraging  the  build-up  of  universal  funded 
supplementary  pension  schemes,  which  invest  in 
highly diversified financial portfolios, would further 
develop  domestic  capital  markets  and  make  the 
system  more 
overall 
sustainable in the light of demographic challenges. 

Portuguese 

pension 

The depth of available venture and 
growth capital 

The  local  venture  capital  (VC)  and  growth 
capital market is still very shallow. According 
to the private TTR database, Portuguese start-ups 
raised  EUR 886 million  in  2024,  marking  a  55% 

(93)  ESMA Market Report: Costs and Performance of EURetail 

Investment Products 2024, January 2025. 

(94)  Portuguese Association of Investment Funds: Análise APFIPP 
ao mercado de Organismos de Investimento Alternativo 
Imobiliário, November 2024. 

55 

 
 
Table A5.1:  Financial indicators 

(1) Annualised data 
Credit growth and pension funds EU data refers to the EA average. 
Source: ECB, ESTAT, EIOPA, DG FISMA CMU Dashboard, AMECO 

There  are  targeted  policies  in  place  to 
promote start-up funding. To address the issue, 
the Portuguese RRP includes measures to support 
the financing of start-ups. In particular, it finances 
the  capitalisation  of  companies  indirectly  through 
the  above-mentioned  public  development  bank, 
Banco  Português  de  Fomento,  with  a  funding 
allocation  of  EUR 1.55 billion. 
in 
November  2024,  the  European  Investment  Fund 
committed a total of EUR 90 million to three funds 
that 
incorporate  Portuguese  VC,  primarily  to 
accelerate the growth of start-up companies. 

In  addition, 

Financial literacy 

Portugal’s financial literacy lags behind that 
of its European peers. Portugal’s population lags 
behind  in  terms  of  financial  literacy,  ranking 
second to last in the financial knowledge score (95). 
While  the  general  trend  in  Portugal  –  as  in  other 
Member States – shows that individuals with lower 
education  levels  tend  to  have  lower  financial 
literacy.  A  recent  study (96)  found  that  even  new 

(95)  Source: Monitoring the level of financial literacy in the EU - 

July 2023 - Eurobarometer survey. 

(96)  Sarabando, P.; Matias, R..; Vasconcelos, P.; Miguel, T. Financial 

literacy of Portuguese undergraduate students in 

56 

students  entering  higher  education  have  notably 
In  particular,  their 
weak  financial  knowledge. 
understanding of financial risks is characterised by 
significant  misconceptions.  To  address 
these 
shortcomings,  Portugal  has  implemented  several 
initiatives, including the national plan for financial 
education  2021-2025  and  the  digital  financial 
literacy strategy, as well as a pilot project (2024–
involving  schools  and  communities  to 
2027) 
the  upper 
reinforce 
secondary 
in 
collaboration  with  Banco  de  Portugal  and 
supported  by  the  European  Commission,  these 
measures  –  by  improving  financial  literacy  –  can 
also  increase  market  participation,  as  individuals 
gain confidence to invest in bonds and equity. 

financial  education  at 
level.  Developed  by  the  OECD 

polytechnics: does the area of the course influence financial 
literacy?. Journal of Economic Analysis, 2023, 2, 28. 

20172018201920202021202220232024-Q3EUTotal assets of MFIs (% of GDP)201.3190.8180.9205.6202.5176.6159.1156.5247.2Common Equity Tier 1 ratio13.913.214.115.415.515.317.117.816.7Total capital adequacy ratio15.215.216.718.118.018.119.620.520.1Overall NPL ratio (% of all loans)13.39.46.14.93.63.02.72.61.9NPL (% loans to NFC-Non financial corporations)25.218.512.39.88.16.55.04.93.5NPL (% loans to HH-Households)7.15.13.73.42.82.32.42.52.1NPL-Non performing loans coverage ratio49.952.451.755.452.655.456.355.742.6Return on Equity1-0.82.74.30.04.98.713.816.010.1Loans to NFCs (% of GDP)37.534.131.437.035.230.827.425.830.1Loans to HHs (% of GDP)61.658.456.961.659.053.848.546.444.4NFC credit annual % growth-0.11.71.110.04.50.8-1.0-0.20.5HH credit annual % growth-0.20.81.11.53.73.4-0.51.20.3Stock market capitalisation (% of GDP)29.823.625.625.126.124.325.824.467.6Initial public offerings (% of GDP)0.000.010.000.000.230.000.00-0.05Market funding ratio42.943.945.546.146.447.148.9-49.6Private equity (% of GDP)0.210.260.090.590.330.120.16-0.41Venture capital (% of GDP)0.010.010.020.020.020.030.01-0.05Financial literacy (composite)------42.5-45.5Bonds (as % of HH financial assets)3.22.92.72.41.61.21.2-2.7Listed shares (as % of HH financial assets)1.51.31.41.51.51.41.5-4.8Investment funds (as % of HH financial assets)4.84.55.25.57.06.36.6-10.0Insurance/pension funds (as % of HH financial assets)18.017.517.516.314.912.411.4-27.8Total assets of all insurers (% of GDP)27.125.625.826.624.621.919.919.053.4Pension funds assets (% of GDP)--10.511.811.28.87.26.822.81-34-1011-1718-2425-27Colours indicate performance ranking among 27 EU Member States.Banking sectorNon-banks sector 
 
 
 
 
 
   
 
ANNEX 6: EFFECTIVE INSTITUTIONAL FRAMEWORK 

Portugal’s  institutional  framework  shapes 
the  country’s  competitiveness.  Portugal 
is 
undertaking reforms to reduce bureaucracy and to 
modernise, but challenges remain. The country has 
made progress on digitalisation. However, the civil 
service  is  struggling  with  low  attractiveness  and 
an ageing workforce. In the justice system, efforts 
length  of 
are  being  made 
proceedings,  but  ensuring  the  availability  of 
sufficient  human  resources  is  still  a  challenge. 
There  is  also  much  scope  to  enhance  regulatory 
practices. 

reduce 

the 

to 

Public perceptions 

Graph A6.1: Trust in justice, regional / local 
authorities and in government 

Source: Standard Eurobarometer surveys 

in  government  and 

Trust 
judiciary  has 
fluctuated  over  the  past  decade.  Among 
national  institutions,  trust  in  regional  and  local 
authorities  is  highest  (see  Graph  A6.1).  When 
asked about improvements that can increase trust 
in Portugal’s public administration, 59% of citizens 
pointed to less bureaucracy (EU: 52%), and 39% to 
better  skilled  civil  servants  (EU:  30%)  (97).  The 
perceived quality of government has improved and 
reached values above the EU average (98). Against 
this  backdrop,  the  country  is  reforming  several 

(97)  Understanding Europeans’ views on reform needs - April 
2023 - - Eurobarometer survey, Country Fact Sheet. 

sectors as part of its recovery and resilience plan 
(RRP)  and  in line  with  the  Portugal  2030  strategy 
(99), to modernise the state, improve efficiency and 
enhance citizen-centric service delivery. Portugal is 
also working to improve regional development and 
the  effectiveness  of  its  public  policies  through 
decentralisation (100). 

Quality of legislation and regulatory 
simplification 

Performance  in  developing  and  evaluating 
legislation  is  below  the  EU  average.  It  is 
stronger  for  stakeholder  engagement  than  for 
identifying  impacts  in  advance  and  for  assessing 
legislation  after  the  fact.  However,  performance 
remains  in  all  three  cases  below  the  EU  average, 
on  account  of  underdeveloped  methodological, 
systematic  adoption,  transparency,  oversight  and 
quality  control  requirements  for  the  above-
(Graph  A6.2). 
mentioned 
Moreover, there remains visible scope for Portugal 
to 
for 
simplifying 
identifying 
and 
administrative burdens (Table A6.1). 

further  strengthen 
regulation 

its  mechanisms 

regulatory 

tools 

to 

improve 

reforms  aim 

Recent 
the 
regulatory  governance.  Steps  have  been  taken 
to  further  strengthen  Portugal’s  legal  framework. 
CEJURE,  a  State Legal Centre,  has been  set up to 
provide  legal  support  and  advice  to  the  public 
administration  (101).  PLANAPP,  the  competence 
centre for planning, policy and foresight, has been 
strengthened  to  become  a  central  body  for 
planning and evaluating public policies. It supports 
is 
evidence-based 
responsible  for  regular  audits  and  transparency 
reports (102). 

formulation 

policy 

and 

(99)  What it is Portugal 2030 – Portugal 2030 

(100)To address the needs of regional governance, the 

Portuguese Commissions of Coordination and Regional 
Development (CCDR) have undergone changes in their 
status and role. 

(101) CEJURE – State Legal Centre 

(98)  Inforegio – European Quality of Government Index 

(102) Decree Law No 67/2024. 

57 

00.10.20.30.40.50.60.7AutumnSpringAutumnSpringAutumnSpringAutumnSpringAutumnSpringAutumnSummerWinterSummerWinterSpringAutumnSpringAutumn2014201520162017201820192020202220232024Justice,  legal system EU27Justice,  legal system PTRegional or local public authorities EU27Regional or local public authorities PTGovernment  EU27Government  PT 
 
     
 
 
 
 
Table A6.1:  Portugal. Selected indicators on administrative burden reduction and simplification 

(1) This table presents a subset of iREG indicators focusing on regulatory costs. The indicators refer to primary legislation. 
Source: OECD (2025), Regulatory Policy Outlook 2025 [https://doi.org/10.1787/56b60e39-en] and Better Regulation across the 
European Union 2025 (forthcoming). 

Graph A6.2: Indicators of Regulatory Policy and 
Governance (iREG) 

inventory  and  assess  whether  such  licences  and 
permits  are  still  required  or  should  be  removed 
(see also Annex 4). 

Social dialogue 

trade  unions  and 

Social  dialogue  is  highly  institutionalised, 
with  the  Economic  and  Social  Council  (CES) 
playing  a  role  in  national  legislation  and 
policymaking.  Two 
four 
employers’  associations  are  represented  in  the 
permanent  social  concertation  organ  of  the  CES 
and are involved in national legislation production 
and  policy  making  decisions.  Most  of  legislation, 
depending on the issue at stake, is preceded by a 
CES  consultation.  Social  partners  are  in  principle 
also  consulted  in  advance  for  their  views  on  the 
design  and  implementation  of  relevant  policy 
measures.  For instance,  this  was  the  case  for  the 
recovery  and  resilience  plan  (RRP),  for  the  2030 
Partnership  Agreement  and  the  key  challenges  to 
be  addressed  in  each  European  Semester  cycle. 
However,  some  civil  society  organisations  and 
social  partners  have  raised  concerns  that  such 
involvement is  a  formality  used  to legitimise pre-
decided policies rather than a genuine platform for 
discussion,  while  others  complain  about  their 

Source: OECD (2025), Regulatory Policy Outlook 2025 and 
Better Regulation across the EU 2025 (forthcoming). 

The  OECD  product  market 
regulation 
indicator shows that that Portugal’s licensing 
system  is  well  aligned  with  some  best 
practices,  but  not  all  of  them.  For  instance, 
while  the  government  keeps  an  up-to-date  online 
licences 
inventory  of  all 
required/issued to businesses by public bodies, it is 
not kept by a single body. There is no requirement 
for  the  government  to  regularly  review  the 

the  permits  and 

58 

0.00.51.01.52.02.53.03.54.0Primary lawsSubordinateregulationsPrimary lawsSubordinateregulationsPrimary lawsSubordinateregulationsPT_StakeholderengagementPT_Regulatory ImpactAssessmentPT_Ex-post evaluation oflegislationMethodologySystematic adoptionTransparencyOversight and quality control2021EU-27Ex ante impact assessment of legislationEx post evaluation of legislationIdentify and assess the impacts of the baseline or ‘do nothing’ option.Is required to consider the consistency of regulations and address areas of duplication.Identify and assess the impacts of alternative non-regulatory options.Is required to contain an assessment of administrative burdens.Quantify administrative burdens of new regulations.Is required to contain an assessment of substantive compliance costs.Quantify substantial costs of compliance of new regulations.Compares the impact of the existing regulation to alternative options.Assess macroeconomic costs of new regulations. Periodic ex post evaluation of existing regulations is mandatory.Assess the level of compliance.Government uses stock-flow linkage rules when introducing new regulations (e.g., one-in one-out).Identify and assess potential enforcement mechanisms.A standing body has published an in-depth review of specific regulatory areas in the last 3 years.In the last 5 years, public stocktakes have invited businesses and citizens to assess the effectiveness, efficiency, and burdens of legislation.When developing new legislation, regulators are required to …Yes /  For all primary laws For major primary laws For some primary lawsNo / Never 
   
 
 
     
 
 
Table A6.2:  Digital Decade targets monitored through the Digital Economy and Society Index 

Source: Digital Economy and Society Index 

involvement. 

limited 
ESF+ 
programme,  as  well  as  the  multi-fund  regional 
programmes,  have  a  dedicated  allocation  for  the 
capacity building of social partners (103). 

thematic 

The 

other  Member  States  through  the  Professional 
Attributes Certification System (SCAP). This allows 
to  access  public  services  provided  by  other 
Member  States,  including  those  enabled  by  the 
Once-Only Technical System, part of the EU Single 
Digital Gateway (105).  

Digital public services 

Portugal  has  made  some  progress  in  the 
provision  of  public  services  online.  While  it 
scores above the EU average on the availability of 
digital public services for citizens and in access to 
e-health  records,  it  is  still  lagging  behind  on 
services for businesses (Table A6.2). 

Portugal  is  making  good  progress  towards 
seamless,  automated  exchange  of  authentic 
documents  and  data  across  the  EU.  It  has 
already  successfully  tested  its  first  transactions 
through  the  Once-Only  Technical  System  (104), 
which  is  part  of  the  European  Union’s  Single 
Digital  Gateway.  Portugal  is  in  the  process  of 
connecting the first authorities. 

Portugal has set up and notified eID schemes 
for legal persons under the eIDAS regulation 
through  the  Digital  Mobile  Key  and  the  Citizen 
Card.  Portuguese  businesses  can  authenticate 
themselves  to  access  public  services  provided  by 

The take-up of digital services in Portugal is 
uneven.  The  use  of  e-government  services  is 
above  the  EU  average  and  citizen  perception  of 
public  service  provision  has  improved  thanks  to 
efforts  on  digital  transformation.  However,  the 
share  of  eID  users  is  markedly  below  the  EU 
average (30.4% vs 41.1% for the EU) (106). In line 
with  its  RRP,  Portugal  is  implementing  measures 
relating  to  digitalisation  of  public  administration 
(107).  Furthermore,  an  integrated  citizen-centred 
process  has  been  put  in  place  for  people  with 
disabilities,  to  minimise  unnecessary  travel  and 
interactions, 
only 
submitted once.  

information 

ensuring 

is 

Civil service 

Portugal’s  public  administration  faces  risks 
due  to  an  ageing  workforce  and  low  public 
employment attractiveness. In 2024, the share 
of government employees above 49 years old was 
almost  47%  of  the  workforce.  The  share  of  civil 

(103) For  an  analysis  of  the  involvement  of  Portugal’s  social 
partners at national level in the European Semester and the 
Recovery  and  Resilience  Facility,  see  Eurofound  (2025), 
National-level  social  governance  of  the  European  Semester 
and the Recovery and Resilience Facility. 

(104) European Commission, The Once Only Principle System: A 

breakthrough for the EU’s Digital Single Market 

(105) European Commission, Once-Only Technical System 

Acceleratormeter. 

(106) European Commission, eIDAS Dashboard 

(107) For example, the Portuguese Ministry of Justice is developing 
a chatbot to simplify access to legal proceedings with a 
more accessible language. 

59 

Digital Decadetarget by 20302022202320242024EU-27Digitalisation of public services179788279100Score (0 to 100)20212022202320232030282828285100Score (0 to 100)202120222023202320303na638679100Score (0 to 100)20212022202320232030Digital public services for businessesAccess to e-health recordsPortugalEU-27Digital public services for citizens 
 
 
 
  
 
 
 
hiring 

digital 

to  make 

servants  with  higher  education  is  rising  (39.7%), 
yet  significantly  below  the  54%  in  the  EU27  (108). 
The  participation  rate  of  civil  servants  in  adult 
learning  has  been  increasing  in  recent  years.  In 
2024,  it  stood  at  21.8%,  vs.  18.9%  in  the  EU27. 
public 
Undertaken  measures 
administration more appealing, including under the 
recovery and resilience plan, promote merit-based 
recruitment  to  attract  younger  talent,  using 
processes  with 
streamlined, 
transparent  progress  tracking  for  candidates. 
Higher  salaries  and  professional  development 
opportunities,  along  with  promoting  workplace 
modernisation  and  flexibility,  were  also  in  focus. 
Additionally,  the  performance  evaluation  system 
has  been  revamped  (109)  to  better  support  and 
value  civil  servants'  careers.  The  new,  accessible 
evaluation  process  emphasises  performance  and 
merit of civil servants for a better quality of public 
service and improvement of public administration. 
Programmes  for  digital  literacy,  green  skills  (110) 
and  increasing  the  educational  attainment  (111)  of 
civil servants have been introduced.  

Integrity 

A  far  higher  percentage  of  companies  than 
the  EU  average  consider  corruption  to  be 
widespread and a problem in doing business. 
In  Portugal,  83%  of  companies  consider  that 
corruption  is  widespread  (EU  average  64%)  and 
51%  consider  that  corruption  is  a  problem  when 
doing  business  (EU  average  36%)  (112).  Moreover, 
only  22%  of  companies  believe  that  people  and 
businesses caught for bribing a senior official  are 
appropriately  punished  (EU  average  31%)  (113). 
However,  corruption  cases  are  being  investigated 
as  a  matter  of  priority,  including  ongoing  cases 
concerning  foreign  bribery.  Portugal  has  adopted 
measures  which  are  expected  to  help  ensure 
sufficient  resources  for  preventing,  investigating 
and prosecuting corruption. However, the shortage 

There 

becoming 

to  allow 

legislation 

time-barred. 

of  police  and  prosecution  service 
resources 
continues  to  pose  a  challenge  for  the  efficient 
prosecution  of  corruption  cases  (114).  Complex 
criminal  proceedings,  including  those  related  to 
high-level corruption, are lengthy, often leading to 
are 
crimes 
reflections  on  how  to  adapt  general  criminal 
procedure 
for  efficient 
handling  of  these  cases  (115).  Furthermore,  there 
the  transparency  of 
are  concerns  regarding 
decision-making  in  public  procurement.  24%  of 
companies (EU average 27%) think that corruption 
has prevented them from winning a public tender 
or a public procurement contract in practice in the 
last  three  years  (116).  A  criminal  investigation 
leading  to  the  dissolution  of  Parliament  revealed 
integrity  risks  linked  to  the  National  Interest 
Projects  (PINs),  which  constitute  an  exceptional 
regime linking governments and businesses (117). 

implemented  a  public 
Portugal  has  not 
register  for  lobbyists,  unlike  most  Member 
States. Stakeholders have urged the government 
to  introduce  relevant  measures  on  lobbying  as  a 
matter  of  priority  (118).  Legislation  on  revolving 
doors 
introduced  stricter  penalties  and 
extended  the  rules  also  to  the  companies  hiring 
the persons in question (120). 

(119) 

Justice 

The  efficiency  of  the  justice  system  has 
improved but challenges remain, in particular 
in  administrative  and  tax  courts.  In  civil  and 
commercial  cases,  the  average  length  at  first 
instance  has 
in  2023, 
compared to 238 days in 2022), and the clearance 

(267  days 

increased 

(114) See the 2024 country-specific chapter for Portugal of the 

Rule of Law Report, pp. 18-19. 

(115) Ibid., pp. 12-13. 

(116) Flash Eurobarometer 543 on businesses’ attitudes towards 

corruption in the EU (2024). 

(108) Eurostat. 2025. European Union Labour Force Survey.  

(117) See the 2024 country-specific chapter for Portugal of the 

(109) Law Decree No 12/2024. 

(110) Início – Portugal Digital; Portaria No 21/2023 | DR. 

(111) Doutor - AP - FCT 

(112) Flash Eurobarometer 543 on businesses’ attitudes towards 

corruption in the EU (2024). 

(113) Ibid. 

Rule of Law Report, p. 23. 

(118) Ibid., pp. 22-23. 

(119) Law No 25/2024, of 20 February, amending Law 52/2019 
(Rules on the exercise of functions by political and high 
public office holders). 

(120) See the 2024 country-specific chapter for Portugal of the 
Rule of Law Report, pp. 19-20, with further references. 

60 

 
 
 
rate dropped to 96% in 2023 (compared to 103% 
in  2022).  In  first-instance  administrative  and  tax 
courts, while there have been improvements in the 
case-backlog,  and  the  disposition  time  has  been 
decreasing  since  2020,  it  remains  comparatively 
high,  at  597  days.  In  second-instance  courts,  the 
disposition time increased further, with 1 200 days 
needed  to  resolve  a  case  in  2023  (compared  to 
1 064  in  2022),  among  the  lengthiest  in  the  EU, 
and the clearance rate dropped to 71% (compared 
to 78% in 2022). Efforts are being made to reduce 
the length of proceedings, including in the context 
of the RRP. While the overall quality of the justice 
system  is  good,  there  are  serious  concerns  about 
resources,  in  particular  regarding  legal  clerks.  In 
February  2024,  over  1 100  posts  in  first-instance 
ordinary  courts  and  59  posts  in  first-instance 
administrative  and  tax  courts  remained  vacant 
(121).  The  shortage  of  human 
is 
considered  to  be  impacting  the  efficiency  and 
level  of 
quality  of  the 
digitalisation is advanced, with widespread use of 
digital technologies by the courts and prosecution. 
However,  online  access  to  judgments  remains 
limited,  especially  for  first-instance  decisions.  As 
regards 
independence,  no  systemic 
deficiencies have been reported. (122)  

justice  system.  The 

resources 

judicial 

(121) Situation  on  27 February  2024.  Ministry  of  Justice,  staff 

map. 

(122) For more detailed analysis of the performance of the justice 
system  in  Portugal,  see  the  upcoming  2025  EU  Justice 
Scoreboard and 2024 Rule of Law Report. 

61 

 
 
SUSTAINABILITY 
ANNEX 7: CLEAN INDUSTRY AND CLIMATE MITIGATION 

faces 

in  wind, 

significant 

solar,  and 

Portugal 
challenges 
regarding  its  clean  industry  transition  and 
climate  mitigation.  Its  modest  manufacturing 
electrolyser 
capacity 
technologies  shows  potential,  especially  in  the 
battery  sector  due  to  large  lithium  deposits. 
industrial  policy  and  R&D 
However,  strategic 
investments  lag  behind  the  EU  average.  The 
automotive industry is strong, but greening efforts 
need  more  infrastructure  investment.  Portugal's 
reliance  on  imported  critical  raw  materials  poses 
sustainability 
circular 
economy 
initiatives.  Manufacturing  emissions 
trends  highlight  the  need  for  additional  industry 
decarbonisation  efforts.  This  annex  reviews  the 
areas  in  need  of  urgent  attention  in  Portugal’s 
clean  industry  transition  and  climate  mitigation, 
looking at different dimensions. 

challenges, 

prompting 

Strategic autonomy and technology 
for the green transition  

Portugal ’s manufacturing capacity across all 
net-zero  technologies  remains  modest  but 
with significant development potential in the 
battery  and  hydrogen  sector. 
In  2023, 
Portugal’s  manufacturing  capacity  amounted  to 
2.4  -  5.55  GW  for  wind  turbine  towers  and  3.5  – 
3.75  GW  for  wind  turbine  blades;  between  450 
and  500  MW/y 
(8-9%  of  EU  capacity)  for 
electrolysers;  and  between  50  and  100  MW/y 
(negligible  share  of  total  EU  capacity)  for  solar 
PV(123).  

Portugal  has  the  largest  lithium  deposits  in 
Europe,  which  could  reduce  dependencies  on 
critical  raw  materials  for  European  battery 
manufacturers.  Approval  was  granted  in  May 
2024  to  the  UK  firm  Savannah  Resources  and 
exploitation  is  expected  to  start  next  year.  Paired 
with  the  announcement  of  a  lithium-ion  battery 
factory  by  CALB  in  Siles  (expected  production 
capacity  of  15  GW/h),  this  could  enable  a  wider 
uptake of battery manufacturing in Portugal. 

(123) European Commission: Directorate-General for Energy, The 
net-zero manufacturing industry landscape across the 
Member States 2025. 

62 

Portugal  participates 
in  three  hydrogen 
IPCEIs:  Hy2Tech,  Hy2Use,  Hy2Infra.  Between 
2021 and 2023, it also received EUR 62 million for 
hydrogen projects from the EU Innovation Fund. 

regarding  net-zero 

A  lack  of  strategic  orientation  in  industrial 
regulatory 
policy  and  of  a  dedicated 
framework 
industry 
means  that  there  are  few  signals  and  little 
scale  to  support  net  zero  manufacturing.    In 
terms  of  investment  support,  relevant  schemes 
involve  two  grant  frameworks  approved  by  the 
European  Commission 
the 
Temporary Crisis and Transition Framework (1 350 
billion) to support investment in the production of 
certain  net  zero  technologies,  namely  batteries, 
solar  panels,  wind 
turbines,  heat  pumps, 
electrolysers  and  equipment  for  carbon  capture 
usage  and  storage.  Additional  investment  and 
efforts 
innovation  capacity  and 
coordination are necessary to compete in net zero 
innovation. 

in  2024  under 

increase 

to 

direct 

produced 

Portugal’s  automotive and  mobility  sector  is 
one  of  the  most  important  industrial  value 
chains in the Portuguese economy and one of 
its leading exporters (11% of total exports). 
Portugal  hosts  over  220  automotive  supplier 
companies  and  four  major  car  manufacturers 
(European  original  equipment  manufacturers, 
OEMs).  The  automotive  industry  employs  5.6%  of 
the Portuguese workforce. This translates into 7.7 
vehicles 
automotive 
per 
manufacturing  employee  (EU  average:  5.4).  In 
total,  Portugal  produces  over  300 000  vehicles  a 
year  (2.14%  of  all  EU  vehicle  production),  with  a 
total  turnover  of  EUR  5.2  billion.  Most  of  these 
(over  96%)  are  exported  to  other  EU  Member 
States  (Germany,  France,  Italy  and  Spain),  the  UK 
and 
the  USA.  The  automotive  components 
production,  with  an  EUR  9.1  billion  turnover, 
represents  most  of  the  value  added  of  the 
automotive 
in  Portugal  and  exports 
mainly to the main vehicle manufacturing member 
states  (Spain  (27%),  Germany  (22%),  France 
(12%)), the USA (6%), as well as the UK (5%). 

industry 

fleet 

require 

Portuguese efforts to green and electrify the 
increased  green 
vehicle 
infrastructure  investment.  In  2023,  61.9%  of 
new registrations in Portugal were petrol-powered 
cars (including hybrids), ranking 19th in the EU. This 
shows Portugal making some progress in greening 

 
 
 
 
 
and  electrifying  the  vehicle  fleet.  There  is  still  a 
high  need  for  green  infrastructure  investments, 
especially in terms of charging infrastructure. 

The strength of Portugal’s automotive sector 
is based on a close cooperation between higher 
education  institutions  and  training  centres,  R&D 
industry 
institutions,  private  companies  and 
the 
associations.  All  under  coordination  of 
Portuguese  government,  which  considers 
the 
industry to be a priority sector. 

Critical raw materials 

(from 

Portuguese  manufacturing  depends  heavily 
on  imports  of  critical  raw  materials  (CRMs) 
needed for  the green and  digital  transitions. 
The  main  critical  raw  material  imports  include 
(from  Turkey,  Norway,  and  Brazil), 
copper 
phosphorus 
and  Morocco), 
aluminium  (primarily  from  Turkey)  and  phosphate 
implies  significant 
rock 
challenges  regarding  sustainability  and  resilience, 
such  as  supply  chain 
risks,  environmental 
degradation,  and  social  concerns.  With  29.6%  of 
material  inputs  to  manufacturing  coming  from 
imports  in  2023  (EU  average:  22%),  Portugal  is 
particularly vulnerable to supply chain disruptions. 

(from  Morocco).  This 

Algeria 

is 

policies 

to 
implementing 
Portugal 
strengthen  supply  chains  and  the  uptake  of 
circular  solutions  for  critical  raw  materials. 
The  eMaPriCE  project  was  developed  during 
identifying 
2021/2022  with  the  objective  of 
opportunities for circular economy strategies to be 
implemented to prevent CRMs ending up as waste. 
It also looks at options for substituting these CRMs 
with non-critical raw materials. 

Portugal’s upcoming Circular Economy Action 
Plan  includes  measures  to  promote  the  use 
of  recycled  materials  over  raw  material 
extraction.  One  key  action  proposed  is  to  study 
potential policies and financial incentives that can 
promote  circularity  and  reduce  reliance  on  critical 
Implementation  of  CEAP 
raw  materials. 
is 
supported  by 
the  2030  National  Waste 
Management Plan, aiming to reintegrate materials 
like  food, 
into  the  economy,  covering  areas 
construction, 
CRMs. 
plastics, 
Furthermore,  the  Strategic  Plan  for  Urban  Waste 
(PERSU  2030)  also  outlines  strategies  to  prevent 

textiles 

and 

CRMs from becoming waste and explores ways in 
which  they  can  be  substituted  with  non-critical 
materials.  The  recycling  rate  for  e-waste,  a  key 
source of critical raw materials, was 57% in 2023, 
well below the EU average of 81%. The reuse and 
recycling rate for end-of-life vehicles is exactly at 
the EU average (89% in 2022). This points to the 
need  to  avoid  the  loss  of  critical  raw  materials, 
notably  as  the  car  industry  shifts  to  -battery 
electric vehicles. 

Portugal  produces  several  critical 
raw 
materials needed for the development of net 
zero industry. These include lithium (the only EU 
source  of  lithium  ores  in  2021),  tungsten,  copper 
and  feldspar.  Portugal’s  raw  materials  resource 
productivity  is  significantly  below  the  EU  average 
(1 454  EUR/Kg  vs  2 454  EUR/Kg).  CRMs  are 
essential 
for  producing  high-tech  products, 
including  electric  vehicles,  wind  turbines,  and 
electronics. The production of these materials is in 
the form of ore concentrates, which is one of the 
reasons  for  Portugal’s  raw  materials  resource 
productivity being below the EU average. Given the 
mineral  potential  of  the  country  there  is  room  to 
improve  productivity.  In  2023,  Portugal  budgeted 
USD  16.5  m  for  the  exploration  of  raw  materials 
(compared to USD 18.8 m in 2022). The main ones 
being lithium (USD 7.9 m), copper (USD 4.3 m) and 
zinc (USD 4 m). Portugal’s strategic dependence on 
raw  materials  is  below  the  EU  average  (0.20  vs 
0.23).  

The  circular  use  of  material  would  help 
reduce Portugal’s dependency on imports. The 
use of recycled materials has remained extremely 
low  (2.8%)  compared  to  the  EU  average  (11.8%) 
over the last decade. 

Climate mitigation  

is 

Portuguese  manufacturing 
relatively 
greenhouse  emissions  intensive.  As  in  the  EU 
total 
overall,  about  one  fifth  of  Portugal’s 
from 
greenhouse 
manufacturing (124).  Industry  emits  400  g  CO2eq 

emissions 

come 

gas 

(124) In  2023.  Manufacturing  includes  all  divisions  of  the  “C” 
section  of  the  NACE  Rev.  2  statistical  classification  of 
economic  activities.  In  the  remainder  of  this  section,  unless 
indicated  otherwise,  data  on  manufacturing  refer  to  the 
divisions  of  the  NACE  section  C  excluding  division  C19 
(manufacture  of  coke  and  refined  petroleum  products),  and 

63 

 
 
 
of  greenhouse  gases  per  euro  of  gross  value 
added  (GVA),  about  50%  more  than  the  EU 
average).  From  2017  to  2022,  the  emissions 
intensity  of  manufacturing  in  Portugal  increased 
by  13%,  compared  to  a  fall  of  20%  in  the  EU 
overall.  At  46%  and  54%  respectively,  the  shares 
of  energy-  and  non-energy-related  emissions  in 
Portugal’s  manufacturing  industry  (the  latter  are 
related  to  industrial  processes  and  product  use) 
remain broadly comparable with the shares in the 
EU overall, 43% and 57%.  

improvements 

in  the 
In  recent  years, 
intensity of Portugal’s manufacturing output 
have been lacking, regarding both energy and 
process  and  product  use-related  emissions. 
Between  2017  and  2022,  the  energy-related 
greenhouse  emissions  intensity  of  Portuguese 
manufacturing remained broadly constant, at 185 
g  CO2eq  per  euro  of  GVA,  about  40%  above  the 
EU  average  in  2022 (125).  Concerning  industrial 
processes and product use, the emissions intensity 
from  these  sources  of  Portugal’s  manufacturing 
increased  by  6%,  to  160  g  CO2eq/€  (60%  above 
the EU average), while it decreased by 23% in the 
EU  overall. 
In  the  meantime,  the  share  of 
renewables and electricity in manufacturing’s final 
energy  consumption 
increased  slightly,  by  3 
percentage points, to 57%. In this regard, Portugal 
comes sixth highest in the EU. The energy intensity 
of  manufacturing  increased  in  this  period  too,  by 
21%,  to  reach  1.8  GWh  per  euro  of  gross  value 
added – up from 1.5 GWh in 2017 and about two 
thirds  higher  than  the  EU  average  of  1.1  GWh  in 
2022.  

the  year  2022.  The  source  of  all  data  in  this  section  is 
Eurostat;  data  following  the  UNFCCC  Common  Reporting 
Framework (CRF) are from the European Environment Agency 
(EEA), republished by Eurostat. 

(125) For the GHG emissions intensity of GVA related to energy use 
and  industrial  processes  and  product  use  respectively,  GHG 
emissions  are  from  inventory  data  in  line  with  the  UNFCCC 
Common  Reporting  Format  (CRF),  notably  referring  to  the 
source sectors CRF1.A.2 –  fuel combustion in manufacturing 
industries  and  construction  and  CRF2  –  industrial  processes 
and  product  use.  The  CRF1.A.2  data  broadly  correspond  to 
the NACE C and E sectors, excluding C-19. GVA data (in the 
denominator  for  both  intensities)  are  aligned  with  this 
sectoral  coverage.  Therefore,  they  are  not  fully  consistent 
with the data referred to in other part of this section. 

64 

Graph A7.1: GHG emission intensity of manu-
facturing and energy-intensive sectors, 2022 

Source: Eurostat. 

and 

intensity 
in  Portugal 

Except  the  paper  products  sector,  the 
of 
greenhouse 
emissions 
is 
energy-intensive  sectors 
comparatively 
Energy-intensive 
low. 
industries (126) account for 16% of Portugal’s total 
manufacturing  gross  value  added  (2022).  Among 
these  industries,  in  2022,  the  manufacture  of 
paper 
a 
comparatively  high  emissions  intensity,  at  1.2  kg 
CO2eq/€ of GVA. This was above the weighted EU 
average  of  0.7 kg.  Despite  comparatively  low 
electricity  prices  prevailing  in  Portugal  lately (127), 
output  from  greenhouse  gas  emissions-intensive 
industries  has  declined  since  2021,  in  particular 
for  the  manufacturing  of  chemicals  and  chemical 
products  (by  more  than  half)  and  manufacturing 
of paper and paper products (by 15%) (128). 

recorded 

products 

paper 

(126) Notably,  the  manufacture  of  paper  and  paper  products 
(NACE  division  C17),  of  chemicals  and  chemical  products 
(C20),  “other”  non-metallic  mineral  products  (C23;  this 
division includes manufacturing activities related to a single 
substance of mineral origin, such as glass, ceramic products, 
tiles,  and  cement  and  plaster),  and  basic  metals  (C24).  To 
date,  these  industries  are  energy-intensive  –  i.e.  consuming 
much  energy  both  on  site  and/or  in  the  form  of  purchased 
electricity  –  and  greenhouse  gas  emissions  intensive,  in 
various combinations. 

(127) For a detailed analysis of energy prices, see Annex 8 on the 

affordable energy transition. 

(128) The 

implemented 

Iberian  Exception, 

in  2022,  was  a 
temporary  mechanism  allowing  Spain  and  Portugal  to  cap 
natural  gas  prices  used  for  electricity  generation,  thereby 
reducing electricity costs for consumers while addressing the 
energy  market  disruptions  caused  by  Russia’s  invasion  of 
Ukraine. 

00.511.522.533.54C-C19C17C20C23C24KG CO2eq / €PortugalEU-27 
 
  
 
Graph A7.2: Manufacturing industry output: total 
and selected sectors, index (2021 = 100), 2017-
2023 

is  projected  to  overachieve  its  effort  sharing 
target,  a  28.7%  reduction,  by  10.7  percentage 
points. 

Graph A7.3: Greenhouse gas emissions in the 
effort sharing sectors, 2005 and 2023 

Source: Eurostat. 

Portugal  has  started  supporting  the  clean 
transition  of  manufacturing.  To  address  these 
challenges,  Portugal  has  implemented  various 
policies including deployment of renewable energy 
and  the  promotion  of  renewable  hydrogen  and 
biogas,  as  outlined  in  the  country’s  National 
Energy  and  Climate  Plan  (NECP).  This  includes  a 
(revised) national hydrogen strategy, a biomethane 
action  plan,  a  system  of  guarantees  of  origin  for 
the injection of renewable gases into the grid and 
a 
centralised 
for 
competitive  auction 
purchasing of renewable gases. 

the 

Portugal is projected to reach its 2030 effort 
sharing  target  with  the  climate  mitigation 
policies it currently has in place (129). In 2023, 
greenhouse  gas  emissions  from  Portugal’s  effort 
sharing sectors are expected  to have been 18.6% 
below  the  level  of  2005  (see  graph  A7.3).  By 
2030,  current  policies  are  projected  to  reduce 
them by 31.8% relative to 2005 levels. Additional 
policies  considered  in  Portugal’s  final  updated 
NECP  are  projected  to  involve  reductions  by  a 
further 7.5 percentage points (130).  Hence Portugal 

(129) The national greenhouse gas emission reduction target is 
set  out  in  Regulation  (EU)  2023/857  (the  Effort  Sharing 
Regulation).  It  applies  jointly  to  buildings  (heating  and 
cooling);  road  transport,  agriculture;  waste;  and  small 
industry (known as the effort sharing sectors). 

(130) The  emissions  from  effort  sharing  sectors  for  2023  are 
based on approximated inventory data. The final data will 
be  established  in  2027  after  a  comprehensive  review. 
Projections on the impact of current policies (‘with existing 
measures’,  WEM)  and  additional  policies  (‘with  additional 

Source: European Environment Agency. 

Sustainable industry 

efforts 

Despite  progress,  Portugal  needs  to  make 
improve  waste 
to 
further 
management  and  develop  the  potential  of 
the  circular  economy.  Portugal  adopted  a 
national  Circular  Economy  Action  Plan  in  2017, 
and  a  new  one  is  still  under  preparation.  New 
national  legislation  on  waste  management  was 
approved 
in  2020.  The  new  national  waste 
management plan (PNGR 2030), the Strategic Plan 
for  Municipal  Waste  (PERSU  2030)  and  the 
Strategic Plan for non-urban Waste (PERNU 2030) 
were  adopted  in  2023.  The  new  regional  waste 
management  plans  for  Madeira  and  Azores  were 
adopted, in 2021 and 2023, respectively. However, 
overall,  progress  in  this  field  has  been  limited, 
although the situation varies by region. 

Portugal  is  far  below  the  EU  average  on 
circular  economy  and  waste  management 
indicators.  Portugal’s  circular  use  of  materials 
had  a  rate  of  2.8%  in  2023,  well  below  the  EU 
average  of  11.8%.  The  resource  productivity  is 
also below the EU average with EUR 1.6 per kg of 
material  consumed  (EU  average:  EUR  2.7  per  kg). 

measures’, WAM) as per Portugal’s final updated national 
energy and climate plan. 

65 

607080901001101201302017201820192020202120222023ManufacturingManufacture of paper and paper productsManufacture of chemicals and chemical productsManufacture of other non-metallic mineral productsManufacture of basic metals0510152025303540455020052023MtCO2eDomestic transport (excl. aviation)Buildings (under ESR)AgricultureSmall industryWaste 
       
 
 
       
 
and  energy  plan  (NECP),  with  the  investment 
included  for  sustainable  energy  and  transport, 
would largely deliver the necessary investment for 
clean  air  and  noise.  The  costs  from  all  pollutants 
are estimated at EUR 4.7 billion (134).  

Portugal missed the EU target of recycling 50% of 
municipal waste by 2020 (its rate was 27%) and it 
is at high risk of missing the new EU waste targets 
for  2025 (131).  Therefore,  Portugal  needs 
to 
implement  these  new  plans,  as  well  as  adopt  the 
pending  measures,  including  additional  initiatives 
and further investment. 

Current 
investment  to  become  a  more 
insufficient. 
circular  economy  has  been 
Portugal  is  estimated  to  need  total  additional 
investment  of  EUR  2.5  billion  a  year  for  the 
including  waste 
transition, 
circular  economy 
management (132). 

Portugal  has  been  making  considerable 
progress  in  reducing  air  pollution,  which  is 
now  decoupled  from  GDP  growth.  However, 
this is a mixed picture. While emissions of several 
air  pollutants  have  fallen  in  recent  decades,  air 
quality  in  Portugal  continues  to  give  cause  for 
concern  in  some  parts  of  its  territory,  mainly  as 
regards NO2. 

releases 

industry  still 

large 
Portugal’s 
amounts  of  water  pollutants.  Some  800 
industrial  installations  are  required  to  have  a 
permit based on the Industrial Emissions Directive. 
the  11th  highest  amount  of 
Portugal  has 
emissions of heavy metals to water, and ranks 6th 
for  emissions  intensity  (below  the  EU  average 
intensity of 0.864 kg / billion EUR GVA).  The main 
contributors to emissions to water in Portugal are 
the  pulp,  paper  and  wood  industry  for  heavy 
metals,  nitrogen, 
total 
phosphorus  and  waste  management  for  heavy 
metals. 

total  organic  carbon, 

The  impact  of  air  pollution  on  human  health 
remains significant.  The  latest  available  annual 
estimates for Portugal (for 2022) by the European 
Environment Agency attribute 3 600 deaths a year 
(or  35 400  years  of  life  lost  (YLL))  to  fine 
particulate  matter  (PM2.5);  710  deaths  a  year  (or 
6 900  YLL)  to  nitrogen  dioxide  (NO2)  and  1  400 
deaths  a  year  (or  13 900  YLL)  to  ozone (133).  The 
adequate  implementation  of  the  national  climate 

(131) European Commission, 2023 Waste early warning report. 

(132) European Commission, DG Environment, Environmental 

investment needs & gaps assessment programme, 2025 
update. Expressed in 2022 prices. 

(133) EEA, 2024, Harm to human health from air pollution in 

(134) Latest available annual estimates by the European 

Europe: burden of disease status, 2024. 

Environment Agency. 

66 

 
 
 
Table A7.1:  Key clean industry and climate mitigation indicators: Portugal 

Source:  Net zero industry: European Commission: The net-zero manufacturing industry landscape across Member States: final 
report, 2025. Automotive industry transformation: Eurostat. Critical raw materials: Eurostat. Climate mitigation: See 
footnotes in the "climate mitigation" section; reduction of effort sharing emissions: EEA greenhouse gases data viewer; European 
Commission, Climate Action Progress Report, 2024. Sustainable industry: Years of life lost due to PM2.5: Eurostat and EEA, 
Harm to human health from air pollution in Europe: burden of disease status, 2024. Air pollution damage: EEA, EU large industry 
air pollution damage costs intensity, 2024. Emissions covered: As, benzene, Cd, Cr, Hg, NH3, Ni, NMVOC, NOX, Pb, dioxins, PM10, 
PAH, SOX. Water pollution intensity: EEA, EU large industry water pollution intensity, 2024. Releases into water covered from 
cadmium, lead, mercury, nickel. Other indicators: Eurostat. 

67 

Strategic autonomy and technology for the green transitionNet zero industryOperational manufacturing capacity 2023- Solar PV (c: cell, w: wafer, m: module), MW50-100 (m)- Electrolyzer, MW450-500- Wind (b: blade, t: turbine, n: nacelle), MW3500-3750 (b), 2400-5550 (t)- battery, MWh-Automotive industry transformation201720182019202020212022202320182021Motorisation rate (passenger cars per 1000 inhabitants), %490511525535541549558539561New zero-emission vehicles, electricity motor, %0.851.953.085.449.2411.6418.211.038.96Critical raw materials201720182019202020212022202320182021Material import dependency, %31.430.730.427.831.329.624.222.6Climate mitigationTrendIndustry decarbonisation201720182019202020212022202320172022GHG emissions intensity of manufacturing production, kg/€0.350.350.370.480.440.4 0.340.27Share of energy-related emissions in industrial GHG emissions45.345.544.144.544.543.946.444.842.5Energy-related GHG emissions intensity of manufacturing181.8180.4190.7233.9214.3185.4-158.4132.9and construction, kg/€Share of electricity and renewables in final energy consumption53.953.954.655.154.457.058.243.344.2in manufacturing, %Energy intensity of manufacturing, GWh/€1.481.511.592.011.891.801.761.291.09Share of energy-intensive industries in manufacturing production16.07.3GHG emissions intensity of production in sector [...], kg/€- paper and paper products (NACE C-17)1.641.601.771.661.421.17--0.730.68- chemicals and chemical products (NACE C20)1.511.351.691.441.521.27--1.251.26- other non-metallic mineral products (NACE C23)3.613.233.123.272.882.83--2.532.24- basic metals (NACE C24)0.480.500.570.560.490.43--2.793.49Reduction of effort sharing emissions20182019202020212022202320182023GHG emission reductions relative to base year, % -17.9-18.2-18.6- domestic road transport-14.4-11.8-25.5-20.4-14.9-9.71.45.2- buildings-36.6-36.5-36.5-38.2-40.6-45.521.432.92005202120222023TargetWEMWAMEffort sharing: GHG emissions, Mt; target, gap, %48.639.939.839.6-28.73.1310.664Sustainable industryTrendCircular economy transition20182019202020212022202320182021Material footprint, tonnes per person17.017.215.418.216.016.514.715.0Circular material use rate, %2.2        2.3        2.5        2.7        3.3        2.8        11.611.1Resource productivity, €/kg1.2        1.3        1.3        1.2        1.5        1.6        2.12.3Zero pollution industryYears of life lost due to PM2.5, per 100,000 inhabitants256      249      242      204      503      -702571Air pollution damage cost intensity, per thousand € of GVA    29.9          27.5      Water pollution intensity, kg weighted by human factors per bn € GVA    1.4   0.9PortugalEU-27PortugalEU-27PortugalEU-27 
 
  
 
ANNEX 8: AFFORDABLE ENERGY TRANSITION 

This  annex  outlines  the  progress  made  and 
the  ongoing  challenges  faced  in  enhancing 
energy  competitiveness  and  affordability, 
while advancing the transition to net zero. It 
examines  the  measures  and  targets  proposed  in 
the  final  updates  to  the  national  energy  and 
climate plans (NECPs) for 2030. 

generally  followed  EU  trends,  with  electricity 
network costs being lower and taxes being higher 
than  EU  average  (with  the  exception  of  non-
household consumers), while household gas prices 
faced  higher  network  costs  and  taxes,  in  contrast 
to lower charges for non-households.  

increasing 

While  Portugal  has  shown  progress  in  the 
share  of  renewable  energy  in  its  electricity 
mix  and 
interconnection 
capacity,  there  are  considerable  challenges 
regarding 
to  be  addressed,  especially 
public 
inadequate 
administration, 
and 
flexibility solutions. 

in 
the 
efficiency 

resources 

energy 

its 

Graph A8.1: Monthly average day-ahead wholesale 
electricity prices and European benchmark 
natural gas prices (Dutch TTF) 

Energy prices and costs 

Table A8.1:  Retail energy price components for 
household and non-household consumers, 2024 

(i) For household consumers, consumption band is DC for 
electricity and D2 for gas. Taxes and levies are shown 
including VAT. 
(ii) For non-household consumers, consumption band is ID for 
electricity and I4 for gas. Taxes and levies are shown 
excluding VAT and recoverable charges, as these are typically 
recovered by businesses. 
Source: Eurostat 

Portugal’s  retail  electricity  prices  in  2024 
rose  for  both  households  (+16%)  and  non-
household  consumers  (+15%)  yet  remained 
below the EU average. Notably, electricity prices 
for  non-households  were  the  third  lowest  in  the 
EU.  In  contrast,  retail  gas  prices  declined  across 
both consumer categories, although household gas 
prices remained slightly above the EU average. The 
components  of  retail  energy  prices  (energy  and 
supply,  network  costs,  and  taxes  and  levies) 

(i) the Title Transfer Facility (TTF) is a virtual trading point for 
natural gas in the Netherlands. It serves as the primary 
benchmark for European natural gas prices. 
(ii) CWE gives average prices in the central-western European 
market (Belgium, France, Germany, Luxembourg, the 
Netherlands and Austria). 
Source: S&P Platts and ENTSO-E 

Thanks  to  a  large  share  of  renewables 
(87.7%)  in  its  electricity  mix,  wholesale 
electricity  prices  in  Portugal  averaged  63.3 
EUR/MWh  in  2024(135),  the  EU’s  fifth-lowest 
wholesale  electricity  prices  (EU  average  of 
84.7  EUR/MWh).  The  Iberian  Peninsula  (PT&ES) 
experienced stronger fluctuation in prices than the 
EU average. Prices in Portugal decreased to as low 
as 13.2 EUR/MWh in April due to strong output of 
in  February-May  2024 
renewables 
compared  to  same  period  in  2023).  Prices  picked 
up  in  the  second  half  of  the  year  amid  rising 
natural gas costs and limited non-fossil flexibility. 
In  November,  prices  spiked  further  in  the  Iberian 
Peninsula  due  to  the  Dunkelflaute  in  the  Central 
Western  European  (CWE)  region  which  negatively 

(+55% 

(135) 

Fraunhofer (ENTSO-E data) 

68 

 
 
 
 
 
 
 
 
 
 
impacted  day-ahead  prices 
neighbouring markets.(136) 

in  CWE  and 

Flexibility and electricity grids 

(CCR)(137),  Portugal 

Being part of the south-west Europe capacity 
is 
calculation  region 
increasing  cross-border  trade  capacity  to 
Spain.  Member  States  should  ensure  that  a 
minimum  of  70%  of 
technical  cross-border 
capacity is available for trading. The general trend 
in  this  CCR  is  a  slight  improvement  in  the 
fulfilment of this requirement. Portugal shows the 
highest interconnection capacity rate in the south-
west region and, in May 2024, Portugal and Spain  
are  implementing  a  new  interconnection  between 
Beariz, Fontefría and Ponte de Lima.  

The  further  expansion  of  Portugal’s  cross-
border  interconnection  capacity,  along  with 
the  reinforcement  of  its  national  grid,  will 
enable  the  country  to  integrate  renewable 
energy  production  more  effectively,  and 
enhance  grid  flexibility  and  export  capacity. 
In  July  2024,  Portugal  and  Spain  started  the 
construction  of  a  new  interconnection  between 
Beariz,  Fontefría  and  Ponte  de  Lima.  The  new 
interconnector  is  included  in  the  first  PCI  (project 
of  common  interest)  and  PMI  (project  of  mutual 
interest)  list  and  is  expected  to  be  commissioned 
in  late  2025,  after  some  initial  delays.  Moreover, 
the  internal  line  between  Pedralva  and  Sobrado, 
which was part of the fifth PCI list and scheduled 
for completion by 2029, will support the necessary 
network  expansion.  This  will  allow  for  better 
integration of renewables, thus making it possible 
to distribute electricity from solar more effectively 
across  the  territory.  Based  on  the  final  updated 
NECP, Portugal should achieve the 15% electricity 
interconnection target in 2030. In 2025, Portugal’s 
from 
interconnection 
overall 
11.47% to 14.01%(138). 

increased 

level 

(136) 
generation data throughout the paragraph) 

Yearly electricity data, Ember (consumption and 

The south-west Europe CCR covers Portugal, Spain and 

(137) 
France. A CCR is a group of countries which calculate cross-
border electricity flows together. 
(138) ENTSO-E Winter Outlook 2024-2025 

69 

to 

efforts 

develop 

The 
hydrogen 
infrastructure  will  support  the  development 
of a national and European hydrogen market 
and  allow  Portugal  to  contribute  as  an 
exporter to  the renewable  hydrogen  corridor 
from  the  Iberian  Peninsula  to  Germany.  This 
flagship corridor, designed to export approximately 
2 Mt  of  hydrogen  from  the  Iberian  Peninsula  to 
other  Member  States,  in  particular  Germany,  is 
enabled  by  two  Portuguese  projects  on  the  first 
PCI and PMI list and expected to be commissioned 
in  2029  and  2030:  the  H2 
interconnection 
between  Portugal  and  Spain  with  a  capacity  of 
0.75 million  tonnes  (Mt)  per  year  (H2  Med/CelZa 
project);  and  the  internal  hydrogen  infrastructure 
(Portuguese 
project). 
According to the final updated NECP, Portugal also 
intends to deploy several hydrogen valleys across 
its territory and enable the storage of hydrogen in 
the  two  additional  cavities  to  be  added  to  the 
Carriço  US  storage  facility,  which  is  to  become 
operational 
initiative  will 
further  contribute  to  the  development  of  the 
hydrogen value chain in Portugal and the EU. 

in  2027-2028.  This 

backbone’ 

‘hydrogen 

Permitting procedures for grid infrastructure 
remain essential to ensure a correct balance 
between  demand  and  supply.  In  Portugal,  the 
permitting  procedure  for  energy  infrastructure 
takes  on  average  36  months  and  is  governed  by 
environmental  and  sector-specific  legislation.  This 
duration  is  comparable  to  that  of  other  Member 
States but  on  the longer side,  thus, there  is  room 
for  acceleration.  Stakeholders  have  identified  as 
key causes for delays the lack of sufficient staff in 
the  permitting  authorities  and  opposition  by  local 
communities  and  municipalities  in  cases  where 
local  benefits  are 
less  evident.  Additionally, 
environmental  assessment  procedures  are  also 
prone to delays, often due to unexpected requests 
for  additional  documentation  and  information.  
The  grid  is  also  facing  constraints  with  unused 
booked  capacity  and  lack  of  transparency  on  the 
available  distribution  grid  capacity  also  makes 
difficult for developers to plan new projects. 

Portuguese 

operational 

electricity 
The 
storage  capacity  reported 
in  the  final 
updated  NECP  is  expected  to  be  around 
3.9 GW  for  pumped  hydro  and  2.0 GW  for 
battery  storage  by  2030.  Portugal  is  currently 
building  several  storage  projects,  such  as  the 

 
 
 
conversion  of  a  generating  group  at  Alto  Lindoso 
to reversible operation Portugal has already taken 
steps  to  promote  the  installation  of  electricity 
storage,  including  the  adoption  of  Decree-Law 
No 15/2022,  which  regulates  the  licensing  of 
autonomous storage plants. Tender procedures are 
being  conducted  for  battery  storage  and  other 
measures,  such  as  incentivising  behind-the-meter 
storage and smart charging strategies and should 
continue until 2026.  

Portugal’s  regulatory  framework  presents 
barriers  to  the  development  of  flexible 
resources.  It  allows  for  demand-side  response 
(DSR) and storage to sell and buy electricity in the 
day-ahead  and  intraday  markets.  However,  DSR 
and  storage  are  not  allowed  to  participate  in 
ancillary  services  and  are  not  eligible  to  provide 
congestion  management  services  to  transmission 
system  operators  (only  industrial  and  commercial 
consumers  were  piloted  in  2022).  Aggregators, 
including  those  that  operate  independently,  are 
excluded  from  participating  in  these  markets  and 
services. 

Portugal’s  large-scale  smart  meter  roll-out 
(86%  in  2023)  is  one  of  the  conditions  that 
enables consumers to be empowered to take 
action.  Portugal  also  had  a  switching  rate  of 
electricity supplied or contract  higher than the EU 
average  between  suppliers  and  tariffs  between 
2022  and  2023.  Nevertheless,  most  households 
are  on  fixed-term  price  contracts,  which  has  an 
impact on flexibility provision. The household retail 
market  is  both  regulated  and  involves  market-
based  offers.  Despite  regulatory  requirements, 
household  consumers  in  Portugal  did  not  have 
access  to  dynamic-price  contracts  as  of  2023. 
Portugal  also  has  a  relatively 
level  of 
prosumers,  which  has  fallen  to  below  5%. 
Renewable  energy  communities  (RECs),  which 
enable collective and citizen-driven energy actions, 
can  be  a  key  contributor  to  Portugal’s  energy 
transition.  However,  Portugal  limits  RECs  to  the 
electricity 
sector  and  mandates  electricity 
production  for  self-consumption  only,  therefore 
preventing  RECs  to  offer  commercial  energy 
services.  Moreover,  there  is  a  lack  of  citizens 
empowerment  in  energy  communities,  since  their 
control is often managed by private companies. 

low 

In  2023,  electricity  accounted  for  25.9%  of 
Portugal’s  final  energy  consumption,  above 
the EU average of 22.9%, and this share has 
seen a slight increase in the last decade(139). 
When it comes to households, electricity  accounts 
for  41.5%  of  final  energy  consumption,  while  in 
industry  it  represents  33.2%  (see  also  Annex  7). 
For  the  transport  sector,  this  share  remains 
in 
negligible 
electrification  across  sectors  is  required  for  cost 
effectively  decarbonising 
the  economy  and 
bringing  the  benefits  of  affordable  renewable 
generation  to  consumers.  Between  2022  and 
2023,  heat  pump  sales  in  Portugal  saw  an 
increased by 9 730 heat pumps, however Portugal 
remains well below the EU average in this regard. 

at  0.8%. 

progress 

Further 

Renewables and long-term contracts 

Portugal  has  made  progress  in  promoting 
renewable  energy  and  increasing  the  share 
of  such  energy  in  final  energy  consumption 
by  2030.  In  particular,  Portugal  has  focused  on 
bringing  about  the  electrification  of  consumption, 
increasing 
renewable 
installed  capacity  and 
electricity  generation,  and  it  is  taking  steps  to 
ensure  electric  vehicle  penetration  notably  by 
reviewing the regulatory framework and putting in 
place other more sustainable mobility solutions. In 
2024,  renewable  energy  sources  (RES)  accounted 
for 87.7% of the electricity mix. (vs EU overall RES 
share of 47%), increasing from 75%(140). Installed 
renewables  capacity  grew  by  10.6%  in  2024, 
reaching  20  476  MW.  As  regards  the  steady 
acceleration  of  solar  deployment, 
total 
installed capacity in 2024 was 5 808 MW (+1 768 
MW, an increase of 43% compared to 2023) while 
installed  wind  capacity  stagnated  (+45  MW,  an 
increase of 0.8%) reaching 5 583 MW in 2024(141). 
Moreover,  in  2023,  35.1%  of  gross  final  energy 
consumption  came  from  renewable  sources,  from 
34.7%  in  2022.  In  early  January  2025,  Portugal 
also announced a plan to install 2 GW of offshore 
wind capacity by 2030 and four sites for this have 
already been identified. 

the 

CAGR (compound annual growth rate) of -0.1% 

(139) 
between 2013 and 2023 and minimum/maximum share of 
25.2% and 26.2%, respectively. 
(140) Yearly electricity data, Ember. 

(141) Renewable capacity statistics 2025, IRENA 

70 

 
 
 
 
Graph A8.2: Portugal's installed renewable 
capacity (left) and electricity generation mix 
(right) 

"Other" includes solid biofuels, renewable municipal 
waste, geothermal energy, biogas and geothermal energy 
Source: IRENA, Ember 

shortening 

Portugal  started  to  take  steps  towards 
developing  a  regulatory  framework  for 
renewable  energy  and 
its 
focus  on 
procedures,  with  a  special 
environmental  impact  assessments  (EIAs), 
but  challenges  remain.  The  country  working  on 
the  digitalisation  front  with  a  view  to  having  all 
steps of the permitting process carried out online, 
such  as  creating 
impact 
assessment. Speeding up the transposition process 
and  staffing  the  relevant  entities  with  sufficient 
human  resources  and  skills  will  further  improve 
the  situation.  Current  legal  framework  is  rather 
complex leading to different interpretations of the 
different  national  bodies  with  responsibilities  in 
this area.  

the  environmental 

Portugal  still  does  not  have  in  place  a  legal 
and  regulatory  framework  to  promote  and 
facilitate 
the  use  of  Power  Purchase 
Agreements  (PPAs)  in  line  with  Regulation 
(EU)  2024/1747(142).  In  the  meantime,  PPAs  are 
signed of 0,42 GW.  

Energy efficiency 

(142) European PPA Market Outlook 2024, Pexapark  

There  has  been  a  slowing  of  energy 
efficiency gains in Portugal despite untapped 
potential.  In  2023,  primary  energy  consumption 
(PEC)  decreased  by  0.3%  to  20.71 Mtoe.  Final 
energy  consumption  (FEC)  increased  by  2.9%  to 
17.20 Mtoe. Compared to 2022, FEC decreased in 
the  industrial  sector  by  4.2%.  In  the  residential, 
transport  and  services  sector,  FEC  increased  by 
1.7%,  8.3%,  and  1.4%,  respectively.  Under  the 
recast  Energy  Efficiency  Directive  (Directive  (EU) 
2023/1791), Portugal should try to reach a PEC of 
16.71 Mtoe and an FEC of 14.37 Mtoe by 2030. 

to 

reduce 

Portugal  aims 
the  energy 
consumption  of  the  residential  sector  by 
11%  by  2030,  but  progress  between  2018 
and  2022  was  inadequate.  Although  there  was 
an  improvement  in  2023,  the  current  pace  is  still 
insufficient  to  meet  the  objective.  To  get  back  on 
track,  it  would  be  beneficial  if  Portugal  were  to 
significantly  intensify  its  efforts  to  reduce  the 
energy consumption of buildings. 

identifying 

Portugal  has  not  notified  the  Commission  of 
its  comprehensive  heating  and  cooling 
assessment 
the 
application  of  high-efficiency  cogeneration  and 
efficient  district  heating  and  cooling  in  line  with 
Article 25(1)  of  the  Energy  Efficiency  Directive. 
There is no estimated completion date for this. 

potential 

for 

gas 

and 

between 

electricity 

The  decarbonisation  of  the  heating  sector  is 
advancing. There was a marked increase in sales 
of  heat  pumps,  signalling  progress.  The  ratio  of 
prices 
has 
substantially  decreased  (almost  50%  between 
2021  and  2023),  which  when  combined  with 
available  finance  assistance  measures  further 
facilitates the switch to decarbonisation. However, 
additional progress and actions may be necessary 
to  meet  de-carbonisation  objectives.  This  could 
include measures to support the supply chain (e.g. 
capacity building for installers), support renovation 
(e.g.  subsidies,  or  financial  schemes),  or  target 
specific sectors that are lagging behind. 

Portugal  continues  to  rely  mostly  on  grant-
based funding schemes for energy efficiency, 
and the use of financial instruments remains 
limited.  No  new  schemes  were  created  for  the 
financing of energy efficiency in 2024, but several 
previously  implemented  schemes  remain  in  place. 
For  instance,  the  Environmental  Fund  manages  a 
set of programmes to increase energy efficiency in 

71 

 
 
 
 
 
 
targeting 

buildings, 
residential,  services  and 
central  government  buildings.  As  part  of  ongoing 
efforts  to  promote  energy  efficiency,  Portugal 
established  the  necessary  legal  framework  in 
2024 for the creation of one-stop shops, known as 
‘citizen  energy  spaces’,  which  will  provide  energy 
efficiency services to the public. This framework is 
expected to come into effect in 2025. 

Portugal has committed substantial amounts 
of  money  to  energy  renovation,  including 
over  EUR 2.4  billion  from  the  Recovery  and 
Resilience Facility. However, the current level of 
absorption  is  still  low  and  faster  assessment  of 
applications  by  the  Environmental  Fund  would 
ensure  a 
rate.  Corrective 
measures  to  efficiently  and  effectively  assess 
applications  and  disburse  the  funds  for  the 
objectives agreed would be important. 

faster  absorption 

Security of supply and diversification 

limited 

its  energy 

Portugal has strengthened the security of its 
gas  supply, 
imports 
dependency,  while 
increased  renewables’ 
share  in  its  energy  mix.  Portugal  has  made 
significant progress in reducing its dependence on 
Russian  energy,  but  further  efforts  are  still 
required  as  the  country  continues  to  import 
Russian energy to some extent. Notably, in the gas 
sector,  Portugal  has  achieved  a  substantial 
reduction  in  imports  compared  to  the  period 
preceding  the  start  of  the  invasion  of  Ukraine  by 
Russia.  Specifically,  Portugal's  imports  of  Russian 
liquefied natural gas decreased from 0.740 bcm in 
2021  to  0.233  bcm  in  2024.  This  decline  is  a 
result  of  Portugal's  intensified  efforts  to  diversify 
its energy supply, with a focus on prioritizing LNG 
imports  from  alternative  sources,  such  as  the 
United States and Nigeria. 

On  28  April  2025,  Portugal  and  Spain  faced 
an  unprecedented  power  outage,  which  also 
affected parts of France.  According to EU law, 
ENTSO-E  will  lead  an  independent  investigation 
into  the  causes  of  the  blackout.   The  European 
Commission  will  inform  all  Member  States  of  the 
progress  of 
the 
Electricity Coordination Group.  

investigation 

through 

the 

Fossil fuel subsidies 

In  2023,  environmentally  harmful  (143)  fossil 
fuel  subsidies  without  a  planned  phase-out 
before  2030  represented  0.70%(144)  of 
Portugal’s  GDP(145),  above  the  EU  weighted 
average of 0.49%. Tax measures accounted for 
94%  of  this  volume,  while  direct  grants  and 
income/price  support  represented  4%  and  0.3%, 
respectively.  Fossil  fuel  subsidies  without  a 
planned phase-out before 2030 and which do not 
specifically  address,  in  a  targeted  way,  energy 
poverty  nor  genuine  energy  security  concerns 
included  fuel  tax  reductions  on  unleaded  gasoline 
and road diesel (“Famílias Primeiro”) as well as tax 
in  certain 
exemptions  for  natural  gas  used 
industrial processes and diesel fuel used by freight 
companies  and 
for  agriculture  machinery. 
Additionally,  Portugal’s  2023  Effective  Carbon 
Rate(146)  averaged  EUR  80.3  per  tonne  of  CO₂, 
below the EU weighted mean of EUR 84.80. 

(143) Direct fossil fuel subsidies that incentivise maintaining or 
increasing in the availability of fossil fuels and/or use of 
fossil fuels. 

(144) Numerator is based on volumes disclosed by the Portuguese 
authorities via the 2025 NECPR reporting. For all Member 
States, it includes public R&D expenditures for fossil fuels as 
reported by the IEA (Energy Technology RD&D Budgets) and 
excludes, for methodological consistency, excise tax 
exemption on kerosene consumed in intra-EU27 air traffic. 

(145) 2023 Gross Domestic Product at market prices, Eurostat. 

(146) The Effective Carbon Rate is the sum of carbon taxes, ETS 
permit prices and fuel excise taxes, representing the 
aggregate effective carbon rate paid on emissions. 

72 

 
 
 
 
Table A8.2:  Key Energy Indicators 

Source: Eurostat, ENTSO-E, S&P Platts 

73 

20212022202320242021202220232024Household consumer - Electricity retail price (EUR/KWh)0,2129          0,2210              0,2180              0,2524          0,2314              0,2649          0,2877          0,2879          Energy & supply [%]34,1%59,4%92,0%53,4%36,6%54,3%55,6%47,8%Network costs19,8%24,7%24,6%16,8%26,7%25,3%24,8%27,2%Taxes and levies including VAT46,1%15,9%-16,6%29,8%36,7%20,3%19,6%25,0%VAT16,9%16,5%15,7%15,5%14,5%13,4%13,8%14,6%Household consumer - Gas retail price0,0766          0,0981              0,1395              0,1254          0,0684              0,0948          0,1121          0,1128          Energy & supply36,0%45,6%54,0%44,2%43,7%61,0%64,5%53,9%Network costs35,9%28,0%20,5%25,0%22,5%17,3%17,1%18,3%Taxes and levies including VAT28,1%26,4%25,5%30,9%33,8%21,7%18,4%27,8%VAT17,9%18,1%18,2%18,0%15,5%11,6%10,2%13,6%Non-household consumer - Electricity retail price0,1089          0,1341              0,1000              0,1148          0,1242              0,1895          0,1971          0,1661          Energy & supply45,4%80,1%88,8%59,1%43,0%66,5%63,0%55,8%Network costs16,2%18,2%20,2%14,5%15,8%10,7%11,9%15,5%Taxes and levies excluding VAT25,2%-19,8%-33,3%10,1%30,4%9,9%11,2%15,4%Non-household consumer - Gas retail price0,0268          0,0786              0,0553              0,0438          0,0328              0,0722          0,0672          0,0517          Energy & supply72,3%78,2%80,4%73,2%66,2%77,3%77,3%68,7%Network costs7,0%2,3%2,8%6,7%7,7%3,8%5,3%7,1%Taxes and levies excluding VAT2,6%1,0%-2,5%2,1%12,5%6,1%7,3%11,6%Wholesale electrity price (EUR/MWh)111,5168,088,663,5111,0233,299,184,7Dutch TTF (EUR/MWh)n/an/an/an/a46,9123,140,534,420172018201920202021202220232024Gross Electricity Production (GWh)59.432          59.636              53.154              53.078          50.980              48.808          49.043          -Combustible Fuels38.344       32.155           27.687           25.214       21.894          23.011       15.662       -Nuclear-              -                 -                 -              -                 -              -              -Hydro7.632         13.628           10.243           13.633       13.455          8.839         14.868       -Wind12.248       12.617           13.667           12.299       13.216          13.244       13.145       -Solar992             1.006             1.342             1.716         2.237            3.519         5.160         -Geothermal217             230                215                217             179                195             208             -Other Sources0                 -                 -                 -              -                 -              -              Gross Electricity Production [%]Combustible Fuels64,5%53,9%52,1%47,5%42,9%47,1%31,9%-Nuclear0,0%0,0%0,0%0,0%0,0%0,0%0,0%-Hydro12,8%22,9%19,3%25,7%26,4%18,1%30,3%-Wind20,6%21,2%25,7%23,2%25,9%27,1%26,8%-Solar1,7%1,7%2,5%3,2%4,4%7,2%10,5%-Geothermal0,4%0,4%0,4%0,4%0,4%0,4%0,4%-Other Sources0,0%0,0%0,0%0,0%0,0%0,0%0,0%-Net Imports of Electricity (GWh)-2.684-2.6573.3991.4564.7539.25310.233-As a % of electricity available for final consumption -5,6%-5,4%7,0%3,1%9,9%18,7%20,4%-Electricity Interconnection [%]8,7%8,3%9,2%8,0%13,7%10,9%13,2%11,5%Share of renewable energy consumption - by sector [%]Electricity54,2%52,2%53,8%58,0%58,4%61,0%63,0%-Heating and cooling41,0%40,9%41,7%41,5%42,7%45,5%47,1%-Transport7,9%9,0%9,1%9,7%8,6%8,7%11,2%-Overall30,6%30,2%30,6%34,0%34,0%34,7%35,2%-20202021202220232020202120222023Import Dependency [%] 65,3%66,9%71,3%66,9%57,5%55,5%62,5%58,3%of Solid fossil fuels -6,5%4,5%107,4%81,2%35,8%37,2%45,9%40,8%of Oil and petroleum products 97,6%97,9%98,7%99,3%96,8%91,7%97,8%94,5%of Natural Gas 99,3%100,0%104,0%97,5%83,6%83,6%97,6%90,0%Dependency from Russian Fossil Fuels [%]of Natural Gas 11,3%13,6%5,1%8,5%41,0%40,9%20,7%9,3%of Crude Oil0,0%0,0%0,0%0,0%25,7%25,2%18,4%3,0%of Hard Coal0,0%0,0%0,0%0,0%49,1%47,4%21,5%1,0%2017201820192020202120222023Gas Consumption (in bcm)6,3                 5,7                     6,1                     6,0                 5,8                    5,6                 4,4                 Gas Consumption year-on-year change [%]24,4%-8,8%5,8%-1,4%-3,7%-3,5%-20,4%Gas Imports - by type (in bcm)6,3                 5,8                     6,1                     5,9                 5,7                    5,8                 4,3                 Gas imports - pipeline2,6                 2,0                     0,5                     0,5                 0,1                    0,1                 -                 Gas imports - LNG3,73,85,65,55,65,74,3Gas Imports - by main source supplier [%]Nigeria33,9%40,6%53,5%52,6%51,3%50,3%44,1%United States8,5%8,4%21,4%18,8%32,9%34,5%42,5%Russia0,0%0,0%1,6%11,3%13,6%5,1%8,5%Trinidad and Tobago0,0%0,0%2,0%1,4%0,0%6,6%5,0%PortugalEU 
 
 
 
     
 
ANNEX 9: CLIMATE ADAPTATION, PREPAREDNESS AND ENVIRONMENT 

Portugal  needs  to  take  further  action  on 
climate change adaptation and preparedness, 
increase  water  resilience  and  reduce  its 
economy's  impact  on  nature.  Anticipating  and 
adapting to the adverse effects of climate change, 
such  as  floods,  coastal  erosion,  droughts,  heat 
waves  and  forest  fires,  remains  a  core  challenge 
for  Portugal,  which  is  one  of  the  EU's  most 
severely affected countries. Due to climate change 
these  natural  hazards  are  expected  to  become 
more  frequent  and  extreme.  Measures  and 
investments  in  risk  prevention  and  preparedness, 
resilience, 
climate  change  adaptation,  water 
nature-based solutions and sustainable agriculture 
practices  are  therefore  necessary  to  achieve 
sustainable growth. 

Climate adaptation and preparedness 

is  particularly  vulnerable 

Portugal 
to 
heatwaves, droughts and wildfires, which are 
set  to  intensify  due  to  climate  change.  Over 
the  past  20  years,  freshwater  availability  has 
decreased  by  20-30%  in  most  river  basins (147). 
The  frequency  of  severe  droughts  is  forecast  to 
increase  significantly  in  Portugal  due  to  climate 
change, a recent example being the 2022 drought 
that  affected  over  43%  of  Portugal’s  total  area. 
Key challenges include managing the variability of 
water  availability  (both  temporal  and  territorial), 
maintaining  ecological  flow  during  droughts  and 
restoring  water  bodies.  Between  2006  and  2023, 
an average of over 93 000 ha burned each year in 
Portugal,  a  notable  example  being  the  fires  of 
2017,  which  affected  over  500 000 ha  and 
resulted  in  more  than  100  fatalities (148).  By  the 
end of the century, the number of days of extreme 
fire  danger  and  the  probability  of  mega-fires  are 
set to rise by a factor of two to three. Heatwaves 
also pose a significant socioeconomic problem for 
livelihoods  and 
Portugal,  affecting  people’s 
aggravating  the  drought  and  forest-fire  risks. 
Climate  projections  show  that  the  number  and 
duration  of  heatwaves  are  set  to 
increase 
significantly, with up to 13 events per year by the 

(147) Agência Portuguesa do Ambiente, 2023, Avaliação das 

disponibilidades hídricas por massas de água e aplicação do 
índice de escassez WEI+. 

end  of  the  century,  compared  to  2-4  events 
historically (149). 

lowest 

Climate  risks  directly  affect  Portugal’s 
economy and society. Between 1980 and 2023, 
Portugal  suffered  EUR 16  billion  in  economic 
losses  due 
to  weather-  and  climate-related 
extreme events, with just 3% of the losses insured. 
This makes Portugal one of the EU Member States 
with  the 
insurance  coverage  against 
extreme events. Portugal also recorded more than 
10 000 fatalities due to extreme events over that 
period (150). European-level estimates suggest that 
parts  of  Portugal  could  see  a  40-fold  increase  in 
mortality  from  heatwaves  if  no  adaptation  and 
mitigation  actions  are  taken (151).  This  would 
disproportionately  affect  vulnerable  populations 
already  at  risk  of  energy  poverty  and  not  able  to 
remain sufficiently cool during such events. 

In  recent  years,  Portugal  has  implemented 
several  national  policy  initiatives  related  to 
adaptation  and  preparedness.  A  national 
governance  structure  for  adaptation  is  in  place, 
and  was  consolidated  in  Portugal’s  Climate  Law, 
adopted 
in  December  2021.  Key  strategic 
documents at national level comprise the national 
climate  change  adaptation  strategy 
(ENAAC), 
adopted  in  2015  and  the  action  programme  for 
climate  change  adaptation  from  2019.  In  2024, 
Portugal  also  finalised  a  national  roadmap  for 
adaptation  2100,  which  will  inform  the  review  of 
the  ENAAC,  planned  for  2025.  Portugal  has  also 
been  implementing  ecological  restoration  actions 
in rivers across the country, under the coordination 
of  the  Portuguese  Environment  Agency  (APA).  A 
national  plan  focused  on  future  interventions  is 
currently being prepared (PRO~RIOS 2030).   

Portugal  has  made  use  of  several  EU  funds 
to  improve  its  preparedness,  including  the 
Cohesion 
Regional 
Development 
Common 
Agricultural  Policy  (CAP)  funds  and  the  Recovery 
and Resilience Facility (RRF). 

European 
the 

(ERDF), 

Fund, 

Fund 

the 

(149) Matos Soares, P. et al., 2024, RNA 2100 – RNA 2100 – 
Climate Projections, Extremes, and Indices – Mainland 
Portugal. 

(150) EEA, 2024, Economic losses from weather- and climate-

related extremes in Europe. 

(148) Matos Soares, P. et al., 2024, RNA 2100 – Sectoral Impacts 

Modelling – Forest Fires. 

(151) EEA, 2022, Climate change as a threat to health and well-

being in Europe: focus on heat and infectious diseases, p. 23 

74 

 
 
 
 
 
 
Climate adaptation is also addressed at sub-
national  level.  The  Portuguese  Climate  Law  has 
strengthened sub-national adaptation practices by 
requiring  all  municipalities  and 
intermunicipal 
communities  to develop  climate  action  plans  with 
mitigation  and  adaptation  measures.  A  survey 
carried out in July 2023 as part of the preparation 
of  the  national  roadmap  for  adaptation  2100 
adaptation 
identified 
documents  at  municipal  level,  as  well  as  22 
intermunicipal climate change adaptation plans in 
force (152).  Furthermore,  the  national  roadmap  for 
adaptation  2100  reviewed  the  integration  of 
climate  adaptation 
into  existing  municipal 
masterplans  and  provided  guidelines  and  best 
practices for mainstreaming adaptation. 

climate 

change 

70 

Water resilience 

remain 

for  Portugal.  Despite 

is  a  matter  of  major 
Water  resilience 
the 
importance 
in  recent  years,  many 
progress  made 
challenges 
terms  of  water 
in 
management,  especially  in  the  areas  of  water 
governance,  water  body  rehabilitation  and  water 
efficiency.  Further  infrastructure  investment  is 
needed,  including  in  wastewater  collection  and 
treatment, reduction of leaks in the networks and 
general  water  supply, 
improving  monitoring 
(quality  and  quantity),  as  well  as  nature-based 
solutions  and  river  restoration.  Portugal  should 
take  advantage  of  the  potential  of  water  reuse. 
For  this  reason,  under  the  2024  European 
Semester,  Portugal  received  the  CSR-3  on  water 
management  and  adaptation  to  climate  change. 
Portugal’s water productivity, or the efficiency with 
which  a  country  uses  its  water  resources,  is 
considerably  lower  than  in  other  Member  States, 
standing at EUR 34 per m3 of abstracted water in 
2022 (153).  An  adequate  and 
improved  water 
pricing  policy  to  recover  the  cost  of  all  water 
services could harness water-saving potential. The 
water exploitation index plus (WEI+), a measure of 
how much water is being used compared with the 

(152) Direção Geral do Território, 2023, WP7B - Review of 

guidelines on climate change adaptation in spatial plans and 
programmes. 

(153) Measured as GDP in 2010 chain linked volumes over total 

fresh surface water abstracted in cubic metres. For 
comparison, France has a water productivity of EUR 87 per 
m3 of abstracted water. 

total  renewable  freshwater  resources  available, 
shows  that,  especially  in  summer  months,  the 
country’s  total  water  consumption  exceeds  its 
renewable freshwater resources. The highest WEI+ 
value  (39)  was  reached  in  the  third  quarter  of 
2022  and  the  second  highest  value  (36)  in  the 
third  quarter  of  2019.  Agriculture  is  the  largest 
consumer  of  water,  with  water  abstraction  in  the 
agricultural  sector  accounting  for  75%  of  total 
consumption  in  2022,  putting  a  significant  strain 
on  the  country’s  water  resources,  particularly  in 
regions  already  suffering  from  serious  water 
scarcity.  For  a  more  detailed  analysis  of  regional 
water scarcity please see Annex 17.  

Portugal 
is  taking  steps  to  face  these 
challenges  in  the  water  sector.  In  February 
2024  Portugal  adopted  a  new  national  strategic 
plan  for  water  supply,  wastewater  and  pluvial 
water  management,  PENSAARP  2030.  The 
Portuguese Government presented in March 2025 
a  far-reaching  national  water  strategy  (“Water 
that Unites”) that aims to improve the sustainable 
management  of  water  resources  throughout  the 
integrated  water 
country 
governance,  water 
climate 
resilience.  The  government  also  announced  the 
revision of the National Water Plan to account for 
the  update  of  the  strategic  priorities  and  the 
investments  it  identified  to  strengthen  water 
resilience.  Other  measures  are  under  way  to  help 
increase  water  resilience  on  the  supply  side,  such 
as  the  Algarve  Regional  Water  Efficiency  Plan 
under the Recovery and Resilience Plan. 

promoting 

efficiency 

and 

by 

the  Commission’s  ability 

Portugal’s delay in submitting its river basin 
and  flood  risk  management  plans  has 
hindered 
to 
evaluate  and  report on  them.  Portugal  did  not 
submit  the  third  river  basin  management  plan 
(RBMP)  and  second  flood  risk  management  plan 
(FRMP)  by  March  2022,  as  required  under  the 
Water  Framework  Directive  and 
the  Floods 
Directive. As a result of this late reporting in April 
2024,  the Commission  has  not  been in  a  position 
to assess the plans and include  its assessment in 
its  report  to  the  European  Parliament  and  to  the 
Council  issued  in  February  2025  for  most  of  the 
Member States. 

The  investment  needs  for  water  protection 
and  management,  as  illustrated  in  Graph 
A7.2, highlight a significant financing gap of 
EUR 371  million  per  year  by  2027.  Roughly 
44% of the gap can be attributed to unaddressed 

75 

 
 
Graph A9.1: Direct dependency (1) on ecosystem 
services (2) of the gross value added generated 
by economic sector in 2022 

in  wastewater 

financing  needs 
infrastructure. 
Increasing investment will be even more important 
as the Urban Wastewater Treatment Directive was 
revised and strengthened in 2024 (154). EU funding, 
such  as 
the  European  Regional 
Development Fund under the 2021-2027 cohesion 
policy and to some degree under the Recovery and 
Resilience  Plan  already  helps  to  meet  Portugal’s 
investment  needs  for  water  protection  and 
management. 

that  from 

Biodiversity and ecosystems 

There  is  clear  room  for  improvement  on 
biodiversity  and  nature  protection  and 
restoration.  Portugal  boasts  a  rich  biodiversity. 
21.2%  of  Portuguese  territory  belongs  to  the  EU 
Natura  2000  network  (the  EU  average  is  18.6%). 
However,  some  species  and  habitats,  particularly 
in  the  marine  environment,  are  not  sufficiently 
protected.  Portugal  should  therefore  extend  its 
Natura 2000 network with additional designations, 
particularly for marine sites. Progress has recently 
been  made  in  the  Azores.  Furthermore,  Portugal 
needs  to  adopt  the  management  plans  for  the 
sites  already  designated,  identifying  the  site-
specific conservation objectives and measures and 
providing  the  necessary  technical,  human  and 
financial resources. Considering both Natura 2000 
and  other  nationally  designated  protected  areas, 
Portugal  legally  protects  22.4  %  of  its  terrestrial 
areas  (EU-27  coverage  26.1%)  and  4.5%  of  its 
marine  areas  (EU  coverage  12.3%).  This  is  below 
the  EU  2030  target  of  30%  under  the  EU 
Biodiversity Strategy. Overall, the status of natural 
habitats  and  species  covered  by  the  Habitats 
Directive has improved in Portugal, although many 
are  still  in  a  poor  or  unfavourable  condition. 
According  to  the  latest  available  data,  24%  of 
habitats (EU-28 average 14.7%) and 27% (EU-28 
average  27%)  of  species  are  reported  as  having 
good conservation status. 

(154) Directive 2024/3019, of 27 November 2024. The deadline 

for transposition is 31 July 2027. 

76 

(1) Dependency based on the sector’s own operations, 
excluding value chain operations within countries and across 
international value chains. A high dependency indicates a high 
potential exposure to nature-related shocks or deteriorating 
trends, which means that the disruption of an ecosystem  
service could cause production failure and severe financial 
loss. 
(2) Ecosystem services are the contributions of ecosystems to 
the benefits that are used in economic and other human 
activity, including provisioning services (e.g. biomass 
provisioning or water supply), regulating and maintenance 
services (e.g. soil quality regulation or pollination), and cultural 
services (e.g. recreational activities). 
Source: Hirschbuehl et al., 2025, The EU economy's 
dependency on nature. 

it 

Nature  degradation  creates  significant  risks 
to  Portugal's  economy  and  competitiveness, 
as 
is  a  Member  State  with  a  high 
dependency  on  ecosystem  services.  Portugal's 
overall direct dependency on ecosystem services is 
55%,  much  higher  than  the  EU  average  of  44%, 
showing  that  Portugal  is  particularly  prone  to  be 
economically affected by biodiversity loss. Several 
sectors, such as agriculture, fisheries, construction 
and  water  utilities 
(see  Graph  A7.1),  are 
particularly dependent on ecosystem services, with 
100%  of  the  gross  value  added  of  these  sectors 
directly  dependent  on  ecosystem 
services. 
Compared  to  other  Member  States,  the  supply 
chain  and  transport,  as  well  as  the  electricity 
sector,  exhibit  a  particularly  high  dependency  on 
ecosystem  services.  This  means  that  failure  to 
maintain  ecosystems'  capacity  to  deliver  services 
could  entail  significant  costs  or  even  stop 

0%20%40%60%80%100%AgricultureForestryFishery and acquacultureMining and metalsConstructionWater utilitiesHealthcare deliveryAviation travel and tourismFood beverages and tobaccoSupply chain and transportPublic services and othersElectricityChemical and materials industryElectronicsOil and gasReal estateHeat utilitiesAutomotiveRetail consumer goods and…Information technologyBanking and capital marketsInsurance and asset…Digital communicationsHighMediumLow 
 
     
in 

production 
these  sectors.  Protecting  and 
restoring  key  ecosystems  would  ensure  that  the 
long-term  competitiveness  of  these  economic 
sectors is preserved. 

Graph A9.2: Investment needs and gaps in EUR 
million, in 2022 constant prices 

Source: European Commission, DG Environment, 
Environmental investment needs & gaps assessment 
programme, 2025 update. 

requires  EUR 1 470  million 

Portugal 
in 
investment per year to effectively conserve and 
restore its natural capital, mitigate the impacts of 
climate  change  and  preserve  the  country’s  rich 
biodiversity  (see  Graph  A7.2).  The  current level  of 
financing 
ecosystem 
biodiversity 
conservation  in  Portugal  is  EUR 665  million  per 
year,  meaning  an  investment  gap  of  EUR 805 
million  per  year.  This  shortfall  puts  at  risk  the 
to  global  biodiversity 
country’s  commitment 
agreements  and  undermines 
long-term 
economic and social development. 

and 

for 

its 

Sustainable agriculture and land use 

Portugal’s  carbon  removals  are  in  line  with 
the  level  of  ambition  needed  to  meet  its 
2030  target  for  land  use,  land  use  change 
and  forestry  (LULUCF).  Portugal’s  forests  are 
responsible  for  a  major  share  of  net  carbon 
removals  and  seem  to  have  partially  recovered 
from  the  decreased  natural  carbon  sink  over  the 
period  2009-2017  resulting  from  severe  forest 
fires,  among  other  phenomena.  To  meet its  2030 

77 

LULUCF target, additional carbon removals of -1.0 
million  tonnes  of  CO2  equivalent  (CO2eq)  are 
needed (155). The latest available projections show 
a  surplus  to  target  of  -11.9  million  tonnes  of 
CO2eq for 2030 (156). Portugal is therefore on track 
to meet its 2030 target. 

Portuguese  agriculture 
is  a  source  of 
greenhouse gas emissions with an impact on 
air,  water  and  soils.  In  2022,  agriculture  was 
responsible  for  a  total  of  7  million  tonnes  of 
CO2eq.  This  includes  5  million  tonnes  of  CO2eq 
from  livestock.  However,  GHG  emissions  from 
agriculture and livestock in Portugal are below the 
EU average and have been decreasing since 2018. 
Portugal's  utilised  agricultural  area 
(UAA) 
increased  slightly,  by  6%,  from  3.8  million 
hectares in  2018 to  3.9 million  hectares in  2022. 
However,  this  increase  did  not  translate  into  a 
growth  in  nutrient  losses  from  agriculture,  mainly 
from  mineral  fertilisers  and  manure.  This  is 
reflected  in  the  country’s  nitrogen  balance,  which 
has  been  decreasing  since  2018.  Moreover,  the 
livestock  density  index  was  0.63  in  2020,  below 
the  EU  average  of  0.75,  and  ammonia  emissions 
showed  a  decreasing  trend  between  2018  and 
2022.  During  2017-2022,  pesticides  at  levels 
exceeding the thresholds were detected in 13% of 
surface  water  bodies,  well  below  the  EU  average 
of 29%. 

of 

the 

impact 

agriculture, 

impact 
authorities 

Portugal  is  transitioning  to  a  sustainable 
food  system  by  implementing  policies  to 
reduce 
of 
environmental 
agriculture,  but  food  waste  remains  a 
challenge.  Portugal  aims  to  reach  19%  of  UAA 
under  organic  farming  by  2030.  To  mitigate  the 
environmental 
the 
Portuguese 
implemented 
measures  to  promote  water  resilience  under  the 
CAP  Strategic  Plan, 
including  by  prioritising 
investment  projects  that  help  to  reduce  water 
consumption.  The  plan  also  supports  the  increase 
integrated 
in  the  share  of  organic  farming, 
production and the use of soil  covers and organic 
fertilisers, 
and 
diversification, and helps to reduce nutrient losses, 
and  promotes  other  sustainable  agriculture 
practices. These measures are crucial to the long-

promotes 

rotation 

have 

crop 

(155) National LULUCF targets of the Member States in line with 

Regulation (EU) 2023/839. 

(156) Climate Action Progress Report 2024 COM/2024/498. 

 - 200 400 600 800 1,000 1,200 1,400 1,600BiodiversityWaterBaselineGap 
     
 
term  competitiveness  of  Portugal’s  agri-food 
its  bioeconomy,  which  play  a 
system  and 
significant  economic 
role.  The  bioeconomy, 
encompassing  the  production  and  processing  of 
biological products, contributed EUR 13.2 million of 
added  value  to  the  country’s  gross  domestic 
product in 2021. Agriculture accounted for EUR 3.3 
million,  while 
industry  contributed 
EUR 2.5 million (24). Food waste, however, remains 
a  challenge  with  185  kg  wasted  per  person  in 
2022,  largely  driven  by  household  practices  and 
ranking as the fourth highest in the EU. 

the  food 

78 

 
Table A9.1:  Key indicators tracking progress on climate adaptation, resilience and environment 

(1) The data show the average for the timespan 2006-2023 based on EFFIS - European Forest Fire Information System. 
(2) Scale: 0 (no protection gap) – 4 (very high gap). EIOPA, 2024, Dashboard on insurance protection gap for natural catastrophes. 
(3) van Daalen, K. R. et al., 2024, The 2024 Europe report of the Lancet Countdown on health and climate change: unprecedented 
warming demands unprecedented action. The Lancet Public Health. 
(4) This indicator measures total water consumption as a percentage of the renewable freshwater resources available for a given 
territory and period. Values above 20% are generally considered to be a sign of water scarcity, while values equal or greater than 
40% indicate situations of severe water scarcity. 
(5) European Commission, 2024, seventh Implementation Report from the Commission to the Council and the European 
Parliament on the implementation of the Water Framework Directive (2000/60/EC) and the Floods Directive (2007/60/EC) (Third 
River Basin Management Plans and Second Flood Risk Management Plans). 
(6) For this indicator, the EU average includes the figure for the UK under the previous configuration, EU-28. 
(7) European Commission, 2023, EU Bioeconomy Monitoring System dashboards. 
(8) Nitrates can persist in groundwater for a long time and accumulate at a high level through inputs from anthropogenic sources 
(mainly agriculture). The EU drinking water standard sets a limit of 50 mg NO3/L to avoid threats to human health. 
(9) Net removals are expressed in negative figures, net emissions in positive figures. Reported data are from the 2024 
greenhouse gas inventory submission. 2030 value of net greenhouse gas removals as in Regulation (EU) 2023/839 – Annex IIa. 
Source: Eurostat, EEA. 

79 

Climate adaptation and preparedness:20182019202020212022202320182021Drought impact on ecosystems0.033.160.010.0143.196.86.772.76[area impacted by drought as % of total]Forest-fire burnt area (1)93 731     93 731     93 731     93 731     93 731     93 731     [ha, annual average 2006-2023]Economic losses from extreme events180          607          101          3              1 190       42            24 142       62 981       [EUR million at constant 2022 prices]Insurance protection gap (2)----1.88         1.88         [composite score between 0 and 4]Heat-related mortality (3)134          134          134          134          134          [number of deaths per 100 000 inhabitants in 2013-2022]Sub-national climate adaptation action60            64            67            72            67            67            4144[% of population covered by the EU Covenant of Mayors for Climate & Energy]Water resilience:20182019202020212022202320182021Water Exploitation Index Plus, WEI+ (4)8.08.78.08.010.1-4.54.5[total water consumption as % of renewable freshwater resources]Water consumption2 757       2 847       2 811       2 831       2 890       -           [million m3]Ecological/quantitative status of water bodies (5)[% of water bodies failing to achieve good status]Surface water bodies-------59%Groundwater bodies-------93%Biodiversity and ecosystems:20182019202020212022202320182021Conservation status of habitats (6)23.7-----14.7-[% of habitats having a good conservation status]Common farmland bird index93.295.094.299.3--72.274.42000=100Protected areas---2222--26[% of protected land areas]Sustainable agriculture and land use:20182019202020212022202320182021Bioeconomy's added value (7)12 001     12 017     11 900     13 242     634 378     716 124     [EUR million]Landscape features----9              -[% of agricultural land covered with landscape features]Food waste--176181185-[kg per capita]Area under organic farming5.77.48.119.319.37.99-[% of total UAA]Nitrogen balance43.443.643.638.135.2-[kg of nitrogen per ha of UAA]Nitrates in groundwater (8)18.318.021.522.6--[mgNO3/l]Net greenhouse gas removals from LULUCF (9)3 497-       4 499-       4 707-       6 021-       5 925-       -           256 077-     240 984-     [Kt CO2-eq]PortugalEU-27PortugalEU-27PortugalEU-27PortugalEU-27 
 
  
 
FAIRNESS 
ANNEX 10: LABOUR MARKET 

Portugal's  labour  market  has  demonstrated 
resilience  and progress  in  recent years,  with 
most  population  groups  feeling  the  benefits. 
The  country  still  faces  structural  challenges  that 
have  a  detrimental  impact  on  its  competitiveness 
and  economic  growth,  such  as  persistently  low 
productivity,  relatively  high  youth  unemployment 
and  labour  and  skills  shortages.  Despite  the 
substantial  inflow  of  foreign-born  workers,  the 
acute  demographic  decline,  unless  reversed,  will 
have  an  adverse  effect  on  the  socioeconomic 
situation 
skill 
cohesion. 
mismatches  and  labour  shortages  together  with 
job  quality  specially  for  young  people  remain 
major  challenges  to  attain  a  more  robust  and 
inclusive labour market. 

Addressing 

and 

in 

remain.  Both 

confirms  decade-long  growth 

Portugal’s 
labour  market  proved  to  be 
resilient  in  the  aftermath  of  the  pandemic, 
although  bottlenecks 
the 
employment and activity rates remained above the 
EU  average, 
reaching  78.5%  and  83.7% 
respectively  in  2024  (vs  EU:  75.8%  and  80.4%). 
This 
the 
employment  rate,  which  has  been  consistently 
rising  (except  in  2020)  and  exceeding  the  EU 
average  since  2017.  At  the  current  pace  Portugal 
is  on  track  to  meet  its  2030  employment-rate 
target  of  80%.  However,  the  unemployment  rate 
remained unchanged (6.5% in 2024) and is above 
the  5.9%  EU  average  since  2023.  Similarly,  the 
long-term unemployment rate remained above the 
EU average (2.4% vs 1.9% in 2024), and although 
it went down 0.1 pps from the 2023 rate, getting 
this section of the population into work remains a 
priority.  Moreover,  the  disability  employment  gap 
increased by 7.3 pps between 2023 and 2024, and 
lies at 21.3%.  

Long-term  youth  unemployment  (3.0%)  is 
higher  than  for  the  general  population  and 
higher  than  the  EU  average  (2.1%).  Regional 
disparities  in  overall  unemployment  are  not  very 
pronounced: in 2023, the highest rate was 7.2% in 
the  Lisbon  Metropolitan  Area.  However,  youth 
unemployment  (ages  15-24)  is  much  higher  in 
certain 
Lisbon 
Alentejo 
metropolitan  area  (23.6%)  and  the  autonomous 
regions  of  the  Azores  and  Madeira.  For  the 
autonomous  regions,  there  is  a  dearth  of  reliable 
secondary data collection, a situation that it would 
be beneficial to address. These regional disparities 
are partly due to structural weakness, especially in 

(22.4%), 

regions: 

the  case  of  the  islands,  not  only  because  of  their 
remote location but also due to the prevalence of 
smaller, less competitive and less innovative firms 
offering  few  quality  job  opportunities  for  young 
people.  Looking  ahead,  employment  growth  is 
forecast  to  fall  further  back  in  2025  and  2026, 
while  the  unemployment  rate  is  expected  to 
decrease  slightly  (6.3%  in  2025  and  6.2%  in 
2026).  Some  sectors  such  as  manufacturing  and 
construction still report labour and skills shortages, 
despite  a  low  rate  of  job  vacancies,  which  also 
pushes up wage pressure. (157) 

Graph A10.1: Key labour market indicators 

Source: Eurostat 

remains  a 

Youth  unemployment 
long-
standing  structural  challenge  for  Portugal’s 
labour  market.  Portugal’s  youth  unemployment 
rate (age 15-24), stood at 21.6% in 2024 (vs EU: 
14.9%)  and  is  among  the  highest  in  the  EU,  a 
persistent situation over the last decade. Even with 
improvements 
labour  market 
in  Portugal’s 
following  the  implementation  of  targeted  policy, 
the employment prospects of young people remain 
modest. The unstable employment status of young 
people  also  affects  their  educational  paths  and 
attainment,  career  prospects,  mobility  and  access 
to  housing,  ability  to  gain  independence  and 
ultimately,  the  overall  demographics  of 
the 
population. For the 15-29 age bracket, the level of 
unemployment is lower (14.2% vs EU: 11.3%), but 
the  pattern  is  similar.  Harnessing  the  labour-
market  potential  of  young  people  is  therefore 
crucial. In 2023, the share of the extended labour 

(157) Economic forecast for Portugal 

80 

68707274767880828486510152025201920202021202220232024(%)(%)Activity rate (20-64) - rhsEmployment rate (20-64) - rhsUnemployment rate (15-74) - lhsLong-term unemployment rate (15-74) - lhsYouth unemployment rate (15-24) - lhs 
 
 
   
 
 
 
Graph A10.2: Labour market outcomes of young 
people 

aged  20-64 

force(158),  for  the  15-29  age  bracket,  was  higher 
than  the  EU  (22.9%  vs  20.9%),  roughly  213 000 
individuals,  approximately  twice  the  figure  for 
people 
(11.3%).  Calculations 
published  by  the  national  public  employment 
services  (PES)(159)  reveal  that  only  1%  of  young 
people registered as unemployed were unavailable 
to look for a first or a new job. This demonstrates 
that  young  people  are  willing  and  ready  to  find 
work.  

fields  with 

social  mobility  and 

Although  young  highly  qualified  workers  are 
more  sought  after,  it  is  beneficial  to  cater 
for  those  less  qualified,  with  a  view  to 
promoting 
career 
progression. According to a 2024 report form the 
Portuguese Youth Employment Observatory(160), of 
three groups of young job seekers  - namely, those 
with lower levels of educational  attainment, post-
secondary  graduates 
lower 
in 
employability  and  migrants  -  those  with  lower 
levels  of  qualifications  faced  the  most  significant 
barriers. This group accounted  for around  36% of 
registered unemployed young people but benefited 
less  from  active  labour  market  policies  (ALMPs) 
which  tended  to  target  young  people  with  higher 
qualifications  and  obtained  fewer  posts.  Young 
the  country  are  also 
people  born  outside 
underrepresented  among  beneficiaries  of  ALMPs, 
at  just  7.7%  of  the  total  number  of  participants. 
The relatively high level of youth unemployment in 
Portugal  contrasts  with  the  current  rate  of  young 
people  not  in  employment,  education  or  training 
(NEETs),  which  in  2024  stood  at  8.7%,  2.3  pps 
below the EU average (11.0%). Most recent reports 
on  the  participation  of  young  people  in  the  Youth 
Guarantee scheme reveal improvements in several 
areas such as the number of people remaining on 
the  scheme  beyond  four  months  and 
the 
acceptance  of  offers  within  four  months  of 
registration. 

(158) Total number of people employed, unemployed, seeking 

work but not immediately available and available to work 
but not seeking 

(159) Annex (Young jobseekers registered with the PES: 
Characteristics, trajectories and placements) 

(160) Young jobseekers registered with the PES: Characteristics, 

trajectories and placements 

Source: Eurostat 

Youth  employment 
is  characterised  by 
precariousness  and  segmentation.  Despite 
considerable investment and reforms, Portugal has 
still  not managed to improve the quality of youth 
employment or provide greater stability and career 
prospects.  In  2024,  Portugal  had  one  of  the 
highest  proportions  of  young  people  (age  15-29) 
on temporary contracts in the EU, as a percentage 
of  employees  (36.7%  vs  EU:  30.9%).  Following 
significant  amendments  to  the  Labour  Code  and 
considerable investments and reforms, the country 
has  managed  to  reduce  overall  labour  market 
precariousness,  with  the  proportion  of  temporary 
contracts for those aged 20–64 dropping to 13.5% 
in 2024 (EU:  10.0%), 5.3 pps lower than in 2018. 
However,  the  situation  for  young  people  remains 
unchanged,  with  the  proportion  of  temporary 
contracts  among  young  people  consistently 
exceeding the EU average. Discontinued measures 
such 
Sustainable 
Employment Commitment, funded by the recovery 
and resilience plan (RRP) (and other initiatives such 
as  ATIVAR.PT  and  AVANÇAR,  both  co-financed  by 
the ESF and ESF+) were unable to make significant 
improvements to job prospects for young people.  

investment 

the 

as 

in 

The government is rolling out a new package 
of  ALMPs  targeting  a  wide  range  of 
unemployed  individuals,  including  low  and 
highly skilled workers, young people, persons 
with  disabilities  and  migrants.  These  include 
programmes such as INICIAR, Estágios + TALENTO 
(professional 
traineeships),  and  Emprego  + 
TALENTO  and  +  EMPREGO.  There  are  also  with 
increased financial incentives for permanent hiring. 
The  cost  of  living  in  Portugal,  and  in  particular 
access  to  affordable  housing  in  the  two  biggest 
metropolitan areas of Lisbon and Porto (see Annex 
11), is a major obstacle for young people, even for 
those on average or above-average income. Young 
people  live  in  their  parental  home  until,  on 

81 

5101520252018201920202021202220232024(%)Youth unemployment rate (15-24): EU 27Youth unemployment rate (15-24): PTNEET rate (15-29): EU 27NEET rate (15-29): PT 
 
  
average,  the  age  of  28.9  (vs  EU:  26.2)  in  2024. 
This  leads  to  a  later  start  in  life,  which  affects 
Portugal’s  demography  in  the  medium  and  long 
term.  

Recent  reports  from  youth  representative 
organisations  also  indicated  that  working 
conditions  were  increasingly  precarious  and 
salary  levels  insufficient  to  ensure  a  decent 
life(161). According to national data, 75% of young 
people  between  the  ages  of  18  and  35  years 
earned  less  than  EUR 1000  per  month  and  25% 
were  below  the poverty  line  in  2023(162).  Through 
support  from  the  RRP  Portugal  is  implementing 
ambitious reforms and is investing in its vocational 
education  and  training  (VET)  system  (see  Annex 
12).  However,  gains  remain  minimal  in  terms  of 
reducing  temporary  employment  and  increasing 
permanent employment among young people. One 
potentially  beneficial  measure  to  improve  long-
term  outcomes for youth, social  cohesion and the 
future of the economy is a national pact for young 
people to be agreed by all decision makers, social 
partners and stakeholder groups.   

Labour shortages, especially in highly skilled 
jobs,  are  becoming  more  evident.  Portugal  is 
in 
facing  significant  supply-side  challenges 
meeting  labour-market  demand:  factors  include 
skills shortages, demographic issues and structural 
challenges  such  as  low  basic  skills  and  poor 
could 
educational  outcomes,  all  of  which 
undermine 
the  country’s  competitiveness.  A 
significant  increase  in  high-skilled  labour  demand 
(44%),  is  expected,  which  represents  a  major 
challenge  for  a  country  with  a  structural  skills 
deficit due to low levels of educational attainment. 
This  may  be  further  exacerbated  if  the  current 
levels  of  participation  in  education  and  training 
remain  low  (see  Annex  12).  This  increase  in 
demand for highly skilled labour is in line with the 
job  openings  forecast  for  the  period  up  to  2035 
for  Portugal:  high-skilled  non-manual  occupations 
(51%),  skilled  non-manual  occupations  (29%), 
skilled manual occupations (14%) and elementary 
occupations  (5%).  A  projected  3%  decline  in  the 
labour force between 2020 and 2035  - driven by 
an  ageing  and  shrinking  population  (expected  to 
decrease  by  2.5%)  -  coupled  with  increasing 
specialisation  in  certain  sectors,  will  affect  the 

composition of employment in Portugal, leading to 
a higher demand for skilled workers. 

Labour  and  skills  shortages  are  having  a 
particularly  adverse  effect  on  sectors  that 
are  essential  for  the  green  and  digital 
transition.  Surveys  suggest  that  in  the  last  two 
years  62%  of  employers  found  it very  difficult  or 
difficult  to  find  and  hire  workers  with  the  right 
skills,  notably 
for  VET  and  post-secondary 
qualifications(163).  Numerous  sectors  are  affected, 
including construction, ICT (although ICT specialists 
account  for  5.2%  of  total  employment  in  2024, 
compared  to  5.0%  in  the  EU),  healthcare  and 
renewable  energy,  where employers  are  finding  it 
increasingly difficult to fill vacancies. According to 
CEDEFOP’s  Skill  Forecast  2023  for  Portugal, 
covering  the  period  2021  to  2035,  there  will  be 
around  3 million  job  vacancies,  of  which  95% 
involve  replacing  workers  and  the  rest  new  job 
fastest-growing  sectors  are 
vacancies.  The 
expected  to  be  ICT  (31%  increase),  followed  by 
electricity,  gas,  steam  and  air  conditioning  supply 
(19%).  For  the  same  period,  the  more  commonly 
demanded  occupations  (with  the  highest  number 
jobs  created)  will  be  business  and 
of  new 
administration  associate  professionals 
(around 
71 000),  personal  care  workers  (around  67 000) 
and  business  and  administration  professionals 
(around 66 000).  

Integrating  the  rapidly  growing  migrant 
population 
requires  a  great  deal  of 
coordination. From 2022 to 2023 the number of 
foreign-born  residents 
increased  almost  34% 
(from  around  782 000  to  1 045 000)  of  whom 
80.5%  are  working  age,  i.e.    between  20  and 
64.(164)  Moreover,  the  migratory  balance  of  the 
country  has  been  positive  since  2017,  with 
significant  increases  particularly  in  2022  and 
2023.(165) The integration of non-EU nationals is a 
challenge  for  Portugal,  not  least  because  of 
current labour shortages and the fact that almost 
40% of migrants with higher education attainment 
have  jobs  below  their  qualifications  (compared 
with 27% for those born in the country).(166)  

(163) Flash Eurobarometer 

(164) AIMA, Report on Migration and Asylum 

(161) CNJ - Position statement: State Budget 2025 

(165) Statistics Portugal, Demographic Statistics 

(162) CNJ - Position statement: State Budget 2025 

(166) European Labour Force Survey – 2017-2022 

82 

 
 
 
PES  are  facing  a  significant  increase  in 
registered unemployed migrants. In 2023, such 
people  accounted  for  18.4%  of  total  registered 
unemployment and according to more recent data 
there  was  a  21.5%  increase  between  November 
2023  and  November  2024  (167).  The  INTEGRAR 
programme  is  a  key  measure  to  address  this 
challenge:  it  introduces  a  coordinated  partnership 
network  (led  by  the  Instituto  de  Emprego  e 
Formação  Profissional  -  IEFP)  to  implement  a 
series of measures intended to improve access to 
work and integration for migrants. Other measures 
include  labour  mobility  agreements  with  non-EU 
countries  (e.g.  India,  Morrocco,  Cape-Verde  and 
Mozambique), 
for 
employers  and  the  GIP  Imigrante  services  to  help 
immigrants  into  work.  Portugal  is  also  putting 
forward  a  comprehensive  national  plan  (Plano  de 
Ação  para  as  Migrações)  that  includes  several 
policy  measures  to  ensure  regulated  inflows  of 
migration,  to  attract  foreign  talent  and  to  ensure 
that migrants are integrated with dignity. 

campaigns 

awareness 

When  it  comes  to  addressing  labour  market 
challenges one key element is enhancing the 
efficiency  of  PES.  The  main  PES  in  Portugal  is 
the  IEFP  (Portuguese  Employment  and  Training 
forward  several 
is  putting 
Institute),  which 
initiatives  to  address  improvement  opportunities. 
resources, 
These 
reinforcing  dedicated 
for  employer 
partnerships,  and  more  effective  integration  of 
training and employment services in organisations. 
The  average  age  of  the  IEFP’s  workforce  is 
currently  around  53.  It  is  in  the  process  of 
recruiting  300  staff  members  to  bring  down  that 
average.  

include  harnessing  human 

teams 

digital-skills  training.  The  deployment  of  all  these 
improve  the 
initiatives  has  the  potential  to 
efficiency  of  PES,  not  only  from  an  internal 
perspective  but  also  in  terms  of  the  quality  of 
services  provided  to  employers  and  to  the 
unemployed. 

Average  wage  trends  in  Portugal  remain 
steady.  Nominal  wage  growth  is  expected  to 
reach  8.0%  in  2024  and  3.6%  in  2025,  following 
increases  of  5.6%  in  2022  and  8.0%  in  2023, 
slightly  above  the  euro  area  and  EU  averages  for 
all  years  (168).  After  a  drop  of  1.5%  in  2022,  real 
wages rebounded by 2.8% in 2023 and are set to 
continue  increasing  by  5.2%  and  1.5%  in  2024 
and 2025, respectively, rates slightly above the EU 
average. This recovery in real wages reflects both 
lower  inflation  and  higher  nominal  wage  growth, 
recouping  the 
in  2022.  The 
statutory minimum wage also increased by around 
16%  between  January  2022  and  July  2024,  an 
increase  of  4%  in  real  terms.  Nevertheless,  at 
9.2%  in  2024,  in-work  poverty  remains  higher 
than  the  EU  average  (8.2%).  In  the  2025  state 
budget the government amended personal income 
tax  for  young  people  (IRS  Jovem),  expanding  its 
coverage  to  young  people  up  to  the  age  of  35 
regardless  of  their  level  of  education,  extending 
the  duration  of  exemptions  from  5  to  10  years 
and 
for 
exemptions. 

increasing 

threshold 

incurred 

income 

losses 

the 

Other  HR  measures  include  promoting  work-
life  balance,  professional  development  (with 
initial  and  continuous  training  plans)  and 
incentives for internal mobility supported by 
mentoring  and  reskilling  programmes.  The 
IEFP is promoting its strategy with employers (and 
will adopt a new one by the first half of 2025) by 
increasing visits to employers and with an internal 
training plan to help workers to improve their skills 
when  approaching  employers.  Other  measures  to 
modernise  the  PES  goes 
include  simplifying 
language,  diversifying  the  channels  for  providing 
services,  virtual  assistants  for  ALMPs  and  more 

(167) IEFP, I.P. – Monthly Statistics of Registered Unemployment 

(168) For nominal wage growth, compensation per employee is 

considered. It includes: i) Wages and salaries payable in cash 
or in kind; and ii) Social contributions payable by employers. 
For real gross wages, the deflator used is HICP. Real wages 
using this deflator then can differ from real wages shown in 
AMECO (that uses private consumption as deflator). Data for 
2024 and 2025 are based on the European Commission 
Autumn 2024 economic forecast. 

83 

 
 
 
 
ANNEX 11: SOCIAL POLICIES 

Portugal  continues  to  face  considerable 
social policy challenges. The limited capacity of 
social  benefits  to  reduce  poverty  and  inequality 
pose risks for Portugal’s sustainable and inclusive 
growth and prosperity. There is potential to further 
strengthen social protection access, adequacy and 
efficiency,  thus  helping  to  achieve  the  2030 
national  poverty  reduction  target.  Despite  some 
improvements, particularly in informal care, access 
to care services remains insufficient in the face of 
rising  demand  due  to  rapid  demographic  ageing, 
with public spending falling below the EU average. 
reached 
housing 
The 
unprecedented levels in 2023, namely in terms of 
purchase  and  rental  prices  and  the  ratio  between 
those  prices  and  the  disposable 
income  of 
families. Market trends, paired with a lack of social 
and affordable housing, puts pressure on families’ 
living standards and has negative knock-on effects 
on  the  job  market.  Energy  poverty  in  Portugal  is 
the  EU  average,  with 
significantly  above 
concerning trends across multiple areas. 

persistent 

crisis 

The  effectiveness  of  social  benefits  remains 
very  limited.  The  impact  of  social  transfers 
(excluding  pensions)  on  income  poverty  reduction 
was  significantly  below  the  EU  average  in  2024 
(22.4% vs 34.4% for the EU). The poverty-reducing 
effect  of  social  benefits  (excluding  pensions) 
remains below that seen before the crisis in 2019 
(4.2 percentage points (pps) vs 5.7 pps) and is half 
of  the  EU  average  (8.6  pps).  These  developments 
are  not  compensated  by  the  level  of  social 
benefits  in  kind (169),  which  accounted  for  just 
7.8%  of  the  GDP  in  2021,  well  below  the  EU 
average of 10%. Moreover, in 2023 expenditure on 
social protection stood at 16.6% (vs 19.2% in the 
EU).  In  2024,  inequalities  remained  above  the  EU 
average, as measured by the income quintile share 
ratio  (S80/S20),  at  5.2  compared  to  the  EU 
average  of  4.6.  Portugal’s  Gini  coefficient 
decreased  (from  33.7  in  2023  to  31.9  in  2024), 
but  remains  above  the  EU  average  of  29.3.  The 
allocation  of  additional  resources  can  improve 
social 
living 
conditions,  but  this  depends  on  targeting  support 
where  it  is  most  needed  and  closing  coverage 
gaps,  while  maintaining  fiscal  sustainability.  The 
single  social  benefit  reform 
in  the 
recovery  and  resilience  plan  (RRP)  scheduled  for 
2026  seeks  to  increase  coverage,  simplify  and 
widen  take-up  and  reduce  duplicate  payments. 

effectiveness 

protection 

included 

and 

(169) Social Protection Committee Annual Report 2024 

Further  targeted  improvements  in  the  area  of 
social  protection  policies  and  investments  should 
also  be  considered 
reduce  poverty.  The 
to 
government plans to adopt measures to guarantee 
the  long-term  sustainability  of  the  social  security 
system. To this end, it has created a working group 
tasked with presenting solutions by 2026. 

Graph A11.1: Impact of social benefits (excluding 
pensions) on poverty reduction 

(1) Percentage of reduction of population at risk of poverty 
Source: Eurostat 

affected, 

coverage 

Access to social protection is still insufficient 
for  some  categories  of  workers.  Gaps  remain 
notably  for  some  types  of  non-standard  workers. 
Individuals  with  very  short-term  contracts  are  the 
most 
for 
lacking 
unemployment,  sickness,  maternity,  paternity, 
work accidents and occupational illness benefits. In 
2023, effective access remained considerably low 
for  temporary  workers  (14.9%  vs  39.2%  in  the 
EU), part-time workers (8.2% vs 33.3% in the EU), 
and the self-employed (4.7% vs 12.7% in the EU). 
The  percentage  of  unemployed  people  receiving 
benefits is also relatively low (23.4% vs 52.4% in 
the EU). In response to these challenges, Portugal 
improve 
has 
access to effective and adequate social protection 
for  the  self-employed  and  for  workers  in  the 
cultural  sector.  Nonetheless,  sustained  efforts  are 
needed  to  close  the  gap  on  effective  social 
protection for workers on non-standard contracts. 

introduced  several  measures  to 

in  quasi-jobless  households 

The adequacy of minimum income in Portugal 
remains  insufficient.  In  2023,  only  65.9%  of 
people  aged  18-64  at  risk  of  poverty  (AROP)  and 
living 
received 
benefits,  compared  83.5%  in  the  EU).  Efforts  to 
increases  the  rendimento  social  de  inserção  (the 
minimum  income  under  the  social  integration 
income  scheme)  to  offset  inflation  over  the  last 
three  years  have  proven  been  insufficient  in 
reverting a long cycle of decline in its adequacy. In 
2023, the minimum income amounted to just 42% 
of  the  poverty  threshold,  below  the  peak  of  46% 

84 

10152025303540201920202021202220232024% of reduction of AROPEU 27PT 
 
 
  
 
 
reached in 2012 (170). Despite the recent update to 
the  minimum  income  benefit  to  account  for 
inflation,  its  level  remains  well  below  the  poverty 
threshold.  Additional  measures  are  needed  to 
increase 
income 
the  adequacy  of  minimum 
schemes,  along  with  active  inclusion  policies,  as 
outlined 
in  the  Council  Recommendation  on 
minimum income. 

gaps  remain  in  areas  such  as  inclusive  education 
and  the  adaptation  of  facilities,  materials  and 
teaching  methods  for  children  with  disabilities 
remain.  Improving  children’s  access  to  healthcare 
is also crucial, particularly as only 37% of children 
at risk of poverty or social exclusion report having 
‘very  good  health’  (37%),  was  well  below  the  EU 
average of 63%. 

Poverty levels remain stable, which calls for 
sustained  efforts  to  reach  the  national 
poverty  reduction  target  by  2030.  The 
percentage  of  people  at  risk  of  poverty  or  social 
exclusion (AROPE)  slightly decreased  compared  to 
2023 and lies at 19.7% in 2024. AROPE levels are 
disproportionally  high  among  certain  groups, 
including  persons  with  disabilities  and  non-EU-
born  individuals.  Progress  toward  the  national 
2030  target  of  reducing  the  number  of  people 
facing  poverty  and  social  exclusion  risks  by 
limited.  Timely  and  full 
765 000  has  been 
implementation of the national strategy to combat 
poverty  (2021-2030)  and  its  associated  action 
plan  will  be  key.  It  is  also  crucial  to  ensure 
with 
synergies 
investments,  namely  from  the  European  Social 
Fund Plus (ESF+) and the Recovery and Resilience 
Plan 
(RRP),  while  ensuring  coordination  with 
targeted strategies, such as the national European 
Child Guarantee (ECG) action plan and the national 
disability strategy. Additionally, it is vital to adjust 
the strategy against poverty in response to recent 
findings,  when  necessary (171).  Despite  some 
improvement  in  the  outermost  regions,the  AROPE 
rate remains notably high in the Azores, at 28.4% 
in 2024. 

complementarities 

and 

(LTC)  services 

Despite some improvements, the provision of 
long-term  care 
remains 
insufficient.  Demographic  developments  are 
driving  increased  demand  for  LTC  services,  with 
24.1% of the Portuguese population aged 65 and 
over  in  2024.  Portugal  is  the  fastest-ageing 
country  in  Europe,  and  its  healthy  life  expectancy 
at 65 is low, particularly for women, who have an 
average  of  just  7.3  years,  compared  to  the  EU 
average  of  9.2  years  in  2022.  LTC  services  are 
underfunded, 
their  availability  and 
limiting 
In  2022,  public  LTC  spending 
affordability. 
accounted  for  0.5%  of  GDP  well  below  the  EU 
average  of  1.7%.  The  largest  share  of  public  LTC 
spending  went 
(57.5%), 
followed by home care (41.8%). However, funding 
for home care remains insufficient, as only 15.9% 
of  those  with  severe  difficulties  receiving  home 
care  in  the  previous  year,  compared  to  28.6%  in 
the EU(172). Despite some progress in recent years, 
the system still falls short in promoting autonomy 
and  independence  for  users.  The  MAVI  scheme, 
designed  to  support  independent  living,  provides 
personal  assistance  to  people  with  disabilities. 
Although the pilot  scheme has been successful, it 
remains  underfunded  relative  to  demand,  and 
it 
be  made 
efforts 
nationally (173). 

residential  care 

expand 

should 

to 

to 

The risk of poverty or social exclusion among 
children has decreased. In 2024, the AROPE rate 
for children  decreased by  1.9 pps reaching  20.7% 
compared  to  the  EU  average  of  24.2%.  By  2030, 
Portugal aims to reduce the number of children at 
risk  of  poverty  or  social  exclusion  by  161 000, 
down  from  380 000  in  2019.  To  date,  29  000 
fewer children are at risk, highlighting considerable 
scope  for further action. Portugal  is implementing 
the  ECG  to  mitigate  the  impact  of  poverty  on 
children.  The  2024  implementation  report  shows 
progress in early childhood education and care, but 

(170) Rendimento mínimo em Portugal, 20 anos de RMG/RSI. 

The  LTC  sector  still  faces  staff  shortages 
and lack of career opportunities.  Although the 
LTC  workforce  has  increased  from  0.8  to  1.1 
workers  per  100  people  aged  65  and  over, 
Portugal  still  relies  heavily  on  informal  carers. 
Approximately  12.3%  of  the  total  population  is 
estimated  to  act  as  informal  carers.  While  recent 
improvements  in  the  status  of  informal  carers, 
including  a  simplified  recognition  process  and 

(172) First report on the implementation of the Council 

Recommendation on access to affordable high-quality long-
term care – Portugal, 2024. 

(171) An evaluation of the national strategy to combat poverty 
(2021-2030) was completed in 2023, but it was not 
released to the public. 

(173) Following a survey, only 26% of people currently have 

personal assistance, and 53% of these are not satisfied with 
the number of hours they receive. 

85 

 
 
 
enhanced  support  are  positive  steps,  effective 
implementation  is  crucial,  particularly  in  the  area 
of respite care. Simultaneously, there is a pressing 
need to increase the number and quality of formal 
carers,  by  providing  training  to  improve  their  skill 
set,  ensuring  decent  remuneration,  and  offering 
career  development  opportunities  and  improved 
working conditions. 

House  purchase  prices  have  been  growing 
substantially  over  the  last  decade.  House 
prices  have  more  than  doubled  since  2015.  They 
increased  by  8.2%  in  2023  and  are  estimated  to 
be  overvalued  by  around  25-30%.  The  growth 
continued  in  2024  (+9.8%  year-on-year  in  Q3-
2024). This cumulated growth has been driven by 
strong tourism demand, significantly supported by 
short-term rentals, low interest rates, a high level 
of  property  investment  by  foreigners,  and  a  low 
level of residential construction and of investment 
on  affordable  housing.  Mortgage  interest  rates 
increased  from  0.8%  in  2021  to  4.0%  in  2023, 
impacting total  amount of mortgage credit, which 
fell  1.4%.  The  adjustment  to  the  higher  interest 
rate environment is having a greater impact on the 
quantity of transactions, with the number of house 
transactions  decreasing  by  19.8%  in  2023  after 
stabilising  in  2022.  However,  building  permits 
continued to increase by 5.4% in 2023. 

housing 

affordability 

Overall 
has 
deteriorated  over  the  past  decade.  The 
standardised  house  price-to-income  ratio  has 
jumped  by  almost  50%  since  2015  and  stands 
around  30%  above  its  long-term  average.  Taking 
into  account  the  cost  of  mortgage  funding,  the 
borrowing  capacity  of  households  worsened 
significantly  over the  last ten  years  as  well,  since 
the  average  household  now  needs  a  significantly 
higher  share  of  its  annual  income  for  mortgage 
payments.   

substantial rental costs. In 2024, the housing cost 
overburden rate (share of people with over 40% of 
their  household 
income  spent  on  housing) 
increased  by  2  pps  compared  to  2023,  reaching 
6.9%,  while  it  decreased  in  the  EU  overall  (EU: 
8.2%).  Renters  are  particularly  affected  with 
30.3%  facing  housing  cost  overburden  compared 
to  19.2%  in  the  EU.  Renters  in  the  vulnerable 
groups  require  stronger  short-term  measures  to 
alleviate  the  cost  of  renting,  and  to  ensure  a 
balanced and accessible rental market in the most 
affected cities. The reasons exposed above for this 
situation  are paired  in  the  rental  market  with  low 
price  and  rent  control  or  regulation  and  the 
pressure 
tourist 
accommodation  market,  particularly  in  popular 
urban and holiday areas.  

the  short-term 

from 

felt 

Affordability  issues  exacerbates    negative 
social  and  job-market  outcomes.    Recent 
studies  show  that  rental  prices  are  increasing 
faster  than  average  wages,  particularly  in  Lisbon, 
where  on  average  52%  of  a  person’s  wage  is 
required to cover rent, limiting the ability of people 
independently (174).  The  municipalities 
to  rent 
surrounding the capital are experiencing a spillover 
effect, with more people relocating to these areas, 
which  also  lack  sufficient  affordable  and  social 
housing.  Similarly,  the  Algarve  region  and  the 
Porto  metropolitan  area  are  facing  significant 
housing  pressure.  Since 
last  year,  there  are 
growing reports of noticeable increase of informal 
settlements,  surging  in  the  suburban  areas  of 
Lisbon,  populated  by  low-income  and  migrant 
cohorts(175).  The  financial  strain  felt  by  workers 
and  households,  paired  with  deteriorating  of 
can  affect 
standard  of 
competitiveness 
thus 
term, 
hindering job-market mobility and in particular the 
capacity to attract and retain qualified workers. 

conditions, 
the  medium 

living 
in 

Portugal  continues 
to  face  a  housing 
accessibility  crisis  and  rental  affordability 
worsened.  Since  the  past  decade,  Portugal  has 
seen  a  sharp  rise  in  housing  costs,  both  for 
purchase and for rent. Rental prices hit a 30-year 
in 
high  with  a  7.3%  year-on-year 
December 2024. Despite the country having a high 
homeownership  rate,  the  ratio  of  new  rents  to 
incomes 
last 
decade  with  increases  of  9.3%  year-on-year. 
Housing  remains  largely  inaccessible  to  young 
people,  vulnerable  groups,  and  increasingly to  the 
middle-  and  lower-income  cohorts,  who  face 

increased  significantly  over  the 

increase 

Social  housing  stock  is  insufficient  to  meet 
demand,  requiring  substantial  measures. 
While Portugal has an ambitious target to increase 
public  housing  stock  to  5%  of  total  housing  by 
2026  and  to  provide  rental  or  home-purchase 
support  for  the  most  vulnerable  groups  and 

(174) Report on impact of rental cost in Portugal for locals: Tornou-
se incomportável arrendar em Portugal, Miguel Salema, 
Prosper Research Center, Católica-Lisbon University. 

(175) Municipalities and local housing associations alike report the 
increase of number of people living in informal settlements, 
with prevalence in the suburban areas of Lisbon. 

86 

 
 
lifespan 

households,  current  efforts  may  fall  short  of 
delivering  the  necessary  systemic  and  short-term 
solutions.  Portugal  has  a  very  low  stock  of  public 
housing,  at  less  than  2%,  while  in  2022  vacant 
dwellings,  excluding  seasonal  and  holiday  homes, 
accounted  for  around  12%  of  the  country’s  total 
housing  stock (176).  The  Portuguese  RRP 
is 
responsible  for  record  investments  in  the  public 
housing  sector  and  is  aiming  to  around  20  000 
new  or  renovated  housing  units,  while  the 
government  will  finance  33 000  more  units  by 
2030.  However,  with  only  3%  delivered  by 
September  2024,  this  raises  strong  doubts  as  to 
the capacity to meet the targets set by the end of 
the  RRP 
in  2026.  The  Portuguese 
government recently introduced measures, such as 
fiscal  benefits  and  public  guarantees,  to  help 
young people access property, though their impact 
on the low- and medium-income cohorts is yet to 
be  seen.  In  2023,  Portugal  introduced  targeted 
initiatives  to  support  vulnerable  or  lower-income 
households with rental costs, including stepped-up 
measures  like  Porta  65+  and  extraordinary  rent 
support. While these measures have an immediate 
effect on the ability of the most vulnerable to pay 
rent,  they  are  not  a  systemic  solution.  Portugal 
should  consider  long-lasting  measures  to  control 
the  rapid  rise  in  rental  prices.  This  could  be 
i)  further  regulating  short-term 
achieved  by 
tourism rentals in pressured  areas, by ii)  enacting 
rent  regulation  measures  to  protect  the  most 
affected groups, and iii) by assessing the supply of 
vacant,  derelict  or  underused  homes  both  in  the 
public  and  private  stocks  in  the  most  affected 
cities promoting their availability,  The Portuguese 
government is expected to prepare a new housing 
strategy  based  on  an  assessment  of  investment 
needs  and  taking  into  account  the  delays  in 
granting  building  permits  and 
in  social  and 
affordable  housing  construction.  It  is  crucial  for 
this  assessment  to  provide  an  updated  and 
complete  overview  of  national  and  local  housing 
investments and reforms. This should also include 
a  reliable  timeline  for  completion  of  builds  and  a 
comprehensive plan to address housing shortages, 
,  based  on  robust  statistical  data.  It  should  also 
further promote a Housing First national approach.  

A  new  strategy  aims  to  provide  long-lasting 
solutions to rising homelessness. In 2023, the 

(176) The OECD reports on public housing stock monitoring reveals 
Portugal has one of the lowest stocks of the group. OECD 
Affordable Housing Database (reports PH4.2 and HM1.1). 

number  of  people 
in  homelessness  on  the 
mainland reached around 13 000, a 23% increase 
from  2022,  with  about  7 700  of  them  sleeping 
rough.  Lisbon  is  the  municipality  with  the  highest 
number  of  people  experiencing  homelessness, 
followed by rural municipalities where the trend is 
heightened  by  seasonal  agricultural  work  and  job 
precariousness. Migrants face severe difficulties in 
finding  adequate  housing,  with  20%  of  people  in 
homelessness  not  being  Portuguese  or  EU 
nationals.  Another  worrying  statistic  is  that  in 
2023  38%  of  homeless  people  were  under  30 
years old, while in 2022 that figure was already as 
high  as  18%,  pointing  to  a  worsening  of  the 
precarious conditions affecting this group. The new 
and  ambitious  2025-2030  national  strategy  for 
the integration of people in homelessness aims to 
provide  an  intersectional  response,  and  for  the 
first  time  includes  a  nation-wide  ‘Housing  First’ 
initiative  with  600  housing  units  to  be  made 
available.  The  strategy  also  focuses  on  the 
reintegration  of  people  in  homelessness  through 
employment  and  personalised  support.  The 
Government  must  guarantee  adequate  and 
currently 
financing  of  measures 
continued 
supported  by  EU  funds to  promote  the  social  and 
labour  market 
in 
homelessness.  Actions  at  municipal  level  have 
emergency 
delivered 
accommodation programmes, with strong support, 
monitoring and coordination by NGOs. 

reintegration  of  people 

prevention 

and 

than 

Energy  poverty  in  Portugal  is  significantly 
above  the  EU  average,  with  concerning 
trends  across  multiple  areas.  The  percentage 
of  the  population  unable  to  keep  their  homes 
adequately  warm  in  2024  was  15.7.%,  which  is 
the  EU  average (177). 
6.5 pps  higher 
Additionally,  29%  of  households  experienced 
issues such as leaks, damp or rot in their dwellings 
in 2023, far surpassing the EU average of 15.5%. 
In  2024,  the  percentage  of  households  in  arrears 
on utility bills is 4.3%, which is lower than the EU 
average  of  6.9%,  but  still  an  area  of  concern. 
Portugal  also  faces  one  of  the  highest  winter 
mortality excess rates in the EU, underscoring the 
severe 
impact  of  energy  poverty.  Portugal’s 
national  long-term  strategy  to  combat  energy 
poverty aims to eradicate energy poverty by 2050. 

(177) A recent survey by Lisboa-E-Nova, Agência de Energia e 

Ambiente de Lisboa, published in January 2024, shows that 
63.2% of the population are unable to keep the house 
adequately warm in the winter. This rate is 56.5%, when it 
comes to keeping the house comfortably cool in the summer. 

87 

 
 
 
which 

long-term 

programme, 

financial  assistance 

to 
initiatives 

The  focus  of  the  strategy  will  be  on  reducing  the 
percentage  of  households  spending  more  than 
10%  of  their  income  on  energy.  The  government 
has launched several initiatives, including the ‘Vale 
Eficiência’ 
supports 
economically  vulnerable  households  by  improving 
the  energy  efficiency  of  housing.  The  National 
Energy  Poverty  Observatory,  established  in  2024, 
will monitor trends and inform policy development. 
While  short-term  measures  like  the  social  tariff 
vulnerable 
provide 
households, 
focus  on 
improving  building  energy  performance  and 
efficiency.  However,  the  national  energy  and 
climate  plan  lacks  specific  targets  for  energy 
poverty, and the assessment of policies to address 
the  overall 
this 
population  in  2023  faced  fewer  affordability 
challenges  for  cars  compared  to  the  EU  average 
(4.7% vs 5.6%), vulnerable income groups, such as 
those  at  risk  of  poverty,  are  disproportionately 
impacted  by  both  the  inability  to  afford  cars 
(13.1%)  and  the  high  costs  of  personal  transport 
fuels. There has been a gradual shift from reliance 
on  private  cars  to  public  transportation,  but  the 
use  of  public  transport  remains  below  the  EU 
average, suggesting room for further improvement 
in  sustainable  transport  use. Finally,  the  future 
European  Social  Climate  Fund  will  be  a  key 
financial  instrument  in  helping  Portugal  direct 
support  to  the  most  vulnerable  in  the  green 
transition. 

incomplete.  While 

issue 

is 

88 

 
ANNEX 12: EDUCATION AND SKILLS 

Portugal’s  competitiveness  is  hindered  by 
weaknesses  in  skills  development  including 
basic  skills,  skills  mismatches  and  a  low 
adult  learning  participation  rate,  despite 
significant  investments.  The  evolving  labour 
market,  driven  by  green  and  digital  transitions, 
puts  pressure  on  education  and  training  systems 
to  equip  both  young  people  and  adults  with 
relevant skills. Basic skills are declining, with about 
one  third  of  students  failing  to  reach  minimum 
standards  in  mathematics.  More  15-year-olds  fail 
to  meet  basic  standards,  limiting  future  upskilling 
opportunities.  Higher  education  and  vocational 
training  are  not  fully  aligned  with  labour  market 
needs,  leading  to  skills  mismatches.  Although 
Portugal’s  workforce  is  more  educated  than  a 
decade ago, many skilled young people struggle to 
find  quality  jobs.  Participation  in  adult  learning 
remains  low,  despite  the  vast  array  of  measures 
supported  by  European  funds  such  as  ESF,  ESF+, 
and  the  recovery  and  resilience  plan  (RRP).  To 
boost  productivity  and 
improving 
educational  outcomes  and  skills  development  is 
crucial. 

innovation, 

but 

ranged 

efforts 

from  100% 

Portugal has reached the EU-level target for 
early  childhood  education  and  care  (ECEC) 
to  achieve 
participation, 
universal  access  need  to  continue.  The 
participation of children between the age of three 
and  the  compulsory  schooling  age 
in  ECEC 
increased from 90.5% in 2021 to 96.3% in 2022, 
exceeding  the  EU  average  (93.3%)  and  the  EU-
level  target  of  at  least  96%.  In  2022,  ECEC 
participation 
the 
autonomous  region  of  Madeira  to  91.4%  in  the 
Lisbon metropolitan area. However, young children 
at  risk  of  poverty  or  social  exclusion  participate 
less  in  ECEC  than  those  not  at  risk.  To  achieve 
education, 
universal 
investments to expand the ECEC network continue, 
supported  through  Portugal's  PARES  programme 
(Programa  de  Alargamento  da  Rede  de 
the  social 
Equipamentos  Sociais) 
equipment  network,  which  is  financed  by  the 
Recovery  and  Resilience  Facility  (RRF).  Supported 
by the Technical Support Instrument (TSI), Portugal 
is now developing a national quality framework for 
ECEC (2024-26). 

to  extend 

preschool 

access 

to 

in 

The  high  share  of  students  underperforming 
in  mathematics  and 
low  share  of  top 
performers pose a risk to future productivity 
and  competitiveness.  Student  performance  in 

89 

in 

line  with 

the  EU/OECD 

basic  skills  has  declined  significantly  since  2018 
trend.  The 
and 
underachievement  rate  is  particularly  high  in 
mathematics.  Portuguese students perform  better 
in  reading  and  science  with  underachievement 
rates below the EU average. At the same time, the 
share  of  top  performers  significantly  dropped  in 
maths  and  reading  and  is  now  among  the  lowest 
levels in the EU. In science, the rate has remained 
unchanged over the past decade and is now lower 
than  the  EU  average.  Other  international  studies 
conducted in Portugal, namely TIMSS 2019 (before 
the 
the  pandemic)  and  PIRLS  2021 
pandemic),  also  recorded  worse  results  compared 
to previous editions (2015 and 2016, respectively). 

(after 

Graph A12.1: Underachievement rates by field, 
PISA 2012, 2018 and 2022 (%) 

Source: OECD (2023). 

While  the  socio-economic  gap  in  basic  skills 
is  smaller  than  in  other  EU  countries,  it  is 
widening.  Underachievement  has  risen  among 
disadvantaged  students. 
It  has  grown  by 
7.5 percentage  points  (pps)  for  students  from  the 
bottom quarter of the socio-economic distribution, 
reaching  46.9%  in  2022,  slightly  below  the  EU 
average  (48.0%).  This  has  widened  the  socio-
economic  gap  by  4.9 pps  since  2018,  in  line  with 
EU trends. Foreign-born students are more likely to 
underachieve  in  mathematics  than  native-born 
students,  similarly  to  other  EU  countries.  Portugal 
is  implementing  several  measures  to  strengthen 
student  performance.  Over  the  last  25  years, 
Portugal's  programme  for  priority  intervention 
educational areas (Programa Territórios Educativos 
de  Intervenção  Prioritária  -  TEIP)  has  helped 
increase  inclusive  education,  improve  basic  skills, 
and  reduce  early  leaving  from  education  and 
training  (ELET)  rates  among  school  students.  In 
2023,  the  fourth  generation  of  the  TEIP  (TEIP4) 
was  launched  for  the  next  six  academic  years, 
strengthening  and  refocusing  previous  measures 

05101520253035PTEUPTEUPTEUMathematicsReadingScience%2012201820222030 EU target 
 
     
 
 
while  granting  greater  autonomy  to  educational 
communities. 

2021 

Portugal 

launched 

In 
another 
comprehensive  plan  to  compensate  for  the 
learning  losses  and  negative  effect  of  the 
pandemic.  The  ‘21|23  Escola+’  plan  was  rolled 
out  for  two  academic  years,  with  an  allocation  of 
over  EUR 900  million,  supported  by  Cohesion 
Policy  funds.  The  plan  has  been  extended  to  the 
academic  year  2023/2024.  The  new 
‘23|24 
School+’ plan aims to have all Portuguese schools 
set up and implement their own learning recovery 
plans in a variety of fields. A new plan to replace 
the  existing  one  after  2024  has  been  approved 
(Council  of  Ministers  Resolution  no.  140/2024,  of 
17  October)  putting  special  focus  on  Integrating 
migrant  students  (as  a  response  to  the  growing 
number of non-Portuguese speaking students). 

Graph A12.2: Employment rate of recent graduates 
by educational attainment (annual) 

Low skilled (Less than primary, primary and lower secondary 
education (levels 0-2)), medium skilled (VET) (Upper 
secondary and post-secondary non-tertiary education (levels 
3 and 4) – vocational), and high skilled (Tertiary education 
(levels 5-8)).  
Source: Eurostat 

Regional  variations  in  early  school  leaving 
remain  significant.  In  2024,  the  ELET  rate 
dropped  to  6.6%  (EU:  9.3%),  well  below  the  EU 
target.  Nevertheless,  it  is  strongly  influenced  by 
place  of  residence.  Regional  disparities  in  ELET 
rates persist, ranging in 2024 from over 19.8% in 
the  Azores  to  5.2%  in  the  North  region.  In  2024, 
ELET rates did not significantly differ according to 
the degree of urbanisation and showed a reduction 
notably in rural areas (2.8 pps less than in 2023). 

90 

Several  measures  aim  to 
increase  the 
attractiveness  the  teaching  profession  and 
improve working conditions. The teaching force 
is 
is  ageing,  and  the  shortage  of  teachers 
the 
worsening  as  few  young  people  enter 
profession(178). In 2023, the government approved 
a  new  management  and  recruitment  regime  for 
primary  and  secondary  school  teaching  staff, 
it  possible  to  offer  fixed-term 
which  made 
contracts  to  more  than  8 000  teachers.  It  also 
approved  a  regulation  fixing  the  terms  for 
implementing  career  progression  mechanisms  for 
in  basic  and 
ECEC  educators  and  teachers 
secondary  education,  which  benefited  around 
60 000  teachers.  A  Decree  Law  altered  the  legal 
framework 
for 
in  preschool,  basic  and  secondary 
teaching 
education.  An  agreement  was  also  reached  with 
trade  unions  on  frozen  service 
time  being 
recovered in two years and ten months. 

for  professional  qualification 

Tertiary  educational  attainment  (TEA)  has 
risen steadily in the past decade but remains 
below the EU average. In 2024, 43.2% of young 
people  aged  25-34  held  a  tertiary  degree,  below 
the  EU  average  (44.2%)  and  the  EU-level  target 
(45%). The TEA rate is much higher than in 2013 
regional 
(30%).  There  are  still  significant 
differences in TEA rates (from 19.6% in the Azores 
to 48.4% in the Lisbon metropolitan area in 2023). 
There  are  also  differences  by  country  of  birth 
(from  35.4%  of  foreign-born  people  to  44.8%  of 
native-born  people;  EU  averages:  39.3%  and 
45.2%,  respectively  in  2024).  While  according  to 
national statistics, more young people are enrolled 
in  higher  education  studies,  the  number  of  higher 
education  STEM  graduates  decreased  in  2022 
compared to the previous year. In Portugal, 30.5% 
of  pupils  enrolled  in  medium-level  vocational 
education and training (VET) in 2023 were in STEM 
fields, compared to 36.3% across the EU. 

The  Portuguese  population  has  historically 
had  a  low  level  of  qualifications,  hindering 
productivity  and  competitiveness,  although 
there has been significant progress in recent 
years.  In  2023,  around  39%  of  people  aged  15-
64 had an International Standard Classification of 

(178)https://economy-

finance.ec.europa.eu/document/download/c6e61ba3-868f-
4de4-833b-
a398213472b6_en?filename=SWD_2024_622_1_EN_Portu
gal.pdf 

40,60,80,100,201920202021202220232024Low skilled: EU27Low skilled: PTMedium skilled (VET): EU27Medium skilled (VET): PTHigh skilled: EU27High skilled: PT 
  
 
Education (ISCED) level of 2 or lower, significantly 
above  the  EU  average  of  24.2%.  This  is  a  major 
improvement  from  2014,  when  the  share  was 
56.4%, reflecting a reduction of over 15 pps. This 
current large pool of persons with low educational 
attainment (particularly for the older segments of 
the  population) 
the 
competitiveness and productivity of the country. It 
also  hinders  the  participation  and  access  of  less-
qualified  individuals  to  higher-skilled  jobs  in  the 
medium  and  long  term,  ultimately  limiting  their 
career progression. 

challenge 

is  a 

for 

Policy  efforts  seek  to  improve  the  matching 
between  VET  offer  and 
labour  market 
demand. In Portugal, 38.7% of pupils in medium-
level  education  attend  programmes  with  a 
vocational  orientation  (2023  data).  More  than 
three  out  of  four  (77.8%  in  2024)  recent  VET 
graduates  had  experienced  work-based  learning 
(compared  to  65.3%  EU-wide).  Still,  recent  VET 
graduates have an employment rate below the EU 
average  (75.5%  as  compared  to  80.0%  in  2024). 
The implementation of the tripartite agreement on 
VET signed in 2021 is lagging, but one of its most 
important measures – the revision of the national 
catalogue of qualifications – should be finalised by 
January 2026. Once completed, this will put more 
emphasis on skills (rather on training content), will 
feature  more  high-skilled  training  offers  and 
qualifications  no  longer  integrate  the  workload. 
Portugal's main forecasting tool for skills needs is 
its  SANQ  system  for  anticipating  qualification 
needs,  which  serves  as  a  solid  base  for  VET 
provision  all  over  the  country.  More  regular 
updates of the forecasts (currently every 3 years) 
would  help 
responsiveness  and 
adaptability to changes in skills demand and feed 
into curricular updates. 

strengthen 

The  RRF  and  the  ESF+  provide  significant 
financial  support  for  VET  measures  to 
promote  quality  employment  for  youth. 
Component 6  of  the  RRP  includes  reforms  and 
investments  in  labour  and  skills,  with  the  VET 
reform  being  a  key  element.  This  reform  is 
complemented  by 
the  RRP  EUR 710 million 
investment  to  modernise  VET  provision  and 
establishments. Its goal is to install and modernise 
365 specialised technological  centres and enlarge 
the network of PES training centres. A total of 104 
technological centres and 59 training centres were 
constructed  or  refurbished  by  the  end  of  March 
2025. 

has 

also 

while 

brought 

to  upskill 

VET  providers  report  that  the  large-scale 
RRP  investment,  alongside  the  VET  system 
significant 
reform, 
improvements 
requiring 
adaptation in methodology, organisation and 
teacher training. To fully harness these benefits, 
further efforts from VET training providers will be 
teaching  workforce. 
needed 
their 
have 
Portuguese  mainland 
implemented  quality  assurance  systems  aligned 
with  ISO  or  European  Quality  Assurance  in  VET 
norms, 
their  management  and 
operations.  ESF+  support  to  VET  activities  has 
been substantial and constitutes the main training 
typology  of  operation 
in  both 
programming  periods  (2014-2020  and  2021-
2027).  The  ESF+  programme  PESSOAS 2030 
allocates  around  EUR 1.5 billion  for  VET,  with  a 
target of 366 000 participants by 2029 (100 000 
participants had been supported by June 2024). 

enhancing 

supported 

schools 

VET 

labour  market  demand 

High  youth  unemployment  and 
labour 
shortages (see Annex 10) mean the VET offer 
must  be  as  closely  aligned  as  possible  with 
the 
to  avoid 
unnecessarily  financing  courses  with  low 
employability  prospects. 
The  government 
intends  to  reorganise  the  VET  system  to  further 
align  it  with  companies’  skills  demand  and  the 
technological  transition.  It  also  intends  to  review 
and systematise VET legislation and reform of the 
system that certifies training providers. 

Adult  participation  in  learning  activities  is 
declining,  creating  a  significant  barrier  for 
the  low-skilled  adult  population.  Older  age 
groups  are  more  affected  by  low  educational 
attainment  (ISCED 2),  with  61.9%  of  individuals 
aged 55-64 having this level of education in 2024, 
compared  to  just  16.2%  of  those  aged  20-34. 
Given the rapidly changing labour market, the twin 
transitions  and  concerning  demographic  trends  in 
Portugal,  adult  learning  opportunities  should  be 
expanded 
labour 
resources, facilitate reskilling, and ultimately boost 
national 
competitiveness. 
Outreach  and  participation  pose  a  significant 
challenge  to  Portugal’s  goal  of  having  at  least 
60%  of  adults  participate  in  training  annually  by 
2030. 2022 data (179) shows participation dropping 

to  maximise 

productivity 

limited 

and 

the 

(179) Data from the Adult Education Survey 2022, special 
extraction excluding guided-on-the-job training. 

91 

 
 
to  33.4%  from  38%  in  2016,  putting  at  risk  the 
attainment  of  the  goal.  Increased  outreach  to 
significantly  improve  the  participation  could  be 
beneficial. 

the 

‘Adult 

The QUALIFICA programme remains the main 
way  to  improve  the  qualifications  of  adults 
and  their  employability.  Under  the  supervision 
of  the  National  Agency  for  Qualification  and  VET 
(ANQEP),  which  promotes  double  certification 
qualifications  (non-tertiary)  and  both  initial  and 
lifelong learning, Portugal continues to implement 
the  QUALIFICA  programme  across  the  country, 
with  over  300  centres.  The  RRP 
invests 
EUR 225 million 
Incentive 
in 
Programme’ to increase the qualification levels of 
the  adult  population.  This  includes  local  training 
programmes  to  improve  basic  levels  of  literacy, 
numeracy  and  digital  skills,  increase  participation 
and  completion  in  ‘Recognition,  Validation  and 
Certification  of  Skills’  processes  and  developing 
short  higher  education  courses.  By  December 
2024,  68 402  certifications  were  provided  via 
RVCC  (68%  of  the  2025  target  of  100 000)  and 
training 
11 231  adults  participated 
programmes  (around  50%  of  the  2025  target  of 
22 500).  The  ESF+  main  thematic  programme 
PESSOAS 2030  allocates  around  EUR 178 million 
for adult education through the QUALIFICA centres 
with a target of 700 000 participants by 2029 and 
also  supports  education  and  training  for  adults 
(Educação e Formação de Adultos - EFA), a double 
certification  approach  that  allows  low-qualified 
adults to improve their basic skills. 

local 

in 

Skills  shortages  and  mismatches  will  hinder 
the  economy  unless  education  and  training 
systems  become  more  efficient.  Reported 
labour  shortages  (see  Annex 10)  underscore  the 
need  to  improve  skills  matching  in  Portugal,  in 
addition  to  addressing  the  skills  deficit  and 
workforce  shortages  highlighted  by  national 
authorities. Despite the reported labour shortages, 
the low job vacancy rate (1.3% in 2024) suggests 
that the available positions may be of poor quality, 
especially for young people, indicating a mismatch 
between 
the 
opportunities  offered  by  public  employment 
services. 

the  demand 

labour  and 

for 

Portugal  has  been 
investing  heavily 
in 
training  across  various 
education  and 
development  areas,  supported  by  European 
funding. However, challenges remain in efficiently 
anticipating labour market needs for different skill 

92 

The 

stakeholder 

engagement. 

levels,  with  proper  diagnostics,  orientation  tools, 
SANQ 
and 
forecasting  system  has  been  important  in  better 
aligning  demand  and  supply,  particularly  at 
regional  level.  However,  it  could  benefit  from 
improvements, especially in terms of the regularity 
of  its  implementation.  Portugal  faces  a  lack  of 
proper  skills  anticipation  mechanisms  for  higher 
education,  a  challenge  it  aims  to  address  with 
support  from  the  TSI  and  the  OECD  through  a 
project 
and 
recommendations,  with  results  expected  by  July 
2026. 

practices 

identify 

good 

to 

The  digital  transformation  is  progressing 
well.  Women  already  represented  22.7%  of  the 
ICT  specialists  in  2024  (EU  average:  19.5%)  and 
the  share  of  the  adult  population  with  at  least 
basic digital skills is currently slightly above the EU 
average (56.0% vs 55.6%). The ESF+ and RRF help 
provide  digital  education  and  training  all  over  the 
country  with  examples  of  digitally-oriented 
measures  under  different  components  of  the  RRP 
and  digital  skills  training  included  in  various 
operations funded by the ESF+. Portugal intends to 
make digital skills an area that intersects with all 
types of education and training activities. 

integration  of  green  skills 

labour  shortages  were  reported 

Compared to the digital transition, the green 
transition is lagging. Portuguese authorities say 
the 
into  training 
programmes  is  progressing  more  slowly,  mainly 
due to a lack of demand for this type of training. 
In  2024, 
in 
Portugal  for several  occupations requiring specific 
skills  related  to  the  green  transition,  including 
agricultural  and  forestry  production  managers, 
forestry labourers, and civil engineers (180). On the 
other hand, environmental education in Portugal is 
already  a  mandatory  subject  for  all  school  levels. 
Interesting projects such as ‘Educating for the Blue 
Generation’,  partnerships  with  NGOs  and  specific 
short-term  teachers  training  programmes  might 
help speed up this transition. 

(180) European Labour Authority 2025 European Employment 

Services (EURES) Report on labour shortages and surpluses 
2024, based on data from EURES National Coordination 
Offices. Skills and knowledge requirements align with the 
European Classification of Occupations, Skills and 
Competences (ESCO) taxonomy on skills for the green 
transition, with examples analysed using the ESCO green 
intensity index. 

 
 
ANNEX 13: SOCIAL SCOREBOARD 

Table A13.1:Social Scoreboard for Portugal 

(1) Update of 5 May 2025. Members States are categorised based on the Social Scoreboard according to a methodology agreed 
with the EMCO and SPC Committees. Please consult the Annex of the Joint Employment Report 2025 for details on the 
methodology (https://employment-social-affairs.ec.europa.eu/joint-employment-report-2025-0). 
Source: Eurostat 

93 

33,46,656,08,75,75,2078,56,52,4110,819,720,722,421,36,959,42,5Critical situationTo watchWeak but improvingGood but to monitorOn averageAdult participation in learning (during the last 12 months, excl. guided on the job training, % of the population aged 25-64, 2022)Equal opportunities and access to the labour marketSocial Scoreboard for PortugalBest performersBetter than averageEarly leavers from education and training(% of  the population aged 18-24, 2024)Young people not in employment, education or training(% of the population aged 15-29, 2024)Gender employment gap(percentage points, population aged 20-64, 2024)Income quintile ratio (S80/S20, 2024)Dynamic labour markets and fair working conditionsSocial protection and inclusionShare of individuals who have basic or above basic overall digital skills(% of the population aged 16-74, 2023)Impact of social transfers (other than pensions) on poverty reduction(% reduction of AROP, 2024)Children aged less than 3 years in formal childcare (% of the under 3-years-old population, 2024)Self-reported unmet need for medical care (% of the population aged 16+, 2024)Disability employment gap (percentage points, population aged 20-64, 2024)Housing cost overburden (% of the total population, 2024)At risk of poverty or social exclusion (AROPE) rate (% of the total population, 2024)Employment rate(% of the population aged 20-64, 2024)Unemployment rate(% of the active population aged 15-74, 2024)Long term unemployment(% of the active population aged 15-74, 2024)Gross disposable household income (GDHI) per capita growth(index, 2008=100, 2023)At risk of poverty or social exclusion (AROPE) rate for children(% of the population aged 0-17, 2024) 
 
 
 
  
 
 
ANNEX 14: HEALTH AND HEALTH SYSTEMS 

health 

system 

Portugal’s 
performs 
comparatively well, with high life expectancy 
at  birth  and  low  rates  of  treatable  and 
preventable  mortality.  However,  Portugal  faces 
challenges with access to healthcare, shortages of 
healthcare  workers  and  an  uneven  geographical 
distribution  of  healthcare 
resources.  These 
challenges need to be  addressed  if the country is 
to  ensure  the  health  of  its  population  and  social 
fairness, while boosting the competitiveness of its 
economy.  

in  Portugal 
Life  expectancy  at  birth 
rebounded  above  its  pre-COVID-19  level and 
was  higher  than  the  EU  average  in  2023. 
There  is  a  striking  gender  gap,  however,  with 
women expected to live 5.8 years longer than men. 
That said, they can expect to live around 2.2 years 
less  than  men  in  good  health.  Portugal  fares 
comparatively  well 
in  avoiding  deaths  from 
treatable  causes.  Diseases  of  the  circulatory 
system  (‘cardiovascular  diseases’)  and  cancer  are 
the  leading  causes  of  death,  but  with  mortality 
rates lower than the EU average. 

hospitals and groups of primary healthcare centres 
in  any  given  geographical  area  into  a  single 
management  structure.  Additionally,  the  ongoing 
health system reform foresees the creation of new 
‘Model  C  family  health  units’,  which  are  operated 
by private healthcare providers integrated into the 
national  health  service  (NHS)  framework  and  are 
designed  to  expand  access  in  primary  healthcare 
delivery.  Public  spending  as  a  proportion  of  total 
health  expenditure  in  Portugal  was  among  the 
lowest in the EU in 2022. This translated into one 
of 
the  highest  proportions  of  out-of-pocket 
payments  for  healthcare  in  the  EU  (29.7%  in 
2022,  more  than  twice  the  EU  average).  Portugal 
is  directing  a  considerable  amount  of  funding 
under  its  recovery  and  resilience  plan  (RRP)  and 
2021-2027  cohesion  policy  programmes  towards 
medical  equipment,  and  new  and  renovated 
facilities  for  hospitals,  primary  healthcare  and 
community  care  centres.  In  2022,  investment  in 
health capital formation, as a share of total health 
expenditure, was among the highest in the EU. Due 
to  ageing, 
in  public 
spending  on  healthcare  raises  concerns  about 
fiscal sustainability (see Annex 1). 

the  projected 

increase 

Graph A14.1: Life expectancy at birth, years 

Graph A14.2: Treatable mortality 

Source: Eurostat (demo_mlexpec) 

Health  expenditure  per  capita  in  Portugal  is 
low,  as  is  the  share  of  spending  covered  by 
public  funds.  Despite  recent  increases,  health 
spending  per  inhabitant  in  2022  (adjusted  for 
differences  in  purchasing  power)  was  around  one 
quarter  lower  than  the  EU  average.  The  largest 
proportion  of  health  expenditure  went  towards 
outpatient  care,  with  a  share  above  the  EU 
average.  This,  together  with  a  relatively  low 
number  of  hospital  beds  (285  per  100 000 
population  in  2022,  lower  than  the  EU  average), 
illustrates  Portugal’s  organisational  focus  on 
primary  healthcare.  This  matches  the  health 
system  reform  trend  observed  in  other  countries. 
Portugal  is  now  expanding  its  concept  of  ‘local 
health  units’  throughout  the  country  to  integrate 

94 

Age-standardised death rate (mortality that could be 
avoided through optimal quality healthcare) 
Source: Eurostat (hlth_cd_apr) 

investment 

As  regards  public  health, 
in 
disease  prevention  remains  low.  In  2022, 
spending  on  prevention  in  Portugal  accounted  for 
3.2% of total spending on health, much lower than 
the  EU  average  of  5.5%.  While  the  rate  of 
preventable mortality in Portugal is lower than the 
EU  average,  nearly  one  third  of  deaths  are  linked 
to  behavioural  risk  factors.  Alcohol  consumption 
remains  relatively  high,  and  overweight  and 
obesity  are  a  growing  public  health  concern. 
Portugal’s  RRP  includes  measures  to  promote 
population,  with  
physical  activity 
investment  directed 
(i)  a  national 
campaign  and  technological  platform  to  promote 

the 
towards: 

in 

81.981.581.581.882.581.380.480.180.681.420192020202120222023PortugalEU82.979.179.174.574.591.389.291.793.389.720182019202020212022per 100 000 populationPortugalEU 
 
            
            
 
 
Table A14.1:Key health indicators 

*The EU average is weighted for all indicators except for doctors and nurses per 1 000 population, for which the EU simple 
average is used based on 2022 (or latest 2021) data except for Luxembourg (2017). Doctors’ density data refer to practising 
doctors in all countries except Greece, Portugal (licensed to practise) and Slovakia (professionally active). Density of nurses: data 
refer to practising nurses (EU recognised qualification) in most countries except France and Slovakia (professionally active) and 
Greece (hospital only). **‘Available hospital beds’ covers somatic care, not psychiatric care. ***The EU median is used for patents. 
Source:  Eurostat database; European Patent Office; ****European Centre for Disease Prevention and Control (ECDC) for 2023. 

physical activity; (ii) extending school sports to the 
community;  and  (iii)  encouraging  physical  activity 
in the workplace. 

and 

geographical 

There are challenges in accessing healthcare, 
with 
income-related 
disparities  in  unmet  needs  for  medical  care. 
In  2024,  the  proportion  of  the  Portuguese 
population reporting unmet needs for medical care 
was  equal  to the  EU  average  (2.5%).  Such  unmet 
needs  in  Portugal  are  mainly  due  to  financial 
reasons  and  waiting  times,  with  lower  income 
groups  disproportionally  affected.  The  difference 
between  income  groups  in  Portugal  is  among  the 
highest  in  the  EU.  Furthermore,  and  specifically 
among people who declared having medical needs, 
the  gap  between  people  below  and  above  the 
poverty threshold (defined as 60% of the median 
equivalised income) is higher in Portugal  than the 
EU average. Moreover, comparatively higher unmet 
needs for medical care are reported in rural areas. 
This  may  be  linked  to  long  travelling  times  to 
healthcare  facilities  (see  Annex  17),  but  also  to 
shortages 
in  healthcare  workers  being  more 
pronounced  in  some  rural  areas.  A  range  of 
measures  under  the  RRP  and  the  cohesion  policy 
aim  to  improve  access  to  healthcare,  including 
investments  in:  (i)  hospital  infrastructure  and 
medical  equipment;  (ii)  new  primary  healthcare 
centres;  (iii)  digitalisation  of  healthcare;  and  (iv) 
accessibility  of  health  services  in  less  developed 
regions.  

Persistent  shortages  of  health  workers  in 
Portugal  limit  the  provision  of  healthcare. 
Shortages  are  apparent  in  nursing  and  several 
medical 
(such  as  gynaecology, 
obstetrics, paediatrics, general surgery, emergency 

specialties 

95 

services  and  mental  health)  as  well  as  in  certain 
regions,  especially  in  the  south.  A  shortfall  of 
general  practitioners  (GPs)  has  resulted  in  an 
insufficient  coverage  of  primary  healthcare: 
around  1.6  million  people  (corresponding  to  more 
than  15%  of  the  country’s  population)  are  not 
registered with a GP. Working conditions for health 
professionals are a significant issue, with low pay 
and limited career prospects acting as a deterrent 
to  working  in  the  NHS,  particularly  for  nurses.  A 
significant  number  of  nurses  and,  importantly, 
around  60%  of  nursing  graduates  choose  to 
emigrate  to  countries  that  offer  better  pay  and 
working  conditions.  Recruitment  of  doctors  is 
equally challenging. Only around half of the doctor 
positions  advertised  between  2020  and  2024  by 
the  NHS  have  been  filled 
(see  Annex  10). 
Incentives  such  as  salary  top-ups  have  not  fully 
in 
succeeded 
general  and  family  medicine.  Hospitals  also  face 
difficulties in recruiting and retaining doctors.  

in  filling  positions,  particularly 

is  considering  measures  to 
The  government 
improve the planning and management of human 
resources  in  the  NHS.  In  2024,  all  family  health 
units  (a  primary  healthcare  structure  in  Portugal) 
converted to ‘Model B’, which allows GPs to have a 
higher  number  of 
registered  patients.  This 
transition  is  expected  to  decrease  the  number  of 
NHS  users  who  have  not  been  assigned  a  GP, 
which  will  in  turn  increase  access  to  primary 
healthcare.  Furthermore,  according  to  a  recent 
study  (181),  more  than  29 000  additional  health 
professionals  (including  around  3 000  additional 

(181) ‘The NHS Healthcare Workforce in Portugal – Overview and 
recent evolution’, PLANAPP – Centre for Planning and 
Evaluation of Public Policies, October 2024. 

20192020202120222023EU average* (latest year) Cancer mortality per 100 000 population244.9240.5226.1219.5n.a.234.7 (2022)Mortality due to circulatory diseases per 100 000 population 279.0 285.0 247.9 237.9n.a.336.4 (2022)Current expenditure on health, purchasing power standards, per capita2 2832 3322 6592 823n.a.3 684.6 (2022)Public share of health expenditure, % of current health expenditure 60.9 64.3 62.8 62.5 61.781.3 (2022)Spending on prevention, % of current health expenditure 1.81.93.23.2n.a.5.5 (2022)Available hospital beds per 100 000 population** 288 286 288 285n.a.444 (2022)Doctors per 1 000 population*5.35.55.65.7n.a.4.2 (2022)*Nurses per 1 000 population* 7.1 7.3 7.5 7.5n.a.7.6 (2022)*Mortality at working age (20-64 years), % of total mortality14.013.413.313.013.214.3 (2023)Number of patents (pharma / biotech / medical technology)152123122429 (2023)***Total consumption of antibacterials for systemic use,                    daily defined dose per 1 000 inhabitants****19.315.215.318.819.720.0 (2023) 
 
 
            
 
interoperability  of  health  data  and  facilitate  the 
implementation  of  the  European  Health  Data 
Space. 

doctors  and  around  14 000  additional  nurses) 
would  be  needed  to  bridge  regional  gaps  in  the 
density  of  human  resources  in  the  NHS.  This 
implies  a  20%  increase  in  the  NHS  workforce  in 
the  hospital  and  primary  healthcare  sectors.  The 
small  increases  in  the  number  of  health  workers 
seen  in  recent  years  are  not  sufficient  to  bridge 
this gap and respond to the population’s needs for 
healthcare.  Portugal  participates  in  the  HEROES 
joint  action  (182)  under  EU4Health,  through  which 
EU  countries  share  knowledge  and  experience  on 
health workforce planning. 

foster 

innovation  and 

The  potential  of  Portugal’s  health system  to 
drive 
industrial 
development  in  the  EU  medical  sector  is  not 
being fully exploited. Portugal is among the EU 
countries  reporting  considerable  public  spending 
on  health  research  and  development.  However, 
this  is  not  fully  reflected  in  the  number  of 
European  patents  granted:  24  in  2023  in  the 
combined 
pharmaceuticals, 
biotechnologies  and  medical  technologies  (183), 
lower than the EU-level median of 29. Clinical trial 
activity in Portugal is also limited (184).  

areas 

of 

Portugal  aims  to  scale  up  the  digitalisation 
of  its  health  system,  with  support  from  EU 
programmes.  The  shares  of  people  accessing 
their personal health records online or using online 
health  services  (excluding  phone)  instead  of  in-
increased  between 
person  consultations  both 
2020  and  2024,  but  there  is  room  for  further 
deployment.  Investments  to  boost  the  digital 
transformation of the health sector in Portugal are 
planned under the RRP and the cohesion policy in 
2021-2027.  Measures  focus  on:  (i)  digitalising 
clinical  records;  (ii)  improving  the  health  data 
network;  (iii)  ensuring  interoperability  between 
different  information  systems;  (iv)  improving  the 
portability  of  data  between  primary  healthcare, 
hospital  and  integrated  continued  care  facilities; 
(v) facilitating the use of data in decision support 
the  availability  of 
systems; 
telemedicine; and (vii) providing training on digital 
skills. The principal aim of these investments is to 
improve  access  to  and  the  quality  of  healthcare 
services.  In  addition,  Portugal  participates  in  joint 
actions  and  benefits  from  direct  grants  under 
EU4Health,  which  aim  to  improve  the  semantic 

(vi)  expanding 

(182) JA HEROES | Health workforce planning project. 
(183) European Patent Office, Data to download | epo.org. 
(184) EMA (2024), Monitoring the European clinical trials 

environment, p. 9. 

96 

 
 
 
 
 
HORIZONTAL 
ANNEX 15: SUSTAINABLE DEVELOPMENT GOALS 

social 

fairness 

This  Annex  assesses  Portugal’s  progress  on 
the  Sustainable  Development  Goals  (SDGs) 
along  the  dimensions  of  competitiveness, 
and 
sustainability, 
macroeconomic stability. 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 
inequalities  and  tackle  climate 
poverty,  fight 
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 
the EU. 

Portugal  is  improving  on  SDGs  related  to 
competitiveness (SDGs 4, 8, 9) but still needs 
to  catch  up  with  the  EU  average  on  both 
decent  work  and  economic  growth  (SDG 8) 
and  innovation  and  industry  (SDG 9).  Basic 

Graph A15.1: Progress towards the SDGs in Portugal 

(55.6%).  The  Portuguese 

digital  skills  among  the  adult  population  are 
progressing  (56%  in  2023)  and  stand  above  the 
EU  average 
labour 
market  is  performing  relatively  well  compared  to 
the  EU  average,  with  a  high  employment  rate 
(78.5%,  vs  an  EU  average  of  75.8%,  in  terms  of 
population  aged  20  to  64  in  2024).  A  decline  in 
long-term  unemployment,  which  fell  to  2.4%  in 
2024 (in terms of active population; EU: 1.9%) was 
also  observed.  Despite  slow  improvement,  R&D 
and innovation remains a key concern. Only 1.69% 
of GDP was allocated to R&D in 2023 (EU: 2.24%) 
while the number of patent applications submitted 
to 
the  European  Patent  Office  per  million 
inhabitants  remains  very  low:  39  in  2024  (EU: 
156).  Portugal’s ambitious recovery and resilience 
plan  has  the  potential  to  transform  its  business 
sector  and  R&I  system.  These  measures  aim  to 
improve the business-academia link, increase R&D, 
and reform vocational education and training. 

Portugal  is  improving  overall  on  the  SDGs 
related to sustainability (SDGs 2, 7, 9, 12, 13, 

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). 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 
five 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 28 April 2025. Data refer mainly to the period 2018-2023 or 2019-2024. Data on SDGs may 
vary across the report and its annexes due to different cut-off dates. 

97 

 
 
 
 
 
 
final 

energy 

in  gross 

responsible 

consumption 

industry  and 

14)  but  is  moving  away  from  the  SDG  on 
sustainable  cities  (SDG 11).  It  performs  well 
on  SDG 7  (Affordable  and  clean  energy)  but 
needs  to  catch  up  with  the  EU  average  on 
infrastructure 
sustainable 
(SDG 9), 
and 
production  (SDG  12),  life  below  water  (SDG 
14), and life on land (SDG 15). In 2022, 19.3% 
of  the  utilised  agricultural  area  in  Portugal  was 
under  organic  farming  (EU:  10.5%).  The  share  of 
renewable 
energy 
consumption  increased  from  30.2%  in  2018  to 
35.2%  in  2023,  standing  well  above  the  EU 
average  (24.6%  in  2023).  The  environmental 
impact of agriculture is lower than the EU average, 
but  the  level  of  nitrate  in  ground  water  is 
increasing (from 18.5 mg NO3 per litre in 2017 to 
23.4 mg  in  2022),  higher  than  the  EU  average 
(20.7 
in  2022).  On  sustainable  agricultural 
production, Portugal performs very well in organic 
farming (19.3% of the utilised agricultural area vs 
10.5%  in  the  EU  in  2022),  while  the  use  of 
chemical  pesticides  remains  higher  than  the  EU 
average (60 vs 54 out of 100, in 2022). However, 
it  has  diminished  substantially  since  2017  (89). 
Portugal protects less than 5% of its marine areas 
(EU:  12.3%  in  2022).  Circular  economy  indicators 
are  also  well  below  EU  averages,  with  a  low  rate 
of recycling of municipal waste (30.6% in 2023, vs 
48.2% for the EU in 2023) and a circular material 
use rate that, even if slightly improved since 2018, 
is  only  around  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.  Various  measures  in  Portugal’s  RRP 
aim  to  further  contribute  to  emission  savings. 
These  include  investments  in  energy  storage  and 
renewables, renewable hydrogen, energy efficiency 
lines, 
renovations, 
increased  use  of  bioproducts  in  industry,  and  the 
decarbonisation of industry. 

the  extension  of  metro 

Portugal is improving on SDGs assessing the 
social  fairness  of  society  and  the  economy 
(SDGs 1, 4, 5, 7, 8) but is moving away from 
the  SDGs  on  inequalities  (SDG  10)  and,  to  a 
lesser extent, on  health and well-being (SDG 
3).  However,  the  status  of 
inequalities 
remains better than EU average.  In 2023, the 
poverty  rate  (persons  at  risk  of  poverty  or  social 
exclusion)  was  slightly  below  the  EU  average 
(20.1%,  vs  21.3%  for  the  EU),  while  the  share  of 
population at risk of monetary poverty after social 

98 

transfers was higher (17%, against 16.2% for the 
EU).  Portugal  performs  well  for  people  living  in 
households  with  very  low  work  intensity  (6.3%  of 
the population aged less than 65 in 2023, vs 8% 
at  EU  level)  and  on  the  housing  cost  overburden 
rate  (4.9%  of  population  in  2023  vs  8.8%  at  EU 
level).  On  the 
in-work-at-risk-of-poverty  rate, 
Portugal is above the EU average (10%, vs 8.3% in 
2023).  Even  if  the  urban-rural  gap  has  slightly 
decreased since 2018, it remains far above the EU 
average (6.1% vs 0.2% in 2023). The same trend 
applies to energy poverty, as in 2023 20.8% of the 
population reported that they were unable to keep 
their  homes  sufficiently  warm  (EU:  10.6%).  The 
citizenship  gap  (difference  between  EU  and  non-
EU  nationals)  narrowed  for  early  leavers  from 
education  and  for  training  but  increased  for 
employment. Despite some improvements, such as 
the  smoking  prevalence  rate  which  dropped  from 
26  (in  2017)  to  21  (2023)  vs  24  at  EU  level,  in 
terms of % of population aged 15 and over, most 
of the health and well-being indicators are still far 
from the EU average. These include those on road 
traffic deaths (6.1 vs 4.5 per 100 000 persons, in 
2023),  the  obesity  rate  (15.8  vs  14.8  as  %  of 
population aged 18 or over, in 2022) and healthy 
life expectancy (59.1 years in 2022 vs 63.6 years 
for  the  EU  in  2021).  Education  and  training 
indicators are better than the EU average, with the 
tertiary  education  attainment  rate  (population 
aged  25-34)  increasing  from  38%  in  2019  to 
43.2% in 2024 (vs an increase of the EU average 
from  39.6%  to  44.2%).  The  same  is  true  for  the 
participation  of  adults  in  learning,  which  stood  at 
16.1% 
(EU:  13.3%).  Portugal  also 
performs  better  than  the  EU  average  on  gender 
equality,  with  a  low  gender  employment  gap,  and 
a  gender  pay  gap  below  the  EU  average  (8.6  in 
2023  vs  12  at  EU  level,  as  %  of  average  gross 
hourly  earnings  of  men).  The  share  of  women  in 
senior  management  and 
in  government  has 
progressed  in  the  last  few  years,  surpassing  the 
EU  average.  The  RRP  includes  measures  aimed 
towards  a  more  equal  and  healthy  society.  These 
include  reforms  of  primary  care  services  and 
simplification  of  the  social  benefit  system,  and 
investments  in  community-based  social  services, 
social  housing,  and  student  accommodation,  as 
well  as  household  support  for  energy  efficiency 
renovations. 

in  2024 

While  Portugal  is  improving  on  some  SDG 
indicators related to macroeconomic stability 
(SDGs 8,  17),  it  is  moving  away  from  the 
justice,  and  strong 
target 

for  peace, 

 
institutions  (SDG  16).  It  is  closing  its  gap  with 
the  EU  average  in  terms  of  the  investment  share 
of GDP, with 19.8% in 2024 (EU: 21.7%). However, 
central government expenditure on the law courts, 
a key indicator of the quality of the justice system, 
remains  below  the  EU  average  (in  2023,  EUR 73 
per  capita  in  Portugal  vs  EUR 121.7  per  capita  at 
EU  level).  The  share  of  the  population  reporting 
crime, violence or vandalism increased from 6.5% 
in 2018 to 6.9% in 2023 (EU: 10%), and the death 
rate  from  homicide  and  the  victims  of  human 
trafficking are increasing (0.92 in 2022 vs 0.69 in 
in  2018, 
2017,  and  3.9 
respectively,  per  100  000  persons).  The  RRP 
includes  measures  to  improve  the  efficiency  of 
administrative  and  tax  courts  and  to  improve  the 
management  of  public  finances,  for  example,  by 
introducing new IT solutions. 

in  2023  vs  1.2 

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

99 

 
ANNEX 16: CSR PROGRESS AND EU FUNDS IMPLEMENTATION 

Portugal  faces  structural  challenges  in  a 
wide  range  of  policy  areas,  as  identified  in 
the country-specific recommendations (CSRs) 
addressed  to  the  country  as  part  of  the 
European  Semester.    They  refer,  among  other 
things,  to  ensuring  the  fiscal  sustainability  of  the 
pension  system,  reducing  the  administrative  and 
regulatory  burden  on  businesses,  improving  the 
effectiveness  of  tax  system  and  the  efficiency  of 
administrative and tax courts, reducing the overall 
reliance on fossil fuels and investing in sustainable 
transport,  accelerating 
the  deployment  of 
renewables  and  investment  in  energy  efficiency, 
strengthening  capacities 
for  energy  storage, 
electricity  transmission  and  the  distribution  grid, 
and improving water and waste management. 

The Commission has assessed the 2019-2024 
CSRs  considering  the  policy  action  taken  by 
Portugal to date and the commitments in its 
recovery  and  resilience  plan  (RRP).  At  this 
stage, Portugal has made at least ‘some progress’ 
on 69% of the CSRs (185), and ‘limited progress’ on 
29% (Table A16.2). 

by 

to  Portugal 

competitiveness, 

EU funding instruments provide considerable 
resources 
supporting 
investments  and  structural  reforms  to 
increase 
environmental 
sustainability  and  social  fairness,  while 
helping  to  address  challenges  identified  in 
the  CSRs.  In  addition  to  the  EUR 22.2  billion 
funding  from  the  Recovery  and  Resilience  Facility 
(RRF) in 2021-2026, EU cohesion policy funds (186) 
are  providing  EUR 22.6  billion 
to  Portugal 
(amounting  to  EUR 31  billion  with  national  co-
financing)  for  2021-2027  (187)  to  boost  regional 
competitiveness  and  growth.  Support  from  these 
instruments combined represents around 16.7% of 
these 
2024  GDP 

(188).  The  contribution  of 

to  Portugal  under 

instruments  to  different  policy  objectives 
is 
in  Graphs  A16.1  and  A16.2.  This 
outlined 
substantial  support  comes  on  top  of  financing 
provided 
the  2014-2020 
multiannual  financial  framework,  which  financed 
projects  until  2023  and  has  had  significant 
benefits  for  the  economy  and  Portuguese  society. 
Project  selection  under  the  2021-2027  cohesion 
policy  programmes  has  accelerated,  while 
significant  volumes  of  investment  are  yet  to  be 
mobilised.  

RRP 

contains 

Portuguese 

transitions, 

128 
The 
investments  and  43  reforms  to  stimulate 
sustainable  growth,  foster  the  green  and 
digital 
improve  skills  and 
qualifications  and  increase  territorial  and 
social cohesion. A year before the end of the RRF 
timespan,  implementation  is  well  on  its  way  with 
51% of the funds disbursed. Portugal has fulfilled 
33% of the milestones and targets in its RRP (189). 
Increased efforts are needed to ensure completion 
of all RRP measures by 31 August 2026. Speeding 
up implementation requires addressing challenges 
terms  of  administrative  capacity,  public 
in 
lengthy  permitting 
procurement 
procedures 
large 
investment projects. 

rules  and 

particular, 

affecting, 

in 

the 

Portugal  also  receives  funding  from  several 
other  EU  instruments,  including  those  listed  in 
common 
Table  A16.1.  Most  notably, 
agricultural policy (CAP) provides Portugal with  an 
EU  contribution  of  EUR 6.1  billion  (190)  under  the 
CAP  strategic  plan  for  2023-2027.  Operations 
amounting to EUR 4.2 billion (191) have been signed 
under  the  InvestEU  instrument  backed  by  the  EU 
guarantee,  improving  access  to  financing  for 
riskier operations in Portugal. 

(185) 7% of the 2019-2024 CSRs have been fully implemented, 

5% substantially implemented, and some progress has been 
made on 57%. 

(186) In 2021-2027, cohesion policy funds include the European 
Regional Development Fund, the Cohesion Fund, the 
European Social Fund Plus and the Just Transition Fund. The 
information on cohesion policy included in this annex is 
based on adopted programmes with the cut-off date of 5 
May 2025. 

(187) European territorial cooperation (ETC) programmes are 

excluded from the figure. 

(188) RRF funding includes both grants and loans, where 

(189) As of mid-May 2025, Portugal has submitted 6 payment 

requests, the last one being under assessment. 

(190) An overview of Portugal’s formally approved strategy to 

implement the EU’s common agricultural policy nationally 
can be found at:  https://agriculture.ec.europa.eu/cap-my-
country/cap-strategic-plans/portugal_en  

applicable. GDP figures are based on Eurostat data for 2024. 

(191) Data reflect the situation on 31.12.2024. 

100 

 
 
 
 
 
Graph A16.1: Distribution of RRF funding in 
Portugal by policy field 

(1) Each RRP measure helps achieve the aims of two of the 
six policy pillars of the RRF. The primary contribution is shown 
in the outer circle, while the secondary contribution is shown 
in the inner circle. Each circle represents 100% of the RRF 
funds. Therefore, the total contribution to all pillars displayed 
on this chart amounts to 200% of the RRF funds allocated. 
Source: European Commission 

Graph A16.2: Distribution of cohesion policy 
funding across policy objectives in Portugal 

Source: European Commission 

and 

competitiveness 

Cohesion  policy  funds  aim  to  increase  the 
productivity 
of 
Portugal’s  firms  and  improve  the  business 
the  European 
environment.  For  example, 
Regional  Development  Fund  (ERDF)  and  the  Just 
Transition  Fund  (JTF)  will  provide  support  to 
17 000  enterprises,  with  the  ERDF  providing 
access to very high-capacity broadband for nearly 
20 000  firms  and  enabling  over  300  public 
institutions  to  develop  a  wide  range  of  digital 
services,  products  and  processes.  The  calls 
launched  have  seen  strong  demand  in  areas  like 
research  &  development,  innovation  productive 
investments, 
internationalisation  of  small  and 
medium-sized  enterprises  (SMEs),  and  business 
adaptation  to  change.  Strategic 
infrastructure 
projects  have  been  launched,  for  example  the 
Mondego  Mobility  System  (in  Coimbra)  and  the 

self-employment, 

reconstruction  of  the  Port  of  Lajes  das  Flores  in 
the Azores following destructive storms. The JTF is 
being used to diversify the local economy in three 
regions affected by the closure of coal-fired power 
plants  and  refineries.  This  includes  supporting 
business  investment,  research  and  innovation  in 
SMEs, 
innovative 
entrepreneurship  and  reskilling.  The  European 
Social  Fund  Plus 
(ESF+)  supports  vocational 
education  and  training  in  the  mainland,  with 
EUR 1.5  billion  enabling  the  participation  of 
366 000  people,  of  which  110 000  had  been 
supported  already by  December  2024.  The  aim is 
that  84.5%  of  participants  in  such  courses  either 
find  employment  or  continue  their  studies.  In 
addition,  by  April  2025,  ESF+  had  already 
supported 109 000 participants in adult education 
centres known as ‘Qualifica Centres’. The target is 
to  reach  700 000  adult participants,  with  90%  of 
them achieving certified qualifications. 

in 

are 

road 

funds 

including 

contributing 

Other 
to 
competitiveness  in  Portugal,  for  instance 
through  open  calls.  The  Connecting  Europe 
Facility  has  financed  strategic  investments  in  the 
rail  and 
the 
transport, 
development  of  alternative  fuel  infrastructure,  as 
well  as  in  maritime,  inland  waterways  and  air 
infrastructures.  It  also  supports  investments  to 
increase  the  capacity,  resilience  and  security  of 
backbone  digital 
infrastructure  by  deploying 
submarine cables improving the connection to the 
Azores and Madeira and advanced the deployment 
of  5G  in  smart  communities,  enabling  remote 
healthcare and smart emergency services. Horizon 
Europe  has  supported  research  and  innovation, 
from  scientific  breakthroughs 
to  scaling  up 
innovations, with Climate, Energy and Mobility; and 
Digital,  Industry  and  Space  as  top  priorities  in 
Portugal.  The  Technical  Support  Instrument  (TSI) 
has assisted Portugal in the implementation of the 
new institutional framework for the integration of 
migrants;  a  training  framework  in  the  area  of 
wildfires;  and  a  more  integrated  approach  to 
health  care  at  local  level.  In  2024,  the  TSI  also 
assisted Portugal to implement RRP measures  for 
strengthening  policy  costing  methodologies  and 
medium-term budgeting practices. 

to 

Portugal’s  RRP  also  contains  ambitious 
measures 
business 
improve 
environment  and  competitiveness.  Measures 
covered  by  payment  requests  submitted  over  the 
past  year  include  major  reforms  and  investments 
improve  the 
to  develop  the  capital  market, 

the 

101 

Green transitionDigital transformationSmart, sustainable andinclusive growthSocial & territorial cohesionHealth & resilienceNext generationSmarter EuropeGreener EuropeConnected EuropeSocial EuropeEurope closer to citizensJTF specific objective 
    
 
   
million  are  reserved  for  farmers  committing  to 
more  ambitious  actions  under  eco-schemes  such 
as  carbon  sequestration,  organic  fertilisation, 
organic farming and integrated production. 19% of 
the agricultural area will be farmed organically by 
2030.  Around  EUR 1.7  billion  have  been  allocated 
for  environmental  and  climate  objectives  under 
rural  development  to  support  climate  change 
adaptation,  soil  practices,  improving  grassland 
quality and fire protection. 

Portugal’s  RRP,  including  the  REPowerEU 
chapter, has a comprehensive set of reforms 
and  investments  for  the  green  transition. 
Measures  covered  by  the  payment  requests 
submitted  over  the  last  year  include:  (i)  the  entry 
into operation of a deposit and refund system for 
non-reusable  plastic  bottles,  ferrous  metals  and 
aluminium;  (ii)  the  creation  of  energy  efficiency 
one-stop  shops  for  the  public;  (iii)  scaling  up  the 
production  capacity  of  renewable  hydrogen  and 
renewable  gases;  and  (iv) the launch  of  a  call  for 
projects to produce renewable hydrogen and other 
renewable  gases  for  a  new  installed  energy 
capacity of at least 77 MW. 

Promoting  fairness,  social  cohesion  and 
access to basic services are key priorities of 
EU  funding  in  Portugal.  For  example,  the  ERDF 
will  be  used  for  new  and  modernised  education 
facilities with classroom capacity for over 52 000 
Investments  planned  for  healthcare 
students. 
facilities  are  expected  to  benefit  over  4.5  million 
people a year. ESF+ is also investing in vocational 
education  and  training  and  paid  traineeships  to 
integrate  young  people  into  the  labour  market  in 
the  outermost  regions  of  Azores  and  Madeira.  
Similarly, the ESF+ is helping low-income students 
access higher education across the country where 
the  overall  aim  is  to  reach  500 000  participants, 
with  183000  already  supported  by  December 
2024.  The  ESF+  has  also  successfully  supported 
1.2  million  pupils  with 
learning  difficulties, 
enabling them to continue their educational path. 

effectiveness  of  public  services  and  support  the 
digitalisation of businesses and the justice and tax 
systems.  Capital  markets  and  securities  codes 
were  revised  to  promote  the  capitalisation  of 
companies  and 
incentivise  access  to  equity, 
business  growth,  debt  financing  and  investor 
participation  in  capital  markets.  Legislation  was 
adopted  to  implement  functional  changes  in  the 
public  administration  and  the  reorganisation  of 
public  services.  A  new  permanent  technical  tax 
policy unit known as ‘U-TAX’ will help simplify and 
monitor  tax  benefits.  Investments  were  made  to 
digitalise  rural  property  taxation  processes  and  in 
platforms to digitalise the justice system, in digital 
invoices  and  digital  certification,  and  in  digital 
innovation  hubs  to  support  the  digitalisation  of 
companies  and  public  administration.  A  total  of 
200 
Industry  4.0  projects  were  selected  for 
support  to  foster  the  digital  transformation  of 
businesses. 

in 

capacity 

through 
infrastructure, 

EU  funds  are  playing  a  significant  role  in 
promoting  environmental  sustainability  and 
green  transition 
in  Portugal  during  the 
current  seven-year  EU  budget  (multiannual 
financial  framework).  The  ERDF  and  JTF  will 
aim  to  create  over  9 100 MW  of  additional 
renewable  energy. 
for 
production 
Meanwhile,  the  ERDF  and  the  Cohesion  Fund  are 
the 
clean  mobility, 
investing 
improvement  of 
the 
railway 
expansion  of  metro  lines,  clean  buses,  and  clean 
ferries  and  ports,  including  the  greening  of  key 
transport  infrastructure  in  the  outermost  regions 
of Azores and Madeira, which is benefiting almost 
half  a  million  people.  Portugal  is  also  investing 
substantial  cohesion  policy  funding  in  improving 
preparedness  for  and  management  of  disasters, 
especially  climate-related  risks.  Significant  ERDF 
resources  are  being  devoted  to  building  resilience 
in  the  face  of  water  scarcity  and  improving  the 
efficiency  of  water  and  wastewater  supply 
systems,  including  in  the  more  affected  regions 
such  as  Alentejo,  Algarve  and  Madeira.  Water 
management,  in  terms  of  quantity  and  quality, 
plays  also  an  important  role  in  the  CAP  strategic 
plan.  To  improve  water-use  efficiency,  support  is 
going  towards  renovating  old  infrastructure  and 
equipment  used 
in  collective  and  on-farm 
irrigation  systems,  covering  up  to  4.5%  of  the 
agricultural area under support. More than EUR 32 
million of funding under the CAP will be invested in 
restoring  forestry  potential  following  natural 
hazards,  including  forest  fires.  In  the  Portuguese 
CAP  strategic  programme,  more  than  EUR 580 

102 

 
Portugal’s RRP contains several reforms and 
investments  related  to  fairness  and  social 
policies.  Measures  covered  by  payment  requests 
submitted over the last year include: (i) delivery of 
1 500  dwellings  to  eligible  households  with  the 
greatest needs; (ii) access for 1 000 health centres 
to the risk stratification instrument, allowing them 
to intervene proactively in populations with higher 
clinical  risk  and  social  vulnerability;  and  (iii)  the 
creation  of 
the  National  Energy  Poverty 
Observatory  to  help  improve  energy  efficiency  in 
the  residential  sector  for  households  experiencing 
energy poverty. 

Table A16.1:Selected EU funds with adopted allocations - summary data (million EUR) 

(1) The cut-off date for data on disbursements under the RRF is 31 May 2025. 
(2) Cohesion policy 2014-2020 allocations include REACT-EU appropriations committed in 2021-2022. 
(3) These amounts relate only to disbursements made from 2021 onwards and do not include payments made to the Member 
State before 2021.  Hence the figures do not comprise the totality of payments corresponding to the 2014-2020 allocation. The 
cut-off date for data on disbursements under EMFAF and EMFF is 29 April 2025.  The cut-off date for data on disbursements 
under cohesion policy funds, AMIF, BMVI and ISF is 5 May 2025. 
(4) AMIF - Asylum, Migration and Integration Fund; BMVI - Border Management and Visa Instrument; ISF - Internal Security Fund. 
(5) Expenditure outside the CAP strategic plan is not included. 
(6) The cut-off date for data on EARDF disbursements is 5 May 2025. The information on EAGF disbursements is based on the 
Member State declarations until March 2025.  Disbursements for the Direct Payments (EAGF) started in 2024. 
Source: European Commission 

103 

Instrument/policyDisbursed since 2021   (1)             RRF grants (including the RepowerEU allocation)8 492.2RRF loans2 903.7Instrument/policyAllocation 2014-2020 (2)Allocation 2021-2027 Disbursed since 2021 (3)    (covering total payments to the Member State on commitments originating from both 2014-2020 and 2021-2027 programming periods) Cohesion policy (total)23 547,522 602,411 905,1European Regional Development Fund (ERDF)12 707,911 496,76 136,5Cohesion Fund (CF)2 781,13 105,31 569,3European Social Fund (ESF, ESF+) and the Youth Employment Initiative (YEI)8 058,57 776,54 129,9Just Transition Fund (JTF) 223,8 69,4European Maritime, Fisheries and Aquaculture Fund (EMFAF) and the European Maritime and Fisheries Fund (EMFF) 392,5 392,6265,1Migration, border management and internal security - AMIF, BMVI and ISF (4) 149,0 186,687,0The common agricultural policy under the CAP strategic plan (5)Disbursements under the CAP Strategic Plan (6)Total under the CAP strategic plan1 621,3European Agricultural Guarantee Fund (EAGF)1 344,3European Fund for Agricultural Development (EAFRD) 277,0Allocation 2023-20276 092,33 814,52 277,8Allocation 2021-2026 16 325,15 890,8FisheriesMigration and home affairs 
 
 
     
 
Table A16.2:Summary table on 2019-2024 CSRs 

(Continued on the next page) 

104 

PortugalAssessment in May 2025Relevant 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.No longer relevantSDG 8, 16Improvethequalityofpublicfinancesbyprioritisinggrowth-enhancingspendingwhilestrengtheningoverallexpenditurecontrol,costefficiencyandadequatebudgeting,withafocusinparticularona durable reduction of arrears in hospitals.Some progressSDG 3, 8, 16Improve the financial sustainability of state-owned enterprises, while ensuring more timely, transparent and comprehensive monitoring.Some progressSDG 92019 CSR 2Some progressAdopt measures to address labour market segmentation.Some progressSDG 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 progressSDG 4Increase the number of higher education graduates, particularly in science and information technology.Some progressSDG 4Improve the effectiveness and adequacy of the social safety net.Some progressSDG 1, 2, 102019 CSR 3Some progressFocus investment-related economic policy on research and innovation,Some progressSDG 9, 10, 11railway transport and port infrastructure,Limited progressSDG 10, 11low carbon and energy transition and extending energy interconnections, taking into account regional disparities.Some progressSDG 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 progressSDG 8Reducetheadministrativeandregulatoryburdenonbusinesses,mainly by reducing sector-specific barriers to licensing.Limited progressSDG 8, 9Developaroadmaptoreducerestrictionsinhighlyregulatedprofessions.Substantial progressSDG 9Increasetheefficiencyofadministrativeandtaxcourts,inparticularby decreasing the length of proceedings.Some progressSDG 8, 162020 CSR 1Some progressInlinewiththegeneralescapeclause,takeallnecessarymeasurestoeffectivelyaddressthepandemic,sustaintheeconomyandsupporttheensuingrecovery.Wheneconomicconditionsallow,pursuefiscalpoliciesaimedatachievingprudentmedium-termfiscalpositionsandensuringdebtsustainability,whileenhancinginvestment. No longer relevantSDG 8, 16Strengthen the resilience of the health system Some progressSDG 3and ensure equal access to quality health and long-term care. Limited progressSDG 3, 8, 102020 CSR 2Some progressSupport employment and prioritise measures to preserve jobs. Some progressSDG 8Guaranteesufficientandeffectivesocialprotectionandincomesupport. Some progressSDG 1, 2, 10Support the use of digital technologies to ensure equal access to quality education and training Some progressSDG 4, 8, 10and to boost firms’ competitivenessSome progressSDG 8, 9  
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
  
 
Table  (continued) 

105 

2020 CSR 3Some progressImplementthetemporarymeasuresaimedatsecuringaccesstoliquidity for firms, in particular small and medium-sized enterprises. Substantial progressSDG 8, 9Front-load mature public investment projects and Some progressSDG 8, 16promote private investment to foster the economic recovery. Substantial progressSDG 8, 9Focus investment on the green and digital transition, in particular on clean and efficient production and use of energy, Some progressSDG 7, 9, 13rail infrastructure Limited progressSDG 11and innovation.Some progressSDG 92020 CSR 4Some progressIncrease the efficiency of administrative and tax courtsSome progressSDG 8, 162021 CSR 1No longer relevantIn2022,usetheRecoveryandResilienceFacilitytofinanceadditionalinvestmentinsupportoftherecoverywhilepursuingaprudentfiscalpolicy.Preservenationallyfinancedinvestment.Limitthe growth of nationally financed current expenditure.No longer relevantSDG 8, 16Wheneconomicconditionsallow,pursueafiscalpolicyaimedatachievingprudentmedium-termfiscalpositionsandensuringfiscalsustainability in the medium term.No longer relevantSDG 8, 16Atthesametime,enhanceinvestmenttoboostgrowthpotential.Payparticularattentiontothecompositionofpublicfinances,bothontherevenueandexpendituresidesofthebudget,andtothequalityofbudgetarymeasures,toensureasustainableandinclusiverecovery.Prioritisesustainableandgrowth-enhancinginvestment,notably supporting the green and digital transition.No longer relevantSDG 8, 16Giveprioritytofiscal-structuralreformsthatwillhelpprovidefinancingforpublicpolicyprioritiesandcontributetothelong-termsustainabilityofpublicfinances,includingbystrengtheningthecoverage,adequacy,andsustainabilityofhealthandsocialprotection systems for all.No longer relevantSDG 8, 162022 CSR 1Limited progressIn2023,ensureprudentfiscalpolicy,inparticularbylimitingthegrowthofnationallyfinancedprimarycurrentexpenditurebelowmedium-termpotentialoutputgrowth,takingintoaccountcontinuedtemporaryandtargetedsupporttohouseholdsandfirmsmostvulnerabletoenergypricehikesandtopeoplefleeingUkraine.Stand ready to adjust current spending to the evolving situation.No longer relevantSDG 8, 16Expandpublicinvestmentforthegreenanddigitaltransitions,andforenergysecuritytakingintoaccounttheREPowerEUinitiative,includingbymakinguseoftheRecoveryandResilienceFacilityandother Union funds.No longer relevantSDG 8, 16Fortheperiodbeyond2023,pursueafiscalpolicyaimedatachievingprudentmedium-termfiscalpositionsandensuringcredibleandgradualdebtreductionandfiscalsustainabilityinthemediumtermthroughgradualconsolidation,investmentandreforms.No longer relevantSDG 8, 16Improvetheeffectivenessofthetaxandsocialprotectionsystems,inparticularbysimplifyingbothframeworks,strengtheningtheefficiencyoftheirrespectiveadministrations,andreducingtheassociated administrative burden.Limited progressSDG 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 progressSDG 6, 12, 15RRP implementation is monitored through the assessment of RRP payment requests and analysis of the bi-annual reporting on the achievement of the milestones and targets, to be reflected in the country Progress on the cohesion policy programming documents is monitored under the EU cohesion policy. 
 
 
 
 
Table (continued) 

(Continued on the next page) 

106 

2022 CSR 4Some progressReduce overall reliance on fossil fuels,Some progressSDG 7, 9, 13including in the transport sector.Some progressSDG 11Acceleratethedeploymentofrenewablesbyupgradingelectricitytransmissionanddistributiongrids,enablinginvestmentsinelectricity storageLimited progressSDG 7, 9, 13andstreamliningpermittingprocedurestoallowforfurtherdevelopmentofwind,particularlyoffshore,andsolarelectricityproduction, as well as renewable hydrogen production.Some progressSDG 7, 8, 9, 13Strengthentheincentivesframeworkforenergyefficiencyinvestments in buildings.Some progressSDG 7Increase energy interconnections.Some progressSDG 7, 9, 132023 CSR 1Substantial progressWinddowntheemergencyenergysupportmeasuresinforce,usingtherelatedsavingstoreducethegovernmentdeficit,assoonaspossiblein2023and2024.Shouldrenewedenergypriceincreasesnecessitateneworcontinuedsupportmeasures,ensurethatthesearetargetedatprotectingvulnerablehouseholdsandfirms,fiscallyaffordable, and preserve incentives for energy savings.Some progressSDG 8, 16Ensureprudentfiscalpolicy,inparticularbylimitingthenominalincreaseinnationallyfinancednetprimaryexpenditurein2024tonotmorethan1.8%1,unlessahigherreferencerateinnetnationallyfinancedprimaryexpendituregrowthisestimatedtobecompatiblewithPortugalreachingitsMTOof-0.5%ofGDP,interaliaifinterestexpenditure is lower than currently projected by the Commission.Full implementationSDG 8, 16PreservenationallyfinancedpublicinvestmentandensuretheeffectiveabsorptionofRRFgrantsandotherEUfunds,inparticularto foster the green and digital transitions.Full implementationSDG 8, 16Fortheperiodbeyond2024,continuetopursueamedium-termfiscalstrategyofgradualandsustainableconsolidation,combinedwithinvestmentsandreformsconducivetohighersustainablegrowth, to achieve a prudent medium-term fiscal position.Full implementationSDG 8, 16Improvetheeffectivenessofthetaxandsocialprotectionsystems,inparticularbyprioritisingthesimplificationofbothframeworks,strengtheningtheefficiencyoftheirrespectiveadministrations,andreducing the associated administrative burden.Limited progressSDG 1, 2, 8, 10, 12, 162023 CSR 2Acceleratetheimplementationofitsrecoveryandresilienceplan,alsobyensuringanadequateadministrativecapacityand,followingtherecentsubmissionoftheaddendum,includingtheREPowerEUchapterandtheadditionalloanrequest,rapidlystarttheimplementationoftherelatedmeasures.Proceedwiththespeedyimplementationofcohesionpolicyprogrammes,inclosecomplementarity and synergy with the recovery and resilience plan.2023 CSR 3Limited progressImprovetheconditionsforthetransitiontowardsacirculareconomy,inparticularbyincreasingwasteprevention,recyclingandreuse,todivert waste away from landfills and incinerators.Limited progressSDG 6, 12, 152023 CSR 4Some progressReduce overall reliance on fossil fuels.Some progressSDG 7, 9, 13Furtheracceleratethedeploymentofrenewablesbyfurthersimplifyinganddigitalisingpermittingtoallowforadditionalwindparticularlyoffshoreandsolarelectricityproduction,aswellaspromoting self-consumption and renewable energy communities.Some progressSDG 7, 9, 13Increase electricity interconnection capacitySome progressSDG 7, 9, 13andupgradetheelectricitytransmissionanddistributiongrids,enabling investment in electricity storageLimited progressSDG 7, 9, 13anddigitalisationofthegrid,includingthefasterroll-outofsmartmeters.Some progressSDG 7, 9, 13Accelerateinvestmentinenergyefficiencybypromotingfinancialschemestoattractprivateinvestmentandsupportinghouseholdsinneed.Some progressSDG 1, 2, 7, 10Stepuppolicyeffortsaimedattheprovisionandacquisitionofskillsand competences needed for the green transition.Some progressSDG 4RRP implementation is monitored through the assessment of RRP payment requests and analysis of the bi-annual reporting on the achievement of the milestones and targets, to be reflected in the country reports. Progress with the cohesion policy is monitored in the context of the Cohesion Policy of the European Union 
 
 
  
 
Table (continued) 

Source: European Commission 

107 

2024 CSR 1Limited progressSubmit the medium-term fiscal-structural plan in a timely manner.Full implementationSDG 8, 16InlinewiththerequirementsofthereformedStabilityandGrowthPact,limitthegrowthinnetexpenditurein2025toarateconsistentwith,interalia,puttingthegeneralgovernmentdebtonaplausiblydownwardtrajectoryoverthemediumtermandrespectingthe3%ofGDP deficit Treaty reference value.Limited progressSDG 8, 16Winddowntheemergencyenergysupportmeasuresbeforethe2024/2025 heating season.Some progressSDG 8, 16Improvetheeffectivenessofthetaxsystem,inparticularbystrengtheningtheefficiencyofitsadministrationandreducingtheassociated administrative burden.Limited progressSDG 8, 16Takeactiontoensurethemedium-termfiscalsustainabilityofthepension systemNo progressSDG 82024 CSR 2StrengthenadministrativecapacitytomanageEUfunds,accelerateinvestmentsandmaintainmomentumintheimplementationofreforms.Addressrelevantchallengestoallowforcontinued,swiftandeffectiveimplementationoftherecoveryandresilienceplan,includingtheREPowerEUchapter,ensuringcompletionofreformsandinvestmentsbyAugust2026.Acceleratetheimplementationofcohesionpolicyprogrammes.Inthecontextoftheirmid-termreview,continuefocusingontheagreedpriorities,takingactiontobetteraddresstheneedsintheareaofpreventionofandpreparednessforclimatechange-relatedrisks,whileconsideringtheopportunitiesprovidedbytheStrategicTechnologiesforEuropePlatforminitiativeto improve competitiveness.2024 CSR 3Limited progressImprovewatermanagementtostrengthenadaptationtotheeffectsofclimatechangeandensurelong-termeconomicandenvironmentalresilience,byputtinginplaceastrategyforintegratedandsustainablewatermanagement,developingitsgovernancestructure,Limited progressSDG 1, 6, 7, 8, 11, 12, 13, 15 promotinginvestmentsinwastewatercollectionandtreatment,leaksreduction and water monitoring,Limited progressSDG 1, 6, 7, 8, 11, 12, 13, 15 whiledevelopingnature-basedsolutionsandwaterbodyrehabilitation, and improving water efficiency and water reuse.Limited progressSDG 1, 6, 7, 8, 11, 12, 13, 15 2024 CSR 4Limited progressStrengthenthecapacityoftheelectricitytransmissionanddistributiongrid,inparticularbyimprovingconnectionproceduresandincreasingtheirtransparencytoincentiviseinvestmentsinthenational network and increase energy storage capacities.Limited progressSDG 7, 9, 13RRP implementation is monitored through the assessment of RRP payment requests and analysis of the bi-annual reporting on the achievement of the milestones and targets. Progress with the cohesion policy programming is monitored in the context of the Cohesion Policy of the European Union. 
 
  
 
ANNEX 17: COMPETITIVE REGIONS 

Portuguese  regions  have  recovered  quickly 
since  2020,  but  disparities  continue  to  be 
pronounced,  with  uneven  development. 
Supporting  business  growth 
to 
improve regional competitiveness, alongside better 
policy  and  administrative 
coordination  and 
improvements  in  the  local  business  environment. 
Demographic  challenges  persist,  and  achieving  a 
carbon-neutral  economy  requires  transformation 
across  all  economic  sectors,  with  some  regions 
facing water management challenges. 

important 

is 

Portugal continues to catch up with the rest 
of  the  EU  in  terms  of  GDP  per  capita,  but 
regional  disparities  remain  significant. 
In 
2023,  the  capital  region  was  the  only  region  in 
Portugal  with  a  GDP  per  capita  above  the  EU 
average,  while  -  apart  from  Algarve,  Madeira  and 
Alentejo – it was below 75% in all other regions. In 
2014-2023,  Madeira,  Algarve,  Norte,  Azores 
experienced the strongest average annual GDP per 
head growth (all above 2.2% compared to the EU 
average of 1.6%).  

Competitiveness 

Despite  the  increase  in  the  GDP  per  capita, 
increasing  productivity  remains  a  challenge 
for  Portuguese  regions.  Considering 
labour 
productivity by industry (GDP per hour worked), the 
‘Manufacturing’  and  ‘Industry’  sectors  registered 
annual  growth  below  the  EU  average  in  2013-
2023 (+1.1% and +0.7% respectively) (192). Despite 
increases  in  labour  productivity  in  all  Portuguese 
regions between 2013 and 2022, it stood at 68% 
of the EU average in 2022. The capital region had 
the  highest  productivity,  while  Norte  had  the 
lowest  levels  of  productivity  in  Portugal  (Table 
A17.1). 

largely 
The  business  structure  remains 
unchanged,  with  medium-sized  and  large 
enterprises  concentrated  in  a  few  regions 
and  notable  differences  in  entrepreneurial 
activity.  In  2022,  micro  and  small  enterprises 
represented  approximately  97%  of  business 
entities, without  significant changes over the past 
decade.  Norte  and  the  capital  region  account  for 
the  highest  number  of  medium-sized  and  large 

(192) Eurostat (nama_10_lp_a21). 

regional 

enterprises. Unleashing the potential of companies 
to scale up would help to stimulate innovation and 
improve 
The 
entrepreneurial  activity  that  is  vital  to  generate 
positive  economic  outcomes  has  improved  over 
the same period, but significant disparities persist 
between and within regions (193). 

competitiveness. 

transition 

limited 
in 

Demographic  trends,  skills  mismatches  and 
industry, 
researchers' 
particularly 
regions  with  a  strong 
industrial  and  business  R&D  base,  are 
undermining competitiveness. According to the 
2023 ageing index (194), Centro and  Alentejo have 
the  highest  rate  of  older  people  for  every  100 
young people. While in 2014-2023, the population 
aged  20-64  in  Portugal  as  a  whole  decreased 
similarly 
the  working  age 
population  has  diminished  at  a  higher  rate  in 
Centro, Alentejo, Norte and Madeira (Table A17.1), 
leading to a shrinking workforce. 

to  EU  average, 

There  are  also  skills  mismatches,  indicating 
that  qualified  workers  are  not  optimally 
engaged  in  the  labour  market.  On  the  other 
hand,  highly qualified individuals with strong R&D 
skills  often  find  opportunities 
in  their  home 
country  less  attractive.  As  a  result,  many  opt  to 
work  abroad  or  explore  alternative  career  paths 
(see Annex 3). The low employment of researchers 
(full-time  equivalent)  in  enterprises  is  evident, 
even  in  the  capital  region  and  Norte,  which  have 
the  highest  employment  of 
in 
enterprises  (6.2  per  1 000  active population)  (195). 
This  persists  despite  an  increase  in  the  overall 
number of researchers since 2014. 

researchers 

investments  continue 

Innovation 
to  be 
concentrated  in  a  few  regions,  with  modest 
improvements  in  high-technology  exports.  In 
2022,  total  expenditure  on  innovation  activities 
reached  EUR 3.4  billion,  an  increase  of  30% 
compared  to  2018,  indicating  a  promising  path. 
is  highly 
However, 
concentrated  in  enterprises  in  Greater  Lisbon  and 

expenditure 

innovation 

(193) GEP  -  Gabinete  de  Estratégia  e  Planeamento  /  MTSSS  - 
Ministério  do  Trabalho,  Solidariedade  e  Segurança  Social 
(2024) Quadros de Pessoal 2012 – 2022. 

(194) Statistics Portugal – 2024. 

(195) DGEEC - Direção-Geral de Estatísticas da Educação e Ciência 
(2024) 
Inquérito  ao  Potencial  Científico  e  Tecnológico 
Nacional.  Investigação  e  Desenvolvimento  (I&D):  Principais 
Indicadores por Região 2022. 

108 

 
 
 
 
 
 
Table A17.1:Selection of indicators at regional level (NUTS 2024) in Portugal 

Source: Eurostat and ARDECO (JRC) 

Norte,  which  accounted  respectively  for  EUR 1.4 
billion  and  EUR 1.2  billion,  or  41%  and  34%  of 
total  innovation  expenditure  (196).  While  export 
increased  from  EUR 42.8  billion  to 
activities 
EUR 79.3  billion  between  2011  and  2024,  the 
relative performance of high-technology exports in 
Portugal  increased  only  from  3%  to  5%  in  the 
same  period.  Norte  is  still  the  main  exporting 
region,  and  its  export  activities  grew  by  EUR 10.7 
billion,  the  highest  absolute  value  among  the 
Portuguese  regions.  The  other  two  regions  which 
recorded the highest increases in exports were the 
capital region and Centro. This trend was observed 
in high-technology exports, which reached5.6% of 
total  exports  in  Norte,  4.8%  in  the  capital  region, 
and 3.9% in Centro (197). 

Fostering  science-industry  and  business-to-
business  cooperation  would  help  to  boost 
innovation  and  the  creation  of  marketable 
products.  This  is  particularly  relevant  in  Norte, 
which  has  a  substantial  concentration  of  industry 
and  enterprises  but  below  average  levels  of 
cooperation.  So  far  there  has  been  a  small 
increase  in  new-to-market  innovation  sales.  In 
2022,  Greater  Lisbon  accounted  for  the  highest 
proportion  of  new-to-market 
innovation  sales 
(5.6%), while the figures were much lower in most 
other  regions.  The  proportion  of  enterprises 

cooperating with other enterprises or organisations 
in R&D activities was highest in Centro (8%), while 
Greater Lisbon had the highest percentage (6.2%) 
of  cooperation  in  other  innovation  activities.  In 
Norte,  which  has  the  highest  concentration  of 
enterprises  in  Portugal,  cooperation  accounted  for 
4.9%  and  4%,  respectively,  falling  behind  the 
national average (198). 

Portugal has a diversified economic structure 
(199),  with  different  regional  specialisation 
patterns,  pointing 
towards  comparative 
advantages  and  emerging  opportunities  to 
generate  new  sources  of  growth  and 
employment.  Norte  is  the  most  industrialised 
region  of  Portugal,  with  a  strong  presence  of  the 
textile  sector  and  manufacturing  of  components 
and  parts  for  the  automotive  sector.  In  the 
pharmaceutical and biotechnology sector, activities 
are driven by BIAL (200). The future Innovation Hub 
which is being developed in the Metropolitan Area 

(198) Community Innovation Survey - 2022. 

(199) The  Portuguese  economy  is  based  on  traditional  industries, 
with  agri-food,  textiles,  footwear  and  the  tourism  sector 
playing an  important  role.  The  key  manufacturing industries 
include  the  automotive  sector,  aeronautics,  automation, 
renewable  energies.  For  detailed 
pharmaceuticals  and 
regional 
see: 
industrial 
https://web.jrc.ec.europa.eu/dashboard/TEDV/index.html. 

indicators 

economic 

(196) Community Innovation Survey - 2022. 

(197) Statistics Portugal – 2025. 

(200) BIAL is ranked 53rd in the EU pharma and biotech companies 
with  the  highest  R&D  investments.  EU  Industrial  R&D 
Investment Scoreboard – 2024. 

109 

GDP per head (PPS)Real GDP per head growthProductivity - GDP per hour worked (PPS)Real productivity growth (per hour worked)Population growthWorking age population (20-64) growthEmployment rate 20-64At-risk-of-poverty or social exclusionIndex EU-27 = 100Average annual % changeIndex EU-27 = 100Average annual % changeAverage annual change per 1000 residentsAnnual % change % of population aged 20-64% of total populationNUTS202420232014-202320222013-20222014-20232014-202320242024European Union (27 MS)1001,61000,91,7-0,375,821,0Portugal811,8680,91,9-0,378,519,7Norte692,3601,40,9-0,477,421,0Algarve872,4720,97,30,279,818,7Centro (PT)691,7631,0-0,7-0,478,518,9Grande Lisboa1261,577-0,85,20,381,116,5Península de Setúbal541,6660,44,60,278,821,8Alentejo762,164-0,2-4,5-0,779,718,7Oeste e Vale do Tejo621,2581,13,2-0,376,719,1Região Autónoma dos Açores712,2630,8-1,8-0,374,828,4Região Autónoma da Madeira872,8711,8-2,0-0,676,322,9 
 
 
 
      
 
of  Porto  is  an  opportunity  to  diversify  economic 
activities  in  new  areas  (201).  The  aeronautics 
industry - not yet as developed as the automotive 
sector  -  has  a  growing  cluster  of  companies. 
Centro is specialised in manufacturing of ceramics 
and  glass,  and  moulding,  with  activities  linked  to 
the pharmaceutical and biotechnology sectors. The 
capital  region  has  the  greatest  concentration  of 
services, with a strong presence of manufacturing 
industries, such as the pharmaceutical sector, and 
in  Península  de  Setúbal,  the  automotive  industry. 
In  Alentejo,  in  addition  to  traditional  sectors, 
aeronautics is a more recently developed sector in 
the  region,  with  the  renewable  energy  cluster 
economic 
providing 
opportunity 
diversification.  Considering  geographic 
location 
and  natural  resources,  there  is  high  but  still 
untapped potential to develop the blue economy in 
coastal  areas  of  mainland  Portugal,  as  well  as  in 
the  outermost  regions  of Azores  and  Madeira,  for 
energy  production. 
instance  on 
Economic  diversification  is  key  to  building  more 
resilient regional economies in Azores and Madeira 
which rely heavily on tourism. 

renewable 

for 

an 

the  capacity  of 

Improving  the  quality  of  governance  would 
be  beneficial  for  improving  the  Portuguese 
economy's  competitiveness  both  at  national 
and  regional  level.  According  to  the  2024 
European  Quality  of  Government  Index  (202),  the 
regions  with  below  scores  below  EU  average  are 
Algarve,  Norte  and  Alentejo.  It  is  important  to 
continue  strengthening 
the 
Commissions 
for  Coordination  and  Regional 
Development (CCDRs), considering the new powers 
granted  to  them during  the  reform  which  entered 
into  force  in  January  2024.  In  addition,  closer 
cooperation  between 
the 
Portuguese  Trade  and  Investment  Agency  would 
investors. 
be  beneficial 
Streamlining internal processes remains important 
to  further 
improve  collaboration  with  other 
national  agencies,  for  instance,  Portugal’s  Agency 
for Competitiveness and Innovation (203). 

for  attracting  new 

the  CCDRs  and 

There  is  also  scope  to  improve  the  business 
environment  by  streamlining  processes  at 

is 

there 

scope 

suggest 

local level. Variations across Portuguese cities in 
the  speed  at  which  building  and  environmental 
is 
permits  can  be  obtained  and  property 
transferred 
for 
improvement (204). For instance, in Funchal it takes 
about  nine  months  to  obtain  a  building  permit, 
while  in  Coimbra  and  Lisbon  it  can  take  up  to  a 
year  and  a  half.  Obtaining  environmental  permits 
in  mainland  Portugal  is  supported  by  a  platform 
(205) which enables comprehensive online services, 
including submissions, payments and notifications. 
In  turn,  the  outermost  regions  of  Azores  and 
Madeira  do  not  have  similar  electronic  platforms, 
relying instead on in-person or email submissions. 
Property  transfer  can  take  44  days  in  Lisbon,  but 
83 days in Ponta Delgada. 

Social fairness 

are 

regions 

affected 

Portuguese 
by 
demographic  changes.  The  four  regions  where 
the  population  grew  in  2014-2023  were  the 
capital  region,  Península  de  Setúbal,  Oeste  e  Vale 
do Tejo and Algarve, mainly due to strong net in-
migration  2022  -  2023.  Alentejo  had  the  largest 
decline in population, with the Azores and Madeira 
showing  also  significant  decreases  (Table A17.1). 
Most of the decline in the Azores is related to net 
outmigration  in  between  2013  and  2019.  Other 
regions  show  positive  net  in-migration  in  this 
period,  which  is  not  sufficient  to  compensate  for 
the  negative  natural  population  change.  It  is  a 
challenge  to  ensure  access  to  essential  services, 
particularly in areas facing depopulation. 

Helping  young  people  find  jobs  is  necessary 
to  sustain  the  working  age  population  and 
in  many  Portuguese 
economic  growth 
regions.  Between  2013  and  2022,  845 000 
people  emigrated  from  Portugal  (206).  Over  the 
past  decade,  thousands  of  young  and  educated 
Portuguese  people  left  the  country  in  search  of 
better opportunities. In 2024, youth unemployment 
was  still  above  the  EU  average  of  15%  in  all 

(201) Sustainable mobility, clean energy, advanced manufacturing 

(204) The  World  Bank  (2024)  Subnational  Business  Ready  in  the 

and marine economy. 

European Union 2024: Portugal. 

(202) European Quality of Government Index 2024 | University of 

(205) Integrated  Environmental  Permitting  System 

(SILiAmb), 

Gothenburg 

managed by the Portuguese Environment Agency (APA). 

(203) OECD  (2024)  Rethinking  Regional  Attractiveness  in  the  Alentejo 

(206) Observatório  da  Emigração  (2024)  Emigração  Portuguesa 

Region of Portugal. 

2023: Relatório Estatístico. 

110 

 
 
 
regions  and  41.9%  of  those  aged  30-34  held 
tertiary  degree,  with  only  the  capital  region 
exceeding the EU average (44.8%). Situation of the 
youth is challenging in the Azores, where the rate 
of early leaving from education and training stood 
at  19.8%,  which  is  three  times  higher  than 
Portugal’s  average  of  6.6%, while  only  22.7%  of 
those aged 30-34 held tertiary degree.  

The outermost regions of Azores and Madeira 
continue  to  face  major  challenges.  In  2024, 
the  Azores  and  Madeira  recorded  the  lowest 
employment  rates  (for  20-  to  64-year-olds)  and 
the  highest  percentage  of  population  at  risk  of 
poverty  and  social  exclusion  (AROPE  rate)  (Table 
A17.1). These disparities appear to be linked to the 
high  rate  of  early  school  leaving  and  below 
average  educational  attainment.  The  percentage 
of population with a tertiary education degree was 
significantly  lower  in  the  Azores  (17.6%)  and 
Madeira  (22.4%)  than  Portugal’s  average  (31.4%) 
in  2024.  Digitalisation  also  remains  a  challenge, 
with  internet  usage  for  interactions  with  public 
authorities at 39% in Azores and 44% in Madeira, 
well below the national average of 49% in 2021. 

Graph A17.1: Access to healthcare and primary 
education in rural areas 

Units: Percentage of population that can reach nearest 
hospital within 10 minutes by car (EU-27) (2020-2021); 
Percentage of children under 15 years old who can reach 
primary school within 15-minute walk (EU-24) (2018). 
Source: Eurostat 

Sustainability 

with 

persist, 

Portugal performs relatively well in terms of 
access  to  essential  services,  but  regional 
significant 
disparities 
difficulties  in  housing.  In  2018, the  percentage 
of the population with a primary school within 15 
minutes' walk  was comparable to the EU  average 
in most regions, with the highest proportion in the 
capital  region  and  the  lowest  in  Centro  (Graph 
A17.1).  This 
for 
municipalities  in  low  density  areas,  which  are 
incurring  considerable  costs  to  ensure  transport 
for  pupils.  The  travel  time  to  the  nearest 
healthcare  centre  exceeds  the  EU  average  in  all 
is 
the  capital 
regions  except 
particularly  long  in  Alentejo,  Centro,  Azores  and 
Madeira,  where  double  insularity  (207)  translates 
into challenging access to services in the smallest 
islands. Moreover, Portugal continues to experience 
significant difficulties in housing (see Annex 11). 

common  problem 

region,  and 

is  a 

in 

territorial 

challenges 

Greenhouse  gas  emissions  per  capita  are 
below  the  EU  average 
in  Portugal  and 
continue  to  decrease,  but  there  are  some 
specific 
the 
transition to climate neutrality. Despite having 
decreased  emissions  by  13.8  tonnes  per  capita 
between  2018  and  2023,  Alentejo  is  the  only 
Portuguese region with a level of emissions above 
the  EU  average.  Centro  is  the  Portuguese  region 
with the second-highest emissions per capita, with 
a  decrease  estimated  at  1.1  tonnes  per  capita  in 
the same period (Graph A17.2). Emissions in those 
two  regions  decreased  following  the  closure  of 
coal-fired  power  plants  in  Sines  (Alentejo  Litoral) 
and Pego (Médio Tejo) in 2021 (208). 

(207) Double insularity refers to geographical remoteness from 1) the 
continental part of the Member State and from 2) the European 
Union (EP report ‘Islands of the European Union: State of play and 
future challenges, March 2021, Research for REGI Committee -
ISLANDS OF THE EUROPEAN UNION: State of play and future 
challenges | Think Tank | European Parliament) 

(208) Alentejo  Litoral  and  Médio  Tejo,  and  Matosinhos  in  the 
Metropolitan  Area  of  Porto,  are  currently  implementing  the 
Territorial  Just  Transitional  Plans,  aimed  at  boosting 
economic  diversification  and  ensuring  that  the  transition 
towards a climate-neutral economy leaves no one behind. 

111 

020406080100LisboaAlgarveNorteMadeiraCentroAlentejoAzoresPortugalEU27Access to healthcare (% of population)Access to primary school (% of children under 15 years old) 
 
 
          
 
 
Graph A17.2: Greenhouse gas emissions per capita 

Unit: Tonnes per capita per year 
Source: REGIO elaboration based in Eurostat 

resource  productivity  and 

Achieving a carbon-neutral economy requires 
transformation  of  every  economic  sector. 
Portuguese regions lag far behind the EU average 
the  use  of 
in 
in 
environment-related  technologies,  but  also 
the 
terms  of  green  employment. 
proportion  of  employment  in  sustainable  but 
competitive  sectors  ranked  below  the  EU  average 
in all regions (12% in the capital region), and much 
(209). 
rail 
lower 
infrastructure, 
and 
decarbonising 
personal  mobility  play  a  key  role,  particularly  in 
Portugal’s  metropolitan  areas,  which 
face 
significant  challenges  in  air  quality  and  traffic 
congestion (see Annex 7). 

Improving 
transport 

in  all  others 

In  2020, 

further 

Algarve,  Alentejo  and  Madeira  are  facing 
stress  has  been 
water  scarcity.  Water 
aggravated  by  prolonged  droughts  and  climate 
change,  and  growth  forecasts  anticipate  that  the 
situation  will  deteriorate 
(see  also 
Annex 9).  The  Algarve  and  Alentejo  already  are 
affected  by  severe  and  extreme  water  scarcity, 
with  expected  further  increase  in  water  demand 
leading 
in  water  availability, 
estimated  at  between  -1%  and  -13%  within  the 
next  decade  (210).  This  suggests  the  need  to 
strengthen water management policy in vulnerable 
territories. 

to  decreases 

(209) Regional Competitive Environmental Sustainability indicator; 
https://publications.jrc.ec.europa.eu/repository/handle/JRC136
629. 

(210) DG REGIO / Guido Schmidt (AMI list expert), Supporting the 

management of water scarcity in Portugal. 

112 

05101520253035EU27NorteAlgarveCentro (PT)LisboaAlentejoAzoresMadeira20182023