COMMISSION STAFF WORKING DOCUMENT 2026 Country Report - Portugal Accompanying the document Recommendation for a COUNCIL RECOMMENDATION on the economic, social, employment, structural and budgetary policies of Portugal
Date: 2026-06-03
Institutions: European Commission, Reform and Investment Task Force
Subjects: Portugal, budget policy, economic policy, economic recovery, economic reform, employment policy, health care, macroeconomics, social policy, stability pact

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 3.6.2026  SWD(2026) 222 final  COMMISSION STAFF WORKING DOCUMENT 2026 Country Report - Portugal Accompanying the document Recommendation for a COUNCIL RECOMMENDATION  on the economic, social, employment, structural and budgetary policies of Portugal {COM(2026) 222 final}  
 
 
 
 
 
 
 
 
 
 
 
ECONOMIC DEVELOPMENTS AND KEY POLICY 
CHALLENGES 

81%  in  2025  but  remained  below  its  historic 
high of 85% in 2000. Only the capital region is 
above  EU  average,  while  Norte  and  Madeira 
were the only regions to experience significant 
convergence  with  the  EU  average  in  the  past 
20  years  (see  Annex 18).  Portugal’s  potential 
growth reached 2.3% in 2025, relative to 1.4% 
for the EU, but the long-term outlook remains 
constrained by an ageing population. 

Graph 1.1: Real GDP growth and selected 
labour market indicators 

(1) Estimates for 2026 and 2027 are from the European 
Commission's Spring 2026 forecast. 
Source: European Commission 

Portugal’s  economy 
remains  heavily 
reliant on low value-added services. As of 
2025,  services  made  up  around  80%  of 
Portugal’s  economy  (compared  to  the  EU 
average  of  76%),  with  foreign  tourism  alone 
accounting  for  8%  -  particularly  concentrated 
in  the  Algarve  and  Madeira.  While  higher 
value-added  sectors 
information  and 
communication  (5%  of  GDP  vs.  the  5.6%  EU 
average)  and  professional,  scientific,  and 
technical  activities  (9%  vs.  the  11%  EU 
average)  have  been  narrowing  the  gap  in 
recent  years,  their  share  remains  below  the 
these 
European  average.  Employment 
sectors  has  grown  faster  than  the  broader 
economy, despite persistent skill shortages. 

like 

in 

Growth remains solid despite 
structural challenges 

to 

grow 

continues 

Portugal’s  economy  outperforms  EU 
average  with  steady  growth.  Portugal’s 
solidly, 
economy 
outperforming  the  EU  average  for  the  fourth 
consecutive  year.  While  economic  growth 
slowed slightly from 2.2% in 2024 to 1.9% in 
2025,  it  remained  robust,  driven  by  strong 
private  consumption  and 
investment—both 
rising  by  close  to  3.5%.  However,  goods 
exports  stagnated  due  to  weak  external 
demand  and  global  trade  uncertainty,  and 
services  exports  saw  only  modest  growth. 
Despite 
imports  rising  much  faster  than 
exports, the country’s current account retained 
a surplus of 1.2%, supported  by lower energy 
prices. 

risks 

The  labour  market  has  strengthened  as 
inflation  eases,  but 
remain. 
Employment  growth  remained  rapid,  reducing 
the unemployment rate from 6.5% in 2024 to 
6.0%  in  2025.  With  an  employment  rate  of 
79.6%, Portugal is close to achieving its 2030 
national  target.  Inflation  eased  to  2.2%,  as 
falling  energy  and  industrial  goods  prices 
offset higher food and services costs. Looking 
ahead,  despite  global  political  and  economic 
risks,  Portugal’s  economy 
is  projected  to 
maintain  sound  growth  of  1.7%  in  2026  and 
1.8%  in  2027.  Unemployment  is  expected  to 
decline  slightly,  though  inflation  may  face 
temporary  upward  pressure  from  a  recent 
rebound in energy prices. 

hold 

constraints 

Structural 
back 
productivity.  Despite  recent  improvements, 
Portugal’s 
levels  and  productivity 
remain  below  the  EU  average.  In  purchasing 
power  standards,  Portugal’s  GDP  per  capita 
improved from 74% of EU average in 2021 to 

income 

2 

-20-15-10-505101520-10-8-6-4-20246810201020112012201320142015201620172018201920202021202220232024202520262027GDP growthEmployment growthUnemployment rate (rhs)y-o-y growth, %% of active population 
 
  
Low  high-tech  exports  hinder  Portugal’s 
economic convergence.  Portugal’s economic 
convergence  also  faces  challenges  due  to  its 
low  share  of  high-technology  exports,  which 
stood  at  just  5%  of  total  exports  -  the  third 
lowest  in  the  EU,  compared  to  the  bloc’s 
average  of  17%,  according  to  Eurostat  data 
for  2022.  This  reliance  on  lower  value-added 
sectors  limits  the  country’s  ability  to  boost 
productivity  and  competitiveness,  despite 
progress  in  reducing  gaps  in  key  service 
industries. 

As  a  small  open  economy,  Portugal  is 
strongly exposed to external risks. Exports 
accounted for 44% of GDP in 2025. However, 
more  than  70%  of  goods  exports  are  to  EU 
countries,  partly  mitigating  these  risks.  The 
same  pattern  applies  to  services,  particularly 
tourism, where the majority of revenue comes 
from  visitors  within  the  EU.  Like  other  EU 
countries,  Portugal  is  dependent  on  energy 
imports.  Despite  the 
large  percentage  of 
domestically  sourced  renewables,  Portugal’s 
energy trade deficit is close to the EU average 
at  1.7%  of  GDP  in  2025.  As  a  country  with  a 
very large coastal area, and a large part of the 
country  covered  by  forest  and  some  areas 
facing water scarcity, Portugal is also exposed 
to significant climate risks. 

face 

structural 

Portugal’s  competitiveness  and  green 
transition 
hurdles. 
Portugal’s business environment is constrained 
by administrative burdens, and inefficiencies in 
the  public  sector  and  the  justice  system. 
Businesses  show  low  innovation  levels,  while 
scaling  up  remains  limited  (see  Section 2). 
Though  renewable  energy  adoption  is  strong, 
further  expansion  is  hindered  by  permitting 
delays,  grid  constraints,  and 
insufficient 
energy  storage  solutions.  Meanwhile,  industry 
and 
remain  major  sources  of 
greenhouse  gas  emissions  and  reliant  on 
imported  fossil  fuels,  and  water  and  waste 
management  pose  ongoing  challenges.  The 
country is also highly exposed to climate risks, 
requiring  urgent  adaptation  measures  (see 
Section 3). 

transport 

Social  inequalities  persist  despite  labour 
market  strengths.  Housing  affordability—
particularly  in  Lisbon  and  coastal  areas—

remains a pressing social issue. Despite strong 
employment  figures,  education  and  training 
fail  to  match  labour  market  demands  and 
skills  levels  remain  generally  low,  leading  to 
skills  mismatches  that  weaken  workforce 
competitiveness  and  affect  disproportionately 
young  people  and  migrant  communities. 
Access  to  quality  healthcare  is  affected  by 
shortages  of  staff  and  the  provision  of  long-
term care remains insufficient (see Section 4), 
challenges 
action  while 
simultaneously  ensuring  the  sustainability  of 
the  National  Health  Service  (see  Annex  2). 
These  challenges  are  even  more  acute  in 
Madeira  and  the  Azores,  where  insularity 
deepens  social  and  economic  disparities  (see 
Annex 18). 

deserve 

that 

Debt continues to decline, with 
risks to the medium-term outlook 

to 

committed 

its  medium-term 

fiscal 
Portugal  has 
discipline,  but  spending  pressures  are 
rising.  Under 
fiscal-
structural  plan  for  2025–2028,  Portugal  has 
pledged  to  limit  net  expenditure  growth  while 
ensuring  continued  debt  reduction.  The  fiscal 
adjustment is backloaded due to the impact of 
expenditure  of  projects  financed  by  loans 
under  the  Recovery  and  Resilience  Facility 
(RRF).  Excluding  the  impact  of  the  RRF  loans, 
the consolidation efforts translate into a linear 
fiscal consolidation of 0.1 pps of GDP per year. 
The  strategy  relies  on  maintaining  positive 
headline and structural primary balances over 
the  medium  term,  supported  by  economic 
growth  and  targeted  fiscal  adjustments  to 
sustain 
However, 
permanent  measures  —  such  as  public  wage 
increases,  updates 
tax 
arrangements,  and  cuts  to  personal  and 
corporate  income  tax  rates  —  risk  weakening 
the budget balance. Additional pressures come 
from 
including 
emergency responses to severe storms, and a 
new  housing  fiscal  package.  Together,  these 
challenges  complicate  Portugal’s  ability  to 
meet its medium-term fiscal targets.  

temporary 

to  youth 

long-term 

spending, 

stability. 

income 

Portugal’s  budget  balance  remains  in 
surplus, despite a sustained expansion in 

3 

 
Box 1:  UN sustainable development goals 

Portugal is improving in most SDGs related to environmental sustainability (SDGs 2, 7, 9, 12, and 13), 
but is moving away from the EU average on clean water and sanitation (SDG 6), and sustainable cities 
and communities (SDG 11), due, for instance, to diminishing water quality of inland bathing water and 
low rates for recycling of municipal waste (Annex 17). Progress is being made in several SDGs related to 
fairness  (especially  SDGs  3,  4,  5,  7  and  8).  However,  Portugal  is  moving  away  for  some  other  SDGs 
related to fairness (SDGs 1 and 10). 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 4). 

from 

benefiting 

government  expenditure.  The  general 
government  surplus  reached  0.7%  of  GDP  in 
2025,  from  0.6%  of  GDP  in  2024,  mostly  on 
the  back  of  buoyant  tax  revenues  and  social 
sustained 
contributions 
economic  activity  and  a  dynamic 
labour 
market.  Nationally  financed  public  investment 
has  started  to  pick  up  since  2020,  driven  by 
the  execution  of  RRF-financed  investments. 
The Commission 2026 spring forecast projects 
the surplus to turn into a small deficit of 0.1% 
GDP in 2026 and 0.4% of GDP in 2027. Public 
debt fell below 90% in 2025, reaching 89.7%, 
and  is  expected  to  continue  its  downward 
trajectory,  albeit  at  a  slower  pace.  It  is 
expected  to  reach  86.0%  by  2027,  driven  by 
persistent primary balance surpluses. 

Defence expenditure in Portugal has been 
limited  but 
is  expected  to  receive 
additional  EU  support  over  the  next 
years.  In  2024,  total  government  defence 
spending  reached  0.9%  of  GDP,  which  fell  to 
0.8% in 2025 and is forecast to remain stable 
through  2026  and  2027,  assuming  no  policy 
changes.  In  order  to  facilitate  an  increase  in 
public spending on defence, the Council of the 
European Union activated the ‘national escape 
clause’  for  Portugal (1).  As  part  of 
the 
European  Commission’s  ReArm  Europe  Plan, 
Portugal has requested EUR 5.8 bn in EU loans 
under  SAFE  (Security  Action  for  Europe)  for 
defence  procurement.  Portugal 
is  also 
leveraging EU cohesion and recovery funds to 

(1)  The  activation  of  the  national  escape  clause  gives  EU 
countries  the  budgetary  flexibility  to  increase  defence 
expenditure,  without  an  immediate  need  to  finance 
such  increase  with  spending  cuts  or  revenue-raising 
measures.  The  flexibility  thus  gives  EU  countries  the 
to  accommodate  higher  defence 
necessary 
expenditure within their national budgets. 

time 

enhance  defence  capabilities.  The  recovery 
and resilience plan (RRP) includes investments 
in dual-use defence projects, such as a multi-
purpose  naval  platform,  a  defence  operations 
centre, and support for the aeronautics sector 
through  the  mobilising  agendas.  Cohesion 
policy is providing support for the development 
of  industrial  capacities  to  strengthen  defence 
capabilities  through  the  regional  programmes 
in Norte, Alentejo, Algarve, and Centro, as well 
as  support  for  military  mobility  in  Norte, 
amounting to a total of EUR 114 million. 

impacts 
increasingly 
Climate  change 
public 
finances.  European  Commission 
scenario  analyses  show  that  the  long-term 
costs of inaction significantly exceed those of 
climate action (2). Portugal’s climate insurance 
protection  gap,  estimated  at  97%,  highlights 
(see  EEA  data (3)). 
potential  fiscal 
Meeting  Portugal’s  mitigation  and  adaptation 
priorities will require additional resources (see 
Section 3). 

risks 

Rising pension expenditure adds to 
the challenges for medium-term 
fiscal sustainability 

Rising  pension  expenditure  continues  to 
pose  a  challenge  for  medium-term  fiscal 
rapidly  ageing 
sustainability.  With  a 
population, 
pension 
expenditure is set to climb from 12.8% of GDP 

Portugal’s 

public 

(2)  See  European  Commission  (2026),  Debt  Sustainability 
Monitor 2025, Institutional Paper No 332, 12 February. 

(3)  European  Environment  Agency:  Economic  losses  from 
weather- and climate-related extremes in Europe. 

4 

 
 
 
 
in  2025  to  15.1%  by  2045  –  projected  to  be 
the  third-highest  expenditure-to-GDP  ratio  in 
the EU. Though the statutory retirement age is 
automatically  adjusted 
life 
expectancy, spending  is still  projected to peak 
in  2046  at  2.5 percentage  points  above 
levels.  Meanwhile,  supplementary 
current 
pension  schemes 
remain  underdeveloped, 
lacking  auto-enrolment  and  covering  only  a 
small fraction of workers (see Annex 2). 

line  with 

in 

a 

Portugal 

Reforms  are  needed  to  secure  the 
pension  system’s  future.  In  2025,  the  EU 
issued 
country-specific 
recommendation 
(CSR)  to  take  action  to 
ensure  the  medium-term  fiscal  sustainability 
the  pension  system.  However,  only 
of 
preparatory steps have been taken so far, with 
the  setting  up  of  a  dedicated  expert  working 
group. In 2026, the working group is expected 
to  deliver  a  report  with  concrete  proposals  to 
ensure  the  long-term  sustainability  of  the 
pension  system,  including  a  reassessment  of 
the  early  retirement  scheme  and  a  study  on 
partial 
and 
complementary schemes. 

mechanisms 

retirement 

Widespread tax expenditures 
continue to make the tax system 
overly complex 

reducing 

inefficient 

Significantly 
tax 
expenditures  could  help  generate  fiscal 
space  and  reduce  the  complexity  of 
Portugal's  tax  system.  In  2024,  there  were 
at  least  781  different  tax  expenditures (4), 
such  as  tax  exemptions,  deductions,  credits 
and preferential rates. Foregone revenue from 
those  exceeded  7%  of  GDP.  VAT-related  tax 
expenditure  alone  represents  4.3%  of  GDP. 
The extensive use of reduced and intermediate 
VAT  rates  for  hospitality  services 
(hotel 
accommodations,  restaurants,  and  catering 
services)  may  disproportionately  benefit 
Numerous 
higher-income 
add 
also 
incentives 

households. 
exemptions 

and 

significantly to the complexity of the corporate 
income tax framework. 

to  streamline 

Effective  action 
tax 
expenditures  remains  limited.  Under  the 
RRP, a new permanent technical tax policy unit 
(U-TAX)  was  created  to  monitor  and  evaluate 
new and existing tax benefits. U-TAX published 
an  assessment  report  in  June  2025,  which 
provides an evaluation of 31 existing benefits, 
with 
revenue 
estimated at EUR 15.6 billion. One of the main 
recommendations  from  U-TAX  is  the  upgrade 
of  the  VAT  rate  for  restaurants  from  the 
preferential 13% rate to the standard rate.  

aggregate 

foregone 

an 

for 

Fossil  fuel  subsidies  remain  a  significant 
impediment  to  Portugal  achieving 
its 
goals 
transport. 
decarbonising 
Portugal received a CSR in 2025 to phase-out 
fossil  fuel  subsidies  notably  in  the  transport 
sector.  Such  subsidies  contribute  to  continued 
reliance  on  fossil  fuels  and  do  not  incentivise 
electrification  (see  Section 3).  Portugal  has 
started  to  introduce  a  partial  reversal  of  the 
extraordinary  fuel  tax  reduction  on  gasoline 
and road diesel (ISP) as of December 2025.  

However,  there  is  no  clear  phase-out 
timeline for the remaining temporary ISP 
relief measures. In the context of the conflict 
in  the  Middle  East  and  increasing  energy 
prices, Portugal reintroduced  reductions in the 
fuel  tax  (ISP)  alongside  new  targeted  energy 
relief measures for specific sectors (goods and 
passengers  transport,  agriculture,  forestry, 
fisheries,  and  aquaculture)  and  one-off  direct 
payments (5).  It  also  has  no  planned  date  to 
phase  out  the  tax  exemption  for  natural  gas 
used in industrial processes and tax reductions 
and  exemptions  for  diesel  used  by  freight 
transport  companies, 
locomotives, 
public  transport  and  agricultural  machinery 
before  2030.  On  the  other  hand,  Portugal 
resumed the annual  update of the carbon tax 
in  2026,  and  the  reversal  of  the  biofuels  tax 
exemption  entered  into  force  as  of  1 January 
2026. 

railway 

(4)  See Relatório Despesa fiscal 2024 (June 2025) 

(5)  Council of Minister Decisions on 6 and 27 March 2026 

5 

 
 
 
Addressing housing affordability 

to 

Portugal is facing a housing affordability 
crisis  with  a  negative  social  impact. 
Portugal  received  a  CSR  in  2025  to  address 
housing  affordability  and  availability  in  high-
(including  by  eliminating 
demand  areas 
barriers 
renting  vacant  houses  and 
renovating  derelict  buildings),  but  progress  is 
limited.  Nominal  house  prices  have  nearly 
tripled since 2015 - an average annual growth 
of  11%,  more  than  double  the  EU  average. 
Over  the  same  period,  the  increase  in  the 
price-to-income ratio was one of the largest in 
the EU (see Annex 16), placing unprecedented 
pressure on vulnerable groups, including young 
people,  students,  and  low-income  households, 
while  also  squeezing  middle-income  families. 
Nearly a third of renters paying market prices 
(6), 
now 
face  housing  cost  overburden 
exacerbating social inequality. 

The surge in housing prices is more acute 
in  certain 
increasing 
regions,  with 
demand  pressures  not  being  met  by 
supply.  The  sharpest  price  hikes  have 
occurred  in  the  metropolitan  areas  of  Lisbon 
and  Porto,  the  Algarve,  in  coastal  areas  and 
mid-size  municipalities,  as  well  as  Madeira. 
Meanwhile,  rural  and  interior  regions  have 
seen  more  modest  changes,  with  some  areas 
even  experiencing  housing  oversupply  (see 
Annexes 16 and 18). High internal and external 
demand  -  fuelled  by  institutional  investors, 
tourism,  and  short-term 
-  has 
outstripped  supply.  Despite  a  recent  recovery 
in  residential  construction,  the  sector  remains 
hampered  by  labour  shortages  and  rising 
costs,  while  weak  investment  over  the  past 
two  decades  has 
left  supply  chronically 
insufficient. 

rentals 

Vacant dwellings could be better utilised. 
Among  the  OECD  countries,  Portugal  has  also 
one of the highest shares of dwellings that are 
not  used  for  primary  residences,  with  many 
dwellings  remaining  vacant  (see  Annex 16). 

(6)  This indicator should be read together with the tenure 
structure (homeowner, tenants), that may differ across 
country and regions. 

Portugal’s  legislation  envisages  aggravated 
rates  of  recurrent  tax  on  immovable  property 
on  unoccupied  buildings.  However, 
the 
application  of  higher  tax  rates  is  left  at  the 
discretion of the municipalities and their ability 
to  enforce 
the  practical 
it.  Moreover, 
effectiveness  of  these  tax  arrangements  is 
hindered by eroded tax bases due to outdated 
cadastral values. 

targeted 

incentives 

Portugal’s  housing  tax  mix  could  provide 
more 
to  better 
support housing supply. The current housing 
tax  mix  in  Portugal  entails  comparatively  low 
recurrent taxes on property ownership, also as 
a result of outdated tax property values, and a 
strong  reliance  on  transaction  taxes  (see 
Annex  3).  Shifting  the  tax  burden  from 
transaction  taxes  toward  recurrent  taxation, 
including  through  an  update  of  tax  property 
for 
provide 
values, 
homeowners  to  put  underused  properties  on 
the  market.  Targeted  tax  deferrals  could  be 
low-income  property 
considered  for  those 
owners  whose  tax  obligations  would  increase 
significantly.  

incentives 

could 

gains 

capital 

introduced 

Tax exemptions risk worsening inequality 
and  housing  pressures.  Both  existing  and 
newly 
tax 
exemptions (7)  risk  fuelling  equality  issues, 
diverting capital away from other investments 
and 
increasing  the  demand  for  housing. 
Reducing  these  exemptions  could  help  deter 
speculative  investment  by  decreasing  the  net 
profit  potential  from  property  sales.  At  the 
same  time,  it  is  doubtful  whether  other 
recently  adopted  tax  measures  -  such  as 
temporarily  reduced  VAT  rates  –  will  be 
effective  in  tangibly  increasing  the  supply  of 
affordable  housing  or  reducing  prices  (see 
Annex 16). 

Improved  governance  and  sustained 
planning 
integrated  with 
financing 

(7)  Portugal  applies  a  general  exemption  for  50%  of 
capital  gains  from  real  estate.  In  addition,  it  recently 
introduced  full  exemptions  for  sales  of  primary  and 
secondary  residences  in  cases  of  purchase  of  another 
property  to  be rented  at  a certain  threshold  or  when  a 
pensioner  or  a  person  aged  65  or  above  reinvests  the 
gains  in  either  a  life  insurance  contract,  a  lifelong 
annuity contract or a pension fund. 

6 

 
 
 
relevant 

the  role  of  the  third  sector,  for  example 
through  housing  cooperatives.  This  would  be 
particularly 
for  middle-income 
households, who are often ineligible for social 
housing  but  face  increasing  difficulties  with 
securing  accommodation  at  current  market 
prices. 

to 

from 

continue 

response 

Homelessness and other forms of housing 
grow,  with 
exclusion 
insufficient 
public 
services.  In  2024,  the  number  of  homeless 
people  increased  for  the  fourth  consecutive 
year, to a record high. The number of informal 
settlements  has  also  increased.  These  are 
often  populated  by  low-income  workers  and 
their  families  (in  particular  in  the  Lisbon 
metropolitan  area)  or  by  Roma  families  (see 
Annex 16).  Local  public  services 
lack  the 
capacity and resources to provide housing and 
related  integrated  services.  Portugal  could 
increase  prevention  efforts,  response  and 
intervention  capacity,  following  a  people-
centred  approach.  Prevention  efforts  include 
integrated  social  services,  so  that  people  at 
risk  of  housing  exclusion  can  maintain  access 
to housing and access services, thus mitigating 
the risk of falling into homelessness. 

better  multi-level 

measures  could  contribute  to  better 
housing  policies.  Portugal  will  be  receiving 
support  through  the  EU’s  technical  support 
instrument  to  establish  a  national  model  for 
housing  data  governance  and  management, 
which  would  help  plan  and  evaluate  housing 
policies (see Annex 16). Portugal would benefit 
from 
institutional 
coordination  between  central,  regional  and 
municipal  authorities  (see  Annexes 7  and  16). 
More 
inter-institutional  collaboration  could 
also  ensure  that  long-term  planning  take  into 
consideration  housing,  as  well  as  urban, 
spatial  and  transport  planning  and  social 
services.  Improved  transport  planning,  quality 
and  frequency,  could  ease  workers  commute 
into  cities,  alleviating  some  pressure  on 
housing,  as  highlighted  in  the  2025 CSR.  This 
requires  strengthening 
the  administrative 
capacity of public central and local authorities. 

There  is  a  structural  shortage  of  social 
and  affordable  housing.  Public  investment 
to  expand  and  upgrade  the  social  and 
affordable  stock  increased  in  recent  years, 
notably  supported  by  the  RRF.  Portugal  will 
continue  to  support  these  efforts  through 
substantial funding from the State budget and 
other  EU  funds,  including  cohesion  policy, 
where  the  allocation  to  housing  has  been 
reinforced.  Nevertheless,  significant  gaps 
remain,  as  Portugal’s  percentage  of  social 
housing remains well below the OECD average 
(around 2% vs 7%, see Annex 16). A long-term 
financing  mechanism  would  be  needed  to 
the  continuous  development  and 
ensure 
maintenance  of  quality  public  housing,  using 
both  public  and private  financing  instruments. 
In the short  term, targeted housing allowance 
schemes can provide more immediate relief to 
vulnerable  households,  which  are  significantly 
dependent on the rental market. However, the 
current schemes would benefit from review to 
improve target reach and efficacy. 

There  is  scope  for  more  private  sector 
in  expanding  affordable 
involvement 
housing.  In  addition  to  the  expansion  of  the 
existing  public  stock,  the  private  sector  could 
play a significant role in expanding affordable 
that  promotes  social  mix  and 
housing 
territorial  cohesion, 
through  strengthened 
public-private  partnerships  and  by  leveraging 

7 

 
 
 
 
 
 
funding 

instruments 

competitiveness, 

provide 
EU 
considerable  resources  to  Portugal.  They 
support investments and structural reforms to 
environmental 
increase 
fairness  and 
sustainability,  skills,  social 
security,  while  helping  to  address  challenges 
identified in the CSRs. Key instruments include 
the  Recovery  and  Resilience  Facility  (see  Box 
2)  and  Cohesion  policy  funds  (see  Box  3).  In 
addition, the Common Agricultural Policy (CAP) 
provides  Portugal  with  an  EU  contribution  of 
EUR 6.1 billion under the CAP strategic plan for 

2023-2027  (8),  while  EUR  392  million  are 
allocated  under 
the  European  Maritime, 
Fisheries  and  Aquaculture  Fund  (EMFAF).  A 
further  EUR  272  million  are  available  under 
the  Asylum,  Migration  and  Integration  Fund 
(AMIF),  together  with the Border  Management 
and  Visa  Instrument  (BMVI)  and  the  Internal 
Security Fund (ISF). Other EU programmes also 
for 
support  competitiveness 
instance  through  open  calls  under  Horizon 
Europe and the Connecting Europe Facility. 

in  Portugal, 

Box 2: 

Key achievements of the Recovery and Resilience Facility (RRF) 

Portugal’s  recovery  and  resilience  plan  (RRP)  represents  a  total  investment  budget  of 
EUR 21.9 billion (EUR 16.4 billion in grants and EUR 5.6 billion in loans), corresponding to 8.3% 
of  GDP,  aimed  at  (i) supporting  the  green  and  digital  transitions,  (ii) strengthening  economic 
resilience,  and  (iii) addressing  long-standing  structural  challenges  identified  in  the  European 
Semester. 

As of 22 May 2026, EUR 14.9 billion (around 68% of the total allocation and EUR 3.7 billion 
of which is in loans) has been disbursed following the satisfactory fulfilment of 235 milestones 
and  targets.  Implementation  has  progressed  steadily,  with  a  growing  number  of  reforms  and 
investments already fulfilled and delivering tangible results on the ground. 

Highlights and impact of the plan 

•  Establishment  and  capital  reinforcement  of  the  national  promotional  bank  (Banco 
Português  de  Fomento),  providing  up  to  EUR 2.6 billion  for  firms’  competitiveness,  and 
EUR 2.9 billion  in  support  for  research  and  innovation  through  the  mobilising  and  green 
agendas. 

•  Construction  and  renovation  of  around  32 000  social  and  affordable  dwellings  in 
mainland, Azores and Madeira, and energy efficiency improvements for 85 000 dwellings, 
and nearly 2 million m² of non-residential buildings. 

•  Regulatory  framework  for  renewable  hydrogen  and  for  renewable  energy  permitting, 

more than 800 decarbonisation of industry projects supported. 

•  Sustainable mobility investments, supporting more than 700 zero-emission buses. 

•  Reinforced capacity to respond to climate risks, with 179 firefighting and fire-prevention 

vehicles, 11 helicopters and upgrade of the meteorological radar network. 

•  Reform  of  the  vocational  education  and  training  offer,  reform  of  the  cooperation 
between  higher  education  and  businesses,  200  education  courses  in  STEM  and  arts, 
digitalisation of schools with laptops and digital equipment. 

•  Reforms of primary care and of the governance model of public hospitals, more than 1 000 
new places in continued and palliative care, digitalisation of the Segurança Social Direta 
website. 

(8)  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 

8 

 
 
 
Box 3: 

Contribution of cohesion policy funds 

is  supporting  Portugal’s  efforts 

EU  cohesion  policy  funding 
increase 
competitiveness, environmental sustainability, transport connectivity, skills and social 
fairness.  In  the  2021-2027  programming  period,  EU  cohesion  policy  funds (9)  are  providing 
EUR 22.6 billion (amounting to EUR 31 billion with national co-financing), or 7.8% of 2024 GDP, 
to  Portugal.  This  makes  cohesion  policy  one  of  the  main  sources  of  public  investment  in  the 
country. The value of selected projects corresponded to 59.1% of the total allocation as of March 
2026, with additional calls for projects in the pipeline. 

to 

• 

Innovation,  business  environment  and  productivity:  More  than  EUR 5.2 billion  are 
allocated for research and innovation, SMEs competitiveness and for the territories affected 
by the energy transition, following the closure of  coal-fired power plants in Sines (Alentejo 
Litoral)  and  Pego  (Médio  Tejo)  and  a  refinery  in  Matosinhos  (Metropolitan  Area  of  Porto). 
Around 5 000 firms have already seen their projects approved. 

•  Decarbonisation,  energy  affordability  and  sustainability:  Overall  EUR 5.3 billion  are 
dedicated to clean transition projects. Of this, more than EUR 1.3 billion goes to sustainable 
urban  mobility;  more  than  EUR 1.2 billion  to  sustainable  water  investments,  which  are 
expected  to  improve  facilities  for  more  than  2.9  million  people;  more  than  EUR 0.7 billion 
support  energy  efficiency,  renewable  energy,  smart  energy  systems  and  charging 
infrastructure interventions. Also, more than EUR 0.8 billion are allocated for climate change 
adaptation  and  reconstruction  in  response  to  natural  hazards  and  around  EUR 1 billion  to 
circular economy and clean technologies. 

•  Skills, quality jobs and social fairness: EUR 3.1 billion are allocated to increase the skills 
and  educational  levels  of  the  population.  In  Madeira  and  the  Azores,  EUR 112 million  are 
allocated to promote young  people integration into the labour market.  Addressing material 
deprivation  and  supporting  the  most  vulnerable  receives  EUR 230 million  in  funding.  The 
access to quality services and the promotion of social integration of people at risk of poverty 
or social exclusion benefits from EUR 2.4 billion. Since 2021, 181 000 students participated 
in vocational education and training courses, 130 000 adults participated in adult learning. 
Social services supported over 23  000 people with  disabilities and  facilitated over 62 000 
consultations with migrants. 

The mid-term review (10) reinforced cohesion policy’s contribution to emerging strategic priorities, 
reallocating more than EUR 2.5 billion. 4.5% of that has been reallocated to defence and military 
mobility.  The  mid-term  review  also  strengthens  key  areas  such  as  competitiveness,  through 
support  for  critical  technologies  (over  EUR  1.2  billion),  better  water  management  in  particular 
increased  water  efficiency  (eliminating  leaks,  increasing  water  re-use,  etc.)  (EUR  524  million), 
and additional  investments  in  social  housing, affordable  housing  for  rent,  student  housing  and 
critical  staff  housing  (EUR  656  million).  The  ringfenced  resources  will  also  promote  the 
development of competences for decarbonisation. 

(9)  ERDF, ESF+, CF and JTF 

(10)  The mid-term review is carried out halfway through the 

2021-2027 programming period. It is a formal 
assessment process required under Article 18 of the 
Common Provisions Regulation that aims to assess the 
implementation of programmes and, where necessary, 
propose adjustments to improve their performance, 
ensure their relevance in light of new and emerging 
needs and keep them aligned with other EU policies. 

9 

 
 
 
 
  
 
 
 
INNOVATION, BUSINESS ENVIRONMENT AND 
PRODUCTIVITY 

in 

received 

investment 

Despite  improvements  in  recent  years, 
Portugal’s  productivity  is  held  back  by 
several  structural  challenges.  In  2025, 
Portugal 
country-specific 
recommendations  (CSRs)  to  (i) reduce  the 
administrative burden and barriers for firms to 
operate  and  scale  up,  (ii) foster  investment  in 
private  equity  (PE)  and  venture  capital  (VC), 
research  and 
(iii) sustain 
innovation (R&I), (iv) increase the efficiency of 
administrative  and  tax  courts  and  (v) improve 
transparency and involvement of stakeholders 
in  policymaking.  Several  measures  have 
these 
already  been 
challenges,  but  frictions  persist 
their 
implementation,  and  some  effects  might  only 
be  visible  in  the  medium  term.  Portuguese 
firms  still  have  a  low  propensity  to  scale  up 
and only moderate R&I intensity. At the same 
time,  long  licensing  processes  and  delays  and 
backlogs 
courts  pose 
significant barriers to business operations and 
investments (see Annex 1). 

in  administrative 

to  address 

taken 

in 

Despite  the  progress  made  on  these 
recommendations, 
important  structural 
challenges  still  hinder  the  business 
environment  and  productivity  growth. 
While  there  was  progress  on  simplifying 
regulation for firms, more action is needed to 
reduce  barriers  to  licensing,  which  firms  still 
identify as a key obstacle to investment. Steps 
were  taken  to  improve  financial  literacy  and 
foster public-private risk sharing for VC and PE 
investments, but private investment in VC and 
PE remains very low, partly due to the limited 
involvement  of  institutional  investors.  Efforts 
were  made  to  reduce  the  tax  system’s 
administrative burden, while continued support 
was  granted  to  research  and 
innovation 
activities.    Important  first  steps  were  also 
taken  to  foster  evidence-based  policy  making 
the 
and 
preparation  of  policies,  but  limited  progress 
stakeholders’ 
was  made 

transparency 

strengthen 

increase 

to 

to 

in 

10 

involvement  in  policy  making.  Furthermore, 
backlogs  and  durations  in  administrative  and 
tax  courts  have  aggravated  over  the  past 
years. 

Lengthy licensing procedures and 
inefficiencies in the judicial system 
remain among the main barriers to 
investment 

Some  progress  was  made  in  digitalising 
and  simplifying  licensing  procedures,  but 
firms  still  report  them  as  excessively 
lengthy  and  burdensome.  Portugal  received 
a  CSR  in  2025  on  reducing  administrative 
burden  and  barriers.  Despite  several  positive 
recent initiatives, the effective implementation 
of  the  new  procedures  remains  challenging. 
Therefore,  firms  still  report  lengthy  licensing 
processes  as  one  of  the  main  barriers  to 
investment.  Further  progress  is  needed  in 
streamlining  processes  across  all  levels  of 
public  administration  (national,  regional,  and 
local), in defining clear deadlines as well as in 
implicit 
better 
approvals.  

the  benefits  of 

reaping 

in 

on 

Firms 

the  Azores  and 

Several  other  administrative  burdens 
weigh 
report 
businesses. 
inefficiencies  both  in  the  judicial  system  as 
well  as  in  the  public  administration.  Despite 
recent improvements, late payments remain a 
concern,  mostly 
the 
healthcare sector. Furthermore, barriers to the 
single  market  persist,  such  as  restrictive 
packaging  and  labelling  requirements.  Easing 
administrative 
the 
implementation  of  posting  of  workers  rules 
could  reduce  regulatory  fragmentation  within 
the  single  market,  facilitate  cross-border 
mobility  and  foster  competitiveness,  without 
undermining workers’ protections. 

requirements 

in 

 
 
increase 

procedures 

governance 

(see  Annex 7).  This, 

Inefficiencies  and  frictions  across  levels 
of 
the 
administrative  burden  on  firms.  Progress 
in implementing new policies is often hindered 
and 
coordination 
in 
shortcomings 
by 
monitoring  across 
levels  of  governance, 
especially  concerning  execution  at  municipal 
level 
together  with 
diverging  interpretations  and  implementations 
by  the  various  authorities,  contributes  to 
lengthy  approval  times  and  inconsistencies. 
These inefficiencies affect different key areas, 
industrial, 
including 
environmental  and  housing 
licensing  and 
permitting  (see  Sections 1  and  3,  Annexes 5, 
16  and  18).  Despite  recent  positive  initiatives 
undertaken,  such  as  digitalisation  and  the 
interoperability  of  IT  platforms  (see  Annex  5), 
further improving the coordination both across 
governance  levels  and  between  municipalities 
is  key  to  reducing  compliance  costs  and 
facilitating  investments,  including  through  the 
strengthened 
and 
development commissions (CCDRs) (see Annex 
18). There is also scope  for further expansion 
of  end-to-end  digital  public  services  (see 
Annex 7). 

coordination 

regional 

for 

inefficiencies 

Businesses  flag 
in  the 
judicial  system  as  one  of  the  main 
barriers  to  investment.  The  2025  CSRs 
highlight the need to increase the efficiency of 
tax  and  administrative  courts  and  reduce  the 
length  of  proceedings.  While  Portugal  has 
taken  steps  –  such  as  increasing  staff  and 
creating new specialised chambers in superior 
courts  –  these  have  yet  to  yield  significant 
improvements.  Estimated  time  to  resolve 
pending  cases  (disposition  time)  increased  in 
2024,  to  858  days  in  first  instance  courts 
(from  594  in  2023).  This  is  partly  due  to  a 
spike 
in 
administrative  courts  related  to  delays  in 
migration-related  administrative  processes 
over  2024  and  2025  (see  Graph 2.1).  Despite 
the  progress  made  in  clearing  the  backlog  of 
cases in civil courts, in the 2025 survey by the 
firms 
Portuguese  Statistical 

the  number  of  new  cases 

Institute (11), 

in 

(11)  Estudos  sobre  estatisticas  das  empresas  custos  de 

contexto das empresas - INE  

11 

ranked  the  judicial  system  as  the  biggest 
obstacle to their operations. 

Graph 2.1: Pending cases in tax, administrative 
and civil courts 

(1) The indicators report the number of pending cases, in 
the respective courts of first instance, as a percentage of 
their peak value (i.e. 1 170 000 in 2015 for civil 
enforcement actions; 53 300 in 2015 for tax cases; 
67 600 in 2024 for administrative cases). 
(2) The clearance rate is computed as the proportion 
between cases closed and new cases, over one year. 
Source: Direção-Geral da Política de Justiça (Estatísticas 
da Justiça), Bank of Portugal Statistics (BPStat) and 
Commission calculations. 

The  public  administration  continues  to 
face  serious  challenges  related  to  its 
ageing workforce and skills gaps, despite 
efforts  to  improve  its  attractiveness. 
Portugal  has  enacted  measures  to  improve 
working  conditions  of  civil  servants  to  attract 
younger  and  more 
candidates, 
especially in areas where there are shortages, 
such  as  healthcare  and  education  (see  Annex 
7). However, despite an increase in the number 
of  civil  servants, 
the  Portuguese  public 
administration  remains  one  of  the  oldest  in 
the EU, with a high proportion of civil servants 
older than 55. 

skilled 

Despite some progress, more needs to be 
done  to  modernise  the  workforce.  Only  a 
small  proportion  of  civil  servants  have  higher 
education  qualifications.  State  investment  in 
training  has  led  to  a  sharp  increase  in  adult 
the  EU 
learning  participation,  surpassing 
average.  However,  further  improving  working 
conditions and expanded training activities are 

0%20%40%60%80%100%120%Civil justiceTaxAdministrativeAdministrative: Clearance rate 
 
      
still  required to  attract,  rejuvenate  and upskill 
the public administration’s workforce. 

Despite a dynamic business 
environment, firms display a low 
propensity to access equity 
finance and scale-up 

underdeveloped  (totalling  0.19%  of  GDP  in 
2024 against an EU average of 0.55%). This is 
also  due  to  the  marginal  role  played  by 
Portuguese  institutional  investors,  inter  alia 
pension funds, in this sector (see Annex 6). 

Graph 2.2: Labour productivity growth and R&I 
expenditure in Portugal and the EU (2012-
2024) 

innovate. 

The business environment is dynamic, but 
remains characterised by micro and small 
enterprises, and a low propensity to scale 
up  and 
recorded 
important  improvements  in  business  activity 
and  R&I,  also thanks  to  a  wide  range  of  RRF-
financed measures. The start-up ecosystem is 
rapidly  growing,  with  over  5 000  active 
startups as of 2025 (+8% from 2024).  

Portugal 

At  the  same  time,  productivity  remains 
well  below  the  EU  average  (68.2%,  in 
2024) and  businesses in  the  country  still 
display  a  low  propensity  to  scale-up. 
Large  public  schemes  support  innovation,  but 
this appears to be concentrated among larger 
companies (which received 65% of tax credits 
for R&I in 2023). SMEs are gradually adopting 
new  digital  technologies,  but  their  digital 
intensity  remains  below  the  EU  average  (see 
Annex 4).  Firms’  low  propensity  to  scale-up 
appears  to  be  driven  partly  by  administrative 
burdens and obstacles to investment, partly by 
risk-aversion  and  sub-optimal  entrepreneurial 
practices. 

improved 

Businesses’ access to venture capital and 
private equity remains well below the EU 
average, with barriers on both the supply 
and demand sides. The 2025 CSRs noted the 
need  to  boost  VC/PE  for  local  businesses, 
including  through  public-private  partnerships 
and 
The 
financial 
Portuguese  authorities  implemented  a  wide 
range  of  public  programmes,  providing  equity 
and quasi-equity financing, mostly through the 
national  promotional  bank.  These  included 
direct  financing  (often  in  cooperation  with 
funding 
private 
programmes, managed as ‘funds of funds’ by 
private  financial  intermediaries.  However,  the 
remains 
for 
private  market 

partners)  and 

literacy. 

indirect 

VC/PE 

(1) Labour productivity growth per hour worked and R&I 
expenditure in Portugal and the EU (2012-2024) 
Source: Eurostat and Commission calculations. 

strategy. 

education 

Important  steps  have  also been  taken to 
improve  financial  literacy.  Portugal  has 
introduced  this  topic 
in  school  curricula, 
targeted  initiatives  for  different  population 
groups,  and  adopted  a  new  five-year  national 
financial 
However, 
behavioural aspects and financial literacy gaps 
still  lead  to  suboptimal  outcomes,  both  for 
businesses’ investment and funding strategies 
as  well  as  for  households’  saving  decisions, 
with 47% of financial assets held as currency 
or  deposits,  compared  to  32%  at  EU  level.  At 
the same time, conservative saving behaviours 
and  firms’  heavy  reliance on  bank  loans  have 
boosted the resilience and strong performance 
of the domestic banking sector (see Annex 6). 

12 

0%2%4%6%8%10%0.0%0.5%1.0%1.5%2.0%2.5%EU-27 expenditure in R&I (% of GDP)PT expenditure in R&I (% of GDP)EU-27 labour productivity growth (right-hand-side axis)PT labour productivity growth (right-hand-side axis) 
      
competitive  edge,  such  as  clean-tech  and  ICT 
(see Section 3). 

Transparency and quality of 
policymaking show room for 
further improvement 

to 

taken 

flagged 

involved 

improve 

to 
and 

Steps  were 
the 
transparency  of  policy  making,  but 
implementation challenges persist. A 2025 
strengthen 
the  need 
CSR 
involvement 
stakeholders’ 
increase 
transparency 
in  shaping  public  policies. 
Portugal  adopted  a  law  on  transparency  in 
interest representation, scheduled to come into 
force  in  July  2026.  It  establishes  rules  for 
interest 
in 
entities 
representation  with  public  entities  and 
introduces a transparency register for interest 
representation (see Annex 7). However, further 
the 
taken 
steps  must  be 
operationalisation of the transparency register 
and  the  effectiveness  of  the  adopted  rules. 
Moreover,  very  limited  progress  has  been 
made  in  enhancing  stakeholders’  involvement 
in policymaking. Mechanisms to systematically 
involve  them  in  the  policy  process  should  be 
considered. 

to  ensure 

legitimate 

in 

this  area 

Evaluations  and  assessments  of  policies 
within  policy-making  processes  remain 
underdeveloped, despite some progress. A 
increasing  evidence-
2025  CSR  concerned 
based policymaking, including by conducting ex 
post  public  policy  evaluations.  Portugal  took 
the 
some  steps 
development  of  a  national  evaluation  agenda 
to  institutionalise  evaluation  in  the  public 
policy  cycle,  under  which    a  pilot  project  was 
launched in the Ministry of Education, Science 
and  Innovation.  However,  the  use  of  impact 
assessments 
remains 
relatively  low  in  Portugal.  While  expanding 
their  use,  it  will  also  be  important  to  ensure 
that 
include  ex  post 
they  adequately 
evaluations (see Annex 7). 

policymaking 

through 

in 

Large public schemes support 
research and innovation, but the 
gap with the EU average remains 
wide 

R&I 

of 
including: 

Portugal  continues  making  progress  in 
expanding its R&I intensity but remains a 
moderate  innovator  (see  Annex 4).  A  2025 
CSR  emphasised  the  need  for  investment-
related  economic  policy  to  continue  to  focus 
on  research  and  innovation.  Portugal  made 
some  progress  in  this  area,  advancing  in  the 
important 
implementation 
several 
tax 
measures 
(i) rationalising 
incentives 
(e.g. 
for 
activities 
SIFIDE program); 
(ii) mobilising  and  green 
agendas  for  research  and  innovation  between 
firms, research institutions and academia; and 
(iii) subsidy  schemes  supporting  firms’  R&I 
activities  and  digitalisation.  As  some  of  these 
programmes  were partially  or  fully  funded  by 
important  to  ensure 
the  RRF, 
sustained  support  to  innovation  and  firms’ 
productivity  also  beyond  the  RRF  timeline 
(which  ends  in  2026).  In  addition,  public  R&D 
expenditure  has  stagnated  below  the  EU 
average  in  recent  years  (at  around  0.6%  of 
GDP),  impacting  the  quality  of  the  public 
science base. 

it  will  be 

Effectively  closing  the  R&I  gap  requires 
support  to  be  channelled  in  the  most 
efficient  ways,  to  areas  with  highest 
potential  for  productivity  and  growth 
enhancement.  Intensity  of  public  support  to 
private  R&I  increased  steeply  over  the  past 
years and is well above the EU average. While 
this  has  contributed  to  foster  innovation  in 
Portugal, some of the programmes supporting 
R&I,  such  as  some  of  the  tax  credits,  did  not 
fully  achieve  their  original  objectives  because 
of  low  cost-effectiveness  (see  Annexes 3  and 
4). In this context, it is paramount for Portugal 
to  continue  evaluating  the  effectiveness  and 
appropriateness  of  the  measures  in  place  to 
swiftly  adapt  them  to  markets  and  users’ 
needs,  while  maximising  their  added  value. 
Support  should  target  the  sectors  with  the 
highest  growth potential  or  sectors  where  the 
regions)  displays  a 
country 

(or  specific 

13 

 
DECARBONISATION, ENERGY AFFORDABILITY AND 
SUSTAINABILITY 

Portugal  has  been  making  progress  in 
substantial 
reducing  emissions,  but 
decarbonisation  potential  remains. 
In 
2025  Portugal 
country-specific 
received 
recommendations (CSRs) to reduce reliance on 
fossil fuels, particularly in transport, accelerate 
renewable  energy  deployment,  strengthen 
electricity  systems  and  grids,  promote  energy 
efficiency  while  addressing  energy  poverty, 
and  improve  water  and  waste  management. 
Portugal has implemented a limited number of 
measures  to  address these.  In  a  year  marked 
by several disruptive events including a major 
energy  blackout,  severe  wildfires,  storms  and 
floods,  several  planned  initiatives  are  still 
facing delays. 

Decarbonisation  potential  is  greatest  in 
the  transport  and 
industrial  sectors, 
while  significant  challenges  persist  in 
water  and  waste  management  and 
climate  adaptation.  The  power  system 
continues  to  face  constraints  related  to 
flexibility,  security  and  stability,  the  transport 
sector  remains  highly  dependent  on  fossil 
fuels  with  limited  sustainable  public  transport 
options,  and  industry  needs  to  continue  its 
decarbonisation  efforts,  including  through  the 
development  of  clean  technologies  where 
Portugal  has  manufacturing  potential.  On 
water  governance  and  waste  management, 
some  measures  have  been  taken  but  their 
effect may take longer to materialise. Portugal 
is  highly  vulnerable  to  climate  change,  where 
continuity  on  investments  and  reforms  would 
be necessary (see Annex 1). 

Strengthening electricity system 
flexibility and grid capacity to 
ensure affordable electricity and 
energy security 

Portugal  has  one  of  Europe’s  most 
decarbonised  power  systems,  but  new 
renewable  capacity  is  only  increasing 
modestly.  Renewable  energy  accounts  for 
83% of electricity generation. Hydropower and 
wind remained the main sources of renewable 
electricity  in  2025,  while solar  power  was  the 
only  renewable  source  to  expand,  albeit 
modestly.  Renewable  installed  capacity  has 
increased  steadily  in  recent  years (12),  mainly 
driven 
photovoltaics. 
decentralised 
Meanwhile,  wind  deployment  has  stagnated, 
with  only  5 MW  of  new  installations  in  2025 
and  one  of 
in 
Europe (13). Even with the expected addition of 
2.1 GW  of  onshore  wind  over  next  four years, 
Portugal  would  remain  about  2.4 GW  short  of 
its  2030  target  of  10.4 GW (14).  As  electricity 
demand  is  expected  to  increase  significantly 
by  2030 (15), 
are 
warranted. 

the  oldest  wind  fleets 

investments 

further 

by 

A number of obstacles are hampering the 
rollout  of  renewables.  In  2025  Portugal 
received  a  CSR  in  2025  to  address  them  and 

(12)  However, overall renewable capacity is still around half 

of the 2030 target (42 GW). 

(13)  Renewables statistics in Portugal, January 2026. 

(Source: Portugal’s Directorate-General for Energy and 
Geology.) 

(14)  Wind energy in Europe, 2025 statistics and the outlook 

for 2026-2030, February 2026, WindEurope 

(15)  90 TWh in 2030 (PT NECP), having recorded 53.1 TWh 
in 2025. (Source: Portugal’s Directorate-General for 
Energy and Geology.) 

14 

 
 
 
accelerate  the  rollout.  Overlapping  spatial 
planning  rules  across  levels  of  governance, 
with  the  involvement  of  multiple  entities, 
limited administrative capacity, and the lack of 
clear and standardised assessment criteria all 
contribute  to  lengthy  procedures.  Moreover, 
the  digitalisation  of  the  permitting  process 
with the creation of a digital one-stop shop is 
facing  serious  delays.  Public  acceptance  has 
become  a  challenge,  reflecting  both  limited 
engagement  mechanisms  and  benefit-sharing 
arrangements  with  local  communities  (see 
Annex 9).  Strengthening  institutional  capacity, 
improving  coordination  across 
levels  of 
responsibilities, notably through a single  point 
of  contact,  and  addressing  the  complexity  of 
the  regulatory  framework  would  help  further 
accelerate renewable deployment. Designating 
renewable  acceleration  areas  would  help 
accelerate  permitting  and  encourage  large-
scale renewables deployment. 

only 

three 

renewable 

to  persistent 

Citizen-led 
energy 
communities  have  struggled  to  develop 
due 
regulatory  and 
administrative  barriers.  As  of  September 
2025, 
communities  were 
operational.  Key  obstacles  include  complex 
licensing  procedures,  low  energy  literacy (16) 
lack  of  community  participation,  and  the 
absence  of  clear  business  models  and 
financing  options.  By  contrast,  collective  self-
consumption 
led  by  energy 
typically 
companies  and  based  on  shared  photovoltaic 
installations  supplying  multiple  consumption 
points  -  have  expanded  more  rapidly (17), 
although these models generally involve more 
limited  citizen  participation  and  governance. 
Municipal  participation  is  also  constrained  by 
procurement  rules  and  overlapping  regulatory 
requirements (see Annex 9). 

- 

Limited  fossil-free  flexibility  and  scarce 
leave  Portugal 
de-risking 
exposed 
to  electricity  price  peaks. 
Wholesale  electricity  prices  remain  volatile  in 

instruments 

(16)  The capacity of a citizen to understand energy systems, 
their impacts and to apply this knowledge to make 
informed decisions and adopt sustainable energy-
saving habits 

(17)  755 installations in operation, 326 under construction 
and 347 additional requests by November 2025 

Portugal,  with  price  spreads (18)  averaging 
EUR 90/MWh  in  2025,  a  29%  increase  from 
2024.  Participation  in  ancillary  services  and 
congestion  management  services 
remains 
constrained  and  barriers  still  hinder  small  or 
new  aggregators 
(see  Annex 9).  Portugal 
would benefit from further developing a clear 
enabling  framework  for  flexibility  markets, 
requirements  and 
simplified  participation 
enhanced access to metering data. In addition, 
the  market  for  power  purchase  agreements 
remains shallow. Portugal plans to introduce a 
state guarantee mechanism and has launched 
a platform to register bilateral contracts. 

Energy  storage  capacity  remains  below 
the  levels  needed  to  support  system 
flexibility  and  is  currently  half  of  the 
national  target  for  2030 (19).  In  2025 
Portugal  received  a  CSR  to  invest  in  energy 
storage  capacities  and  demand-side  response 
tools.  Portugal  has  mainly  relied  on  reverse 
hydro storage, with 3.6 GW installed and most 
is  already  exploited.  By 
of 
contrast,  battery  storage  remains  limited,  and 
support  has  so  far  been  confined  to  the  RRP. 
Behind-the-meter  storage  deployment  also 
remains  modest,  suggesting  scope  to  further 
incentivise  households  and  companies  to 
couple  photovoltaics  installations  with  battery 
storage. 

its  potential 

of 

the 

connection 

Grid capacity  limitations  are  increasingly 
affecting 
new 
renewable  projects,  as  highlighted  in  a 
CSR  in  2025.  While  measures  have  been 
taken  to  improve  the  use  of  existing  grid 
capacity,  further  improvements  in  monitoring 
and  transparency,  promoting  hybrid  projects 
and introducing incentives to deter speculative 
applications  could  increase  grid  efficiency. 
Bottlenecks  persist  due  to  unused  capacity 
reservation  titles  and  limited  transparency  in 
connection  queues  (see  Annex 9).  Releasing 
unused  reserved  capacity  could  help  unlock 
additional connection capacity. 

(18)  ‘Spread’ refers to the difference between the highest 
and lowest hourly day-ahead electricity prices in a 
single day. 

(19)  Final national energy and climate plan, 2025 

15 

 
 
 
for  grid  access  has  also 
Demand 
increased  significantly.  As  of  mid-2025, 
around  30 GVA (20)  were  awaiting  connection 
to  the  transmission  network,  with  a  further 
9 GVA in capacity already allocated but not yet 
operational. Portugal has therefore temporarily 
replaced its ‘first-come-first-served’ allocation 
model with a ‘high-demand zones’ mechanism, 
an exceptional and competitive mechanism for 
allocating  capacity 
in  areas  under  heavy 
pressure,  which  was  recently  extended  to  the 
whole mainland. 

completion 

the  network’s 

Investments  in  electricity  grids  could 
boost 
resilience  and 
security,  in  line  with  the  2025  CSR. 
Significant  investments  of  EUR 1.7 billion  in 
transmission and EUR 1.6 billion in distribution 
networks are planned over the next five years. 
cross-border 
of 
The 
interconnection  with  Spain  will  also  help 
Portugal  reach  its  15%  interconnection  target 
by  2030  (see  Annex 9).  However,  permitting 
procedures  remain  complex  and  lengthy,  and 
developing grid acceleration areas could better 
align  grid  planning  with  renewable  potential. 
Finally,  the  strong  storms  in  February  2026 
highlighted  the  need  to  strengthen  climate 
resilience in grid planning. 

the 

Improving the design of energy 
efficiency schemes and addressing 
energy poverty 

and 

including 

complex 

efficiency, 

Energy  efficiency  schemes  are  weakened 
limited 
design 
by 
predictability.  In  2025  Portugal  received  a 
CSR  calling  for  accelerated  investment  in 
better 
energy 
Despite 
leveraging 
renovation 
substantial  EU 
programmes, 
consumption 
increased  between  2019  and  2024,  mainly 
due  to  behavioural  effects,  putting  Portugal 
off track to meet its energy efficiency targets. 
The  constant  delays  in  implementing  support 

financing. 

funding 

private 

energy 

final 

for 

by 

(20)  A gigavolt-ampere (GVA) is a unit of apparent power 

used in power systems. 

schemes and their limited impact partly reflect 
complex  and  unstable  programme  design, 
including  limited  predictability  regarding  the 
timing  and  scope  of  funding  calls 
(see 
Annex 9). 

of 

deep 

limiting 

renovation, 

the  ability 

Regulatory  hurdles  stifle  renovation.  In 
cases 
regulatory 
bottlenecks on condominiums´ rules create an 
obstacle.  Data  gaps  also  persist,  as  many 
buildings  still  lack  an  energy  performance 
to  design 
certificate, 
recently 
targeted  support.  Portugal  has 
introduced  a  financing  scheme  to  mobilise 
private financing, although its uptake remains 
unclear.  Citizen  one-stop  shops  could  play  a 
in  engaging  with 
stronger  active 
municipalities,  social  institutions,  associations 
and  condominium  owners  to  facilitate  access 
to  renovation  support.  In  the  public  sector, 
rigid 
lengthy  permitting  procedures  and 
procurement 
delay 
renovation projects. 

continue 

rules 

role 

to 

Map 3.1:  Energy poverty vulnerability index, 
NUTs III, 2024 

(1) The energy poverty vulnerability index combines the 
thermal discomfort gap and the population´s adaptive 
capacity, also integrating a participatory component 
through a survey. 
(2) The index ranges from 1 (low vulnerability) to 20 
(high vulnerability) allowing comparison between regions 
and territorial patterns of energy vulnerability 
Source: European Commission, based on data from the 
Portuguese National Observatory of Energy Poverty 

Energy  poverty  remains  high  in  Portugal. 
In  2024,  around  15.7%  of  the  population 
reported being unable to adequately heat their 
homes, and households experience issues such 
as  leaks,  damp  or  rot  at  nearly  twice  the  EU 
average.  Progress  in  addressing  the  related 

16 

 
 
 
 
 
2025  CSR  has  been  limited.  Portugal  recently 
adopted  an  action  plan  to  tackle  energy 
poverty,  although  the  associated  financial 
allocations remain unclear (see Annex 12). 

(such  as 

Stronger  involvement  of  regional  and 
local  authorities  could  help 
identify 
potential  beneficiaries  more  effectively 
and  ensure  better  communication  with 
affected  households.  Despite  the  merit  of 
current  measures 
the  E-Lar 
programme)  to 
increase  electrification  of 
insufficiently 
consumption, 
targeted.  Future  measures  outside  the  social 
climate  plan  could  therefore  go  beyond 
income-based criteria such as the social tariff 
and  consider  other  factors  such  as  building 
performance  and  regional  considerations  (see 
Map 3.1). 

remain 

these 

Accelerating the decarbonisation 
of transport 

Portugal is making progress in promoting 
electric  mobility  and  decarbonising  its 
vehicle  fleet. 
In  August  2025,  Portugal 
adopted  a  decree-law  reforming  the  legal 
framework  for  electric  mobility  by  liberalising 
the  market  and  simplifying  permitting  and 
operation  of  charging 
(see 
Annex 8).  With  RRP  support,  around  15 000 
public  charging  points  are  expected  to  be 
deployed (23).  In  2025,  the  charging  network 
recorded strong growth in use. 

infrastructure 

However,  often  this  does  not  stretch  to 
low-income  households.  Limited  purchasing 
power  drives  a  strong  preference  for  used 
vehicles,  slowing  fleet  renewal,  prolonging 
fossil  fuel  use  and  contributing  to  an  ageing 
and  less  efficient  vehicle  stock.  Current  tax 
incentives  and  subsidies  for  the  purchase  of 
zero-emission  vehicles  are  not  targeted  at 
lower-income households, and no government-
backed  social  leasing  scheme  is  currently 
available.  Phasing-out  fossil  fuel  subsidies 
lower-
shifts 
could  encourage 
emission vehicles (see Section 1). 

towards 

emissions, 

largest  source  of 
is  the 
Transport 
as 
gas 
greenhouse 
decarbonisation  and  modal  shift 
lag 
behind.  Portugal  received  a  CSR  in  2025  to 
reduce  overall  reliance  on  fossil  fuels  in  the 
transport  sector  and  invest  in  sustainable 
transport, particularly rail. Transport remains a 
major  source  of  emissions,  dependent  on 
imported 
transport 
continues  to  dominate  both  passenger  and 
freight  transport (22)  and  trains  and  public 
transport 
poses 
significant  challenges  for  air  quality,  traffic 
congestion and energy security (see Annex 19). 
Moreover,  urban  low-emission  and  limited-
traffic  zones  are  either  non-existent  or 
inadequately enforced. 

oil (21),  while 

remains 

limited. 

road 

This 

public 

transport 

A weak public transport network prevents 
the modal shift, especially in rural areas. 
Although 
is  generally 
affordable,  limited  infrastructure  and  weak 
service provision restrict  access outside urban 
areas,  leaving  many  households,  in  particular 
those in rural and more disperse areas, largely 
car  dependent.  Rail  connectivity  is  particularly 
low  in  Centro  and  Alentejo  (see  Annex 18). 
require 
Inter-regional 
substantial  strengthening  across  all  modes  of 
public  transport,  including rail.  This  could  play 
an 
the 
attractiveness  of  territories  and  reducing 
pressure  (like  housing  demand)  on  urban 
centres (see Section 1). 

connectivity  would 

improving 

important 

role 

in 

(21)  Oil accounted for 93% of transport total final energy 

consumption in 2023 and for 58% of Portugal’s net oil 
imports. 

(22)  Road transport represented 95% of transport energy 

demand, with passenger vehicles representing 61% and 
freight trucks 39%. Private cars accounted for 88% of 
passenger transport (EU average: 83%). 

to 

investments 

  decarbonise 
Large 
transport  are  ongoing.  Key  infrastructure 
projects  are  underway  including  the  high-
speed  connections  between  Lisbon  and  Porto, 
and  high-speed  cross-border  connections 
between  Porto  and  Vigo  and  Lisbon  and 

(23)  Equal to 484.2 GW, 5.89% above the requirements of 

the Alternative Fuels Infrastructure Regulation. 

17 

 
 
 
in 

for 

and 

particular 

simplifying 

industrial  production  (see  Annex 5).  Further 
permitting 
streamlining 
processes, 
net-zero 
technologies,  would 
reduce  administrative 
uncertainty, incentivise investment and provide 
clearer  pathways  for  integrating  renewables 
and  clean  technologies.  Moreover,  the  lack  of 
CO₂-storage  and 
infrastructure 
represents  a  barrier  to  the  development  of 
carbon  capture,  use  and  storage 
(CCUS) 
projects.  The  lack  of  a  regulatory  framework 
for  CCUS  also  limits  the  decarbonisation  of 
energy  intensive  and  hard-to-abate  sectors 
with a strong presence in Portugal, such as the 
cement industry. 

transport 

Portugal is well positioned to advance the 
manufacturing  of  net-zero  technologies 
and  clean  materials  and  consolidate  its 
place  in  the  EU  value  chain  (see  Annex 5). 
This  is  due  to  its  decarbonised  electricity 
system  and  privileged  access 
to  clean 
technology  resources,  including  critical  raw 
lithium.  Public  support 
materials  such  as 
schemes  could  benefit  from  building  on 
existing 
target 
deployment of net-zero technologies, enhance 
their  strategic  role  in  domestic  value  chains, 
and  help  scale-up  innovations  to  commercial 
maturity (see Annex 8). 

investments 

better 

to 

Future  support  can  build  on  already 
successful  schemes.  Thanks  largely  to  the 
RRP,  Portugal 
implementing 
is  actively 
initiatives  to  decarbonise  existing  industries 
and  attract  strategic  low-carbon  sectors  such 
as  the  battery,  biomethane  and  renewable 
hydrogen  sector.  Currently  most  of  Portugal’s 
revenues  from  the  EU  emissions  trading 
system  are  allocated  to  amortising  electricity 
tariff debt. As this tariff debt is expected to be 
phased out in the coming years, Portugal could 
reallocate 
the 
funds 
decarbonisation of industry. 

to  support 

these 

financed  by 

‘Portos  5+’  strategy 

Madrid (see Annexes 18 and 19). In 2025 and 
2026, the government concluded contracts for 
the  purchase  of  195  new  trains  (totalling 
EUR 1.8 billion,  partially 
the 
Cohesion  Policy  Funds),  which  is  expected  to 
modernise  and  decarbonise  the  fleet (24).  The 
new 
for  maritime 
transport  includes  electrifying  short-distance 
and inland waterway  passenger transport and 
port equipment. Such investments will improve 
the  sustainability  and  competitiveness  of  the 
transport  sector 
in  Portugal,  but  close 
monitoring  is  needed  to  ensure  their  timely 
delivery. 

Unlocking the potential to 
decarbonise Portuguese industry 

in 

energy 

The  industry  sector  is  not  delivering 
structural  emissions  reductions.  Despite 
advancements 
efficiency, 
greenhouse  gas  emissions  have  remained 
stable  since  2015.  Energy-intensive  industries 
such  as  paper,  non-metallic  minerals  and  the 
refining  sector  account  for  more  than  half  of 
the  total 
industrial  energy  demand,  and 
continue  to  rely  heavily  on  imported  fossil 
fuels  (see  Annex 5).  Portugal  lacks  a  unified 
strategy 
decarbonisation 
industrial 
establishing 
sub-sectoral  emission 
clear 
reduction  pathways,  identifying  the  necessary 
technologies  and  infrastructure,  and  outlining 
measures to unlock investment and strengthen 
competitiveness (see Annex 8). 

the 

hinders 

complexity  of 

regulatory 
The 
faster 
framework 
industry.  Lengthy 
decarbonisation  of 
processes, 
lack  of  predictability  and  the 
involvement  of  multiple  authorities  at 
different  levels (25)  remain  significant  barriers 
to the permitting of industrial sites. Moreover, 
the 
net-zero 
process 
technologies  is  the  same  as  for  any  other 

permitting 

for 

(24)  Government invests EUR 1.8 billion in the purchase of 

195 new trains 

(25)  Source: study on Portugal´s environmental licensing 
and inspections regime conducted under the EU’s 
technical support instrument funding programme. 

18 

 
 
adopted  a  new  action  plan  for  the  circular 
economy in 2026. 

system 

introduced 

Further  policy  reforms  and  economic 
strengthen 
should  help 
instruments 
waste management. Under the RRP, reforms 
were 
to  strengthen  collection, 
sorting  and  treatment  capacity,  including  a 
for  non-reusable 
deposit-refund 
beverage  packaging  and  a  take-back  scheme 
for  electrical  and  electronic  waste  which  will 
enter into force in 2026. In addition, a pay-as-
you-throw  (PAYT)  system  became  mandatory 
for  retail,  services  and  catering  sectors  in 
2025  and  is  expected  to  be  extended  to 
households  by  2030.  Replacing  the  current 
flat-rate  waste  tariff  with  a  mandatory  PAYT 
model  could  help  address 
rising  waste 
generation  by  providing  households  with 
stronger financial incentives to reduce waste. 

Tackling water management 
inefficiencies and increasing water 
resilience 

There  are  persistent  challenges  in  water 
management,  particularly  regarding  the 
water  sector’s  resilience  to  climate 
change as highlighted in the CSR in 2025. 
Water  demand  already  exceeds  available 
resources  in  certain  regions  where  water 
scarcity is acute (like Alentejo and Algarve, see 
Annex 19). This affects sectors like agriculture, 
industry  and  tourism  across  different  regions, 
with  agriculture  remaining  the  largest  water 
consumer. Water productivity, or the economic 
value  produced  per  cubic  metre  of  water  in 
Portugal  was  EUR 34/m³  in  2022  (EU-27 
average:  EUR 151/m³).  There  are  significant 
disparities in water prices across municipalities 
and  infrastructure  gaps  remain  substantial. 
Portugal’s  wastewater  treatment  compliance 

Transformação Eficiente de Resíduos em Recursos 
Ambientais). Available at: Plano de ação TERRA - 
Transformação Eficiente de Resíduos em Recursos 
Ambientais - XXIV Governo Constitucional 

Addressing ineffective waste 
management and advancing the 
transition to a circular economy 

Portugal  faces  significant  challenges  in 
improving  waste  management 
and 
advancing  the  transition  to  a  circular 
economy. The circular material use rate stood 
at 3% in 2024, well below the EU average of 
12%.  Portugal  also  lags  behind  on  municipal 
waste  recycling,  with  a  recycling  rate  of  31% 
in  2023 (26). 
remains  high, 
Landfilling 
accounting  for  57%  of  municipal  waste  in 
2023. Meanwhile close to two-thirds of landfill 
sites  are  nearing  capacity,  putting  Portugal  at 
risk  of  missing  the  2035  target  of  reducing 
landfilling  to  a  maximum  of  10% 
(see 
Annex 8). Portugal is estimated to need around 
the  circular 
EUR 2.5 billion  annually 
economy 
waste 
management,  with  an  estimated  annual 
investment gap of EUR 472 million (27). 

for 
including 

transition, 

Portugal  has  adopted  several  plans  to 
improve  waste  management,  but  their 
impact still needs to be assessed. Portugal 
received  a  CSR  in  2025  calling  for  improving 
the  conditions  for  the  transition  towards  a 
circular  economy,  particularly  by  increasing 
waste  prevention,  recycling  and  reuse  to 
reduce landfill and incinerator waste. Portugal 
adopted  several  strategic  plans  in  2023 (28), 
and  around  300 municipalities  adopted  waste 
management action plans (PAPERSU) in 2024–
2025  to  support  compliance  with  national 
has 
targets. 
identified 
Portugal 
for  expanding  waste 
investment  needs 
management  capacity  by  2030 (29)  and 

also 

(26)  While data for 2025 is not yet available, Portugal is 
considered to be at risk of missing the target of 
recycling 55% of municipal waste by 2025. 

(27)  European Commission, 2025 Environmental 

Implementation Review, Country Report - Portugal. 
Estimates expressed in 2022 prices. 

(28)  The national waste management plan (PNGR 2030), 
the strategic plan for municipal waste (PERSU 2030) 
and the strategic plan for non-urban waste 
(PERNU 2030) 

(29)  Action Plan ‘TERRA – Efficient Transformation of Waste 
into Environmental Resources’  (Plano de ação TERRA - 

19 

 
 
 
 
 
 
rate  of  82%  in  2020  was  above  the  EU 
average.  However,  shortcomings  persist  and 
have 
procedures 
concerning non-compliant agglomerations. 

infringement 

led 

to 

Further  efforts  will  be  needed 
to 
strengthen long-term water management 
and  climate  resilience.  Despite  progress 
through  the  adoption  of  the  national  water 
strategy  (‘Water  that  Unites’),  with  planned 
investment of around EUR 5.5 billion by 2030, 
plus  complementary  initiatives  focused  on 
restoring  rivers  and  streams  and  deploying 
nature-based 
strengthen 
ecosystem  resilience  and  reduce  flood  risks, 
significant challenges remain. 

solutions 

to 

in 

efficiency 

Improving 
water 
management requires better coordination 
of  supply-side  issues  across  governance 
levels.  Reducing  leaks  in  water  networks, 
expanding wastewater reuse, increasing water 
retention  in  landscapes,  restoring  wetlands 
and  floodplains,  and  enhancing  monitoring 
systems could help address water scarcity and 
climate risks. Demand-side measures will also 
be  important,  including  water  pricing  reforms 
that  better  reflect  resource  scarcity  while 
taking  account  of  social  vulnerabilities. 
Continued  implementation  of  the  national 
water  strategy, 
together  with  sustained 
investment  and  improved  governance,  will  be 
key  for  Portugal  to  balance  economic  water 
use  with  the  protection  of  ecosystems  and 
long-term climate adaptation. 

to 

linked 

Investment needs in water protection and 
management  point  to  a  financing  gap, 
wastewater 
largely 
infrastructure  requirements.  Although  EU 
funding under the 2021-2027 cohesion policy 
and the Recovery and Resilience Facility helps 
address  these  needs,  a  significant  number  of 
planned measures - such as those under PRO-
RIOS 2030  -  still  relies  on  future  funding 
programmes and lacks fully secured financing. 
A financing gap of around EUR 371 million per 
year  by  2027  has  been  identified (30).  In 

(30)  European Commission, 2025 Environmental 

Implementation Review, Country Report - Portugal. 
Estimates expressed in 2022 prices. 

20 

addition,  Portugal  submitted  with  delay  its 
river  basin  and  flood  risk  management  plan 
and  assessment  on  progress  under  EU  water 
legislation is ongoing. 

Improving climate preparedness 

is 

Portugal 
increasingly  exposed  to 
frequent  and  intense  extreme  climate 
events.  In  recent  years,  prolonged  droughts 
have  highlighted  the  country’s  vulnerability  to 
water  scarcity,  while  episodes  of 
intense 
rainfall  and  severe  storms  point  to  growing 
climate  volatility.  The  alternation  between 
extended  dry  periods  and  heavy  precipitation 
reflects an intensification of climate variability, 
increasing  pressure  on  water  resources,  and 
infrastructure.  The  most  affected  sectors 
include  water  management,  agriculture, 
fisheries  and  aquaculture,  and 
forestry, 
coastal  areas.  Current 
levels  of  coastal 
protection are insufficient to prevent increased 
economic damages from coastal flooding and 
erosion  (see  Annex 10).  Recent  storms  have 
also  highlighted  the  vulnerability  of  critical 
infrastructure  in  the  power  sector.  Climate 
change  is  expected  to  increase  electricity 
demand, reduce the efficiency of conventional 
energy  systems  and  heighten  risks  to  energy 
infrastructure  from  extreme  weather  events. 
Portugal  adopted  in  April  2026  the  Portugal 
Transformation,  Recovery  and  Resilience 
(PTRR)  Programme,  structured  around  three 
pillars:  recover  (addressing  immediate  needs), 
protect  (strengthening  critical  infrastructure 
and systems),  and respond (ensuring a robust 
crisis response capacity). 

Forest  policy  reforms  need  to  accelerate 
and  adapt  to  increasing  climate  risks. 
Several  measures  to  reduce  wildfire  risks, 
including  those  supported  by  the  RRP  and 
cohesion policy funding, reflect a shift from a 
reactive  approach  centred  on  fire  suppression 
towards  greater  emphasis  on  prevention  and 
landscape 
key 
in  advancing  structural 
challenges  remain 
landscape 
strengthening 
engagement  with  private  landowners  in  fuel 
management  and  addressing  the  growing 
intensity  of  fires  driven  by  more  extreme 

transformation.  However, 

transformation, 

 
 
weather  conditions (31).  Continuous  focus  on 
developing  viable  economic  value  chains  for 
forest  biomass,  aiming  to  incentivise  private 
fuel  management  by  monetising 
forest 
‘cleaning’ activities would be helpful. 

remain 

Adequate and predictable financing is key 
to  supporting  climate  preparedness  for 
Portugal.  The  national  adaptation  strategy  is 
currently  under  revision,  but  its  effective 
implementation  will  depend  on  a  stable  and 
well-planned  financing  framework.  Significant 
to  adapt  and 
investment  needs 
climate-proof  critical  infrastructure  such  as 
electricity grids, railways and roads, estimated 
at  around  EUR 561 million  per  year  until 
2050 (32).  For  example,  adapting  the  TEN-T 
network 
around 
could 
EUR 2.3 billion  (see  Annex 10).  Strengthening 
climate  resilience  of  energy  networks  will 
require  improved  planning  to  ensure  timely 
investments,  while  avoiding  an  excessive 
burden on consumers. 

require 

alone 

is 

limited 

in  Europe 

insurance  coverage  against 
National 
natural  catastrophes 
in  a 
country  with  high  climate  risks. This 
contributes  to  one  of  the  lowest  shares  of 
insured  economic 
(see 
losses 
Annex 10).  As  a  result,  the  government  often 
bears  the  cost  of  damages  from  extreme 
events  through  ad-hoc  budgetary  support, 
which  can  delay  responses,  increase  fiscal 
pressures  and  lower  incentives  for  individuals 
to  take  preparedness  steps.  The  planned 
creation  of  a  natural  catastrophes  fund  - 
financed  via 
insurance-linked  contributions 
and backed by reinsurance - by summer 2026 
could help address this protection gap. 

(31)  Executive summary: Towards an integrated rural fire 

management framework in Portugal | OECD 

(32)  European Commission (2026), Assessment of EU and 

Member States adaptation investment needs. 

21 

 
 
SKILLS, QUALITY JOBS AND SOCIAL FAIRNESS 

restrain 

preserving 

care,  while 

spite  of  good 

In 
labour  market 
developments  in  recent  years,  persistent 
skills  mismatches 
labour 
competitiveness; at the same time, there 
are pressures on the healthcare and long-
In  2025,  Portugal 
term  care  system. 
received  country-specific 
recommendations 
(CSRs)  to  ensure  equal  access  to  health  and 
the 
long-term 
sustainability  of  its  National  Health  Service 
(NHS).  Portugal  also 
received  CSRs  on 
addressing  skills  mismatches  (including  by 
improving the skills level of the population and 
by  making  education  and  adult  learning more 
relevant  to  the  needs  of  the  labour  market) 
and on the skills and competencies needed for 
the  green  transition.  Despite  investments  in 
the  NHS, 
to 
to  staff 
healthcare 
shortages. 
is 
largely 
chronically 
insufficient,  failing  to  keep  pace  with  one  of 
the EU's fastest-ageing population. Portugal is 
implementing  measures  to  address  skills 
challenges, but these remain insufficient given 
the  extent  of  the  challenges.  Portugal  is  also 
gradually 
skills 
dimension into training programmes (Annex 1). 

issues  with  equal  access 
remain,  mostly  due 
In  addition, 

long-term  care 
and 

underfunded 

integrating 

green 

the 

Addressing skills mismatches and 
promoting the labour market 
integration of young talent is key 
to improve competitiveness 

Persistent  skills  mismatches  combined 
with  still  low  skills  levels  of  the  adult 
labour  supply  and 
population  hinder 
competitiveness.  In  2025  Portugal  received 
a  CSR  to  address  skills  mismatches,  including 
by improving the skills level of the population. 
However,  demand 
is 
increasing  and  firms  continue  reporting  a 

for  specific  skills 

in 

2025), 

significant  lack  of  available  workers  with  the 
right  set  of  skills (33).  In  addition,  despite  an 
overall job vacancy rate below the EU average, 
labour  shortages  in  specific  sectors  such  as 
construction  (with  an  estimated  shortfall  of 
education, 
80 000 workers 
healthcare,  justice,  and  service  occupations 
(e.g.  care  and  hospitality  workers)  suggest 
efficiency  gaps  in  the  matching  of  labour 
supply  and  demand.  In  the  ICT  sector  - 
particularly  relevant  for  the  country’s  future 
competitiveness  –  Portugal  has  one  of  the 
EU’s  highest  job  vacancy  rates  (4%  in  2025 
against an EU average of 2.3%). Demand here 
is expected to increase further, but only 3.6% 
of tertiary education students were enrolled in 
related  degrees  in  2024  (against  5.7%  in  the 
skills 
EU, 
mismatches 
the 
availability  of  labour  for  certain  sectors  and 
inefficient  use  of  the 
contributing  to  an 
qualified migrant workforce (see Annex 13). 

Annex 13). 

Increasing 

reducing 

further 

see 

are 

Tertiary 

educational 

Addressing  skills  challenges  will  require 
investments  and  boosting 
long-term 
participation  in  upskilling  and  reskilling 
measures. 
levels 
increased  significantly  in  recent  years,  and 
Portugal is implementing measures to improve 
adult  skills,  which  contributes  to  addressing 
(see  Annex 13).  Ongoing 
the  2025  CSR 
investments 
in  vocational  education  and 
training  (VET)  and  adult  learning  (like  the 
QUALIFICA  programme)  are  welcome  in  this 
respect,  but  adult  participation  in  learning  is 
still  relatively  low  and  far  from  the  2030 
targets (see Annex 13). Many recent measures 
are  being  implemented  with  RRP  support,  but 
long-term  actions  beyond  2026  will  be 
reform,  also 
essential.  The  current  VET 
supported  under  Portugal’s  RRP,  aiming  to 
increase  flexibility  and  uptake  of  training 
programmes,  remains  fundamental  to  steer 

(33)  EIB Investment Survey, 2025 

22 

 
 
 
training  measures.  Expanding  post-secondary 
VET  to  focus  on  areas  with  growing  labour 
market  demand  and  increasing  adult  learning 
to 
focus  on  digital,  environmental  and 
technological  aspects  could  also  help  bridge 
participation  gaps,  including  for  the  more 
disadvantaged 
their 
employability), and consider also demographic 
challenges. 

improving 

(thus 

are 

and 

training 

investments 

not 
Education 
systematically  aligned  with 
labour 
market  needs,  fuelling  further  skills 
mismatches.    Important  elements  are  still 
pending  despite  a  CSR  in  2025  on  this  issue. 
While 
in  VET  courses  are 
substantial  and  participants  quickly  integrate 
the 
labour  market,  only  11%  of  VET 
participants find a job related to their training, 
suggests  a  persistent  mismatch 
which 
between  the  current  VET  offer  and  the  skills 
sought  by  employers  (see  Annex  13).  In 
addition,  Portugal  is  leveraging  OECD  support 
Support 
(through 
Instrument’)  to  develop  a  skills  intelligence 
strategy  for  tertiary  education,  including  a 
skills  forecasting  tool  that  could  support  the 
alignment  of  education  places  and  curricula 
with  labour  market  needs  (see  Annex 13).  To 
further  help  align  VET  and  tertiary  education 
with  the  labour  market,  the  use  of  skills 
anticipation  tools  could  help  regularly  inform 
career  guidance  and  counselling,  both 
in 
schools and in the public employment services 
and  ultimately  help  address 
the  skills 
mismatches. 

‘Technical 

EU’s 

the 

people 

experience 

Young 
high 
unemployment,  precariousness  and  poor-
quality  jobs.    The  high  rate  of  youth 
unemployment  persists 
in  Portugal,  with 
important regional disparities and even higher 
rates  for  less-qualified  young  people  (see 
Annex 11). Temporary employment is also well 
above the EU average for this group (24.9% vs 
12.0%  in  2025),  as  is  part-time  employment 
(35.1% vs 18.2% in 2025), both mostly of an 
involuntary  nature.  Poor  job  quality  is  a 
deterrent: 
lack  of 
predictable  and  secure  employment  contracts, 
and  insufficient  training  and  career  prospects 
remain  important  bottlenecks  for  the  labour 
market integration of young people. 

levels,  the 

low  wage 

23 

through 

More effective and targeted active labour 
market policies (ALMPs) are important to 
improve  the  integration  of  young  people. 
Portugal  is  taking  measures  to  tackle  youth 
the 
including 
unemployment, 
European  Social  Fund+  PESSOAS  2030 
programme  and  the  ‘Exceptional  measure  to 
Encourage  Unemployed  Young  People 
to 
Return  to  Work’ (see  Annex 11).  Young people 
are  the  main  beneficiaries  of  ALMPs 
in 
Portugal.  To  maximise  their  participation  and 
employability  results,  it  would  be  essential  to 
(i) align  ALMPs  with  labour  market  demand 
while  also  making  use  of  robust  skills 
anticipation mechanisms, (ii) take into account 
the  different  qualifications  levels  of  young 
people,  (iii) thoroughly  monitor  and  evaluate 
the  impact  of  traineeships  and  hiring  support 
measures. 

Improved  and  structured  cooperation 
between  public  employment  services  and 
employers could contribute to addressing 
the  mismatches.  The  balance  between 
labour  market  demand  and  supply  and  a 
workforce that is projected to shrink highlights 
the  need  for  effective  public  employment 
to  strengthen  collaboration  and 
services 
potentially help address hard to fill vacancies, 
particularly for skilled workers. More dedicated 
services to integrate foreign-born workers in a 
fair and inclusive manner while making use of 
their  high  qualification 
levels  would  help 
address  their  significant  percentage  of  over-
qualification and lowering high unemployment 
tertiary  educational 
among 
attainment holders (see Annex 11). 

foreign-born 

Ensuring quality and inclusive 
education for future-proof skills 
and social cohesion 

improved 

Portugal  has 
educational 
attainment levels, but there is a negative 
trend in proficiency in basic skills among 
students.  Despite  significant  progress 
in 
levels 
raising 
cohorts), 
(particularly 
proficiency 
reading,  mathematics  and 
science  skills  among  Portuguese  15-year-olds 

educational 
among 

attainment 
younger 

in 

 
points 

concerns 

dropped  between  2018  and  2022,  which 
raises 
towards 
and 
shortcomings  in  the  quality  and  effectiveness 
of  education.  The 
issue  goes  beyond 
underachievement  and  also  concerns  top 
performance,  particularly 
in  mathematics, 
where  the  share  of  students  achieving  better 
results  fell  sharply  and  is  now  below  the  EU 
average,  reducing  the  highly  skilled  talent 
pipeline  for  fields  such  as  STEM,  relevant  for 
the  green  and  digital 
(see 
Annex 13).  Ensuring  good  acquisition  of  basic 
competencies  is  key  to  increasing  the  skills 
levels of the population. 

transitions 

retirement 

Rising  teacher  shortages  threaten  the 
delivery  of  quality  education.  The  number 
of  new  entrants  in  the  career  does  not  meet 
the  projected  needs  and  an  ageing  teaching 
workforce makes the issue even more pressing 
(in  2023,  60%  of  lower-secondary  teachers 
were 50 or over). Shortages are most severe in 
pre-primary,  primary,  and  special  education, 
undermining  the  continuity  and  quality  of 
education  and  slowing 
implementation  of 
reforms  (see  Annex 13).  The  government  has 
introduced  measures  to  offset  critical  gaps, 
incentives  for  teachers  to  keep 
including 
working 
the 
beyond 
recruitment  of  professionals  with  advanced 
non-teaching  qualifications  subject  to  later 
certification, the expansion of study places on 
teacher training programmes and scholarships 
for  students  enrolling  in  teaching  degrees. 
Beyond  these  measures,  structural  reforms 
are  essential  to  make  teaching  a  more 
attractive profession and ensure a sustainable 
solution.  The  revision  of  the  ‘Teaching  Career 
Statute’ planned for 2026 aims to incorporate 
certain  structural  changes,  with  ongoing 
negotiations  involving  key  stakeholders.  New 
reforms 
the 
better 
recommendations from the National Education 
education, 
Council 
induction  and  mentoring,  working  conditions, 
and professional autonomy. 

integrate 

improve 

teacher 

could 

age, 

to 

The  surge  in  foreign-born  students  adds 
pressure  on  Portugal's  education  system. 
Over  the  past  six  years,  the  foreign-born 
student  population  has  nearly  tripled,  now 
constituting about 14% of students in primary 
and 
These 
students experience dropout rates three times 

lower-secondary 

education. 

than 

their 

native 

counterparts, 
higher 
highlighting integration challenges that impact 
future  employment  and  overall  integration 
prospects 
it 
essential  to  expand  language  and  tailored 
remedial  learning  support  to  all  foreign-born 
students, based on regular diagnostics. 

(see  Annex 13).  This  makes 

have 

services 

This  pressure  adds  to  already  existing 
inequalities.  Socio-economic  and  regional 
disparities persist, and over 8% of primary and 
lower-secondary 
special 
students 
educational needs (see Annex 13). Formalising 
coordination  between  education,  health,  and 
social 
ensure 
comprehensive  support  for  disadvantaged 
learners,  enhancing  educational  equity  and 
social  cohesion.  As  Portugal 
its 
inclusive  education  policies,  multi-annual 
planning,  needs-based  financing,  and  robust 
monitoring  and  evaluation  are  crucial  for 
maximising education investment and focusing 
resources where they are most effective. 

locally  would 

refines 

Strengthening healthcare, long-
term care and social protection to 
ensure equal access to services 
and reduce poverty 

Portugal  still  faces  challenges  in  equal 
access  to  healthcare.  In  2025  Portugal 
received  a  CSR  to  ensure  equal  access  to 
quality  healthcare,  while  also  ensuring  the 
sustainability  of  the  National  Health  Service 
(NHS). It has taken steps in the right direction, 
but they have been insufficient to address the 
challenge. The country performs comparatively 
well  on  healthcare  outcomes  and  has  been 
investing 
infrastructure  and 
digitalisation  (including  through  its  RRP  and 
cohesion  policy  funding).  However,  it  faces 
significant  difficulties  in  filling  vacancies  and 
retaining  healthcare  professionals  in  the  NHS, 
which has been contributing to inefficiencies in 
healthcare  provision  and  inequalities  within 
the population in seeing their healthcare needs 
met (see Annex 15). 

in  healthcare 

The  impact  is  stronger  in  some  regions 
and  among  lower-income  and  vulnerable 

24 

 
in 

groups. In early 2025, 15% of the population 
did not have an assigned general  practitioner, 
there  were  long  waiting  times  for  certain 
surgeries  and 
issues  concerning  the  due 
functioning  of  emergency  departments  and 
obstetric  services  in  hospitals.  This  poses 
challenges 
quality 
healthcare,  particularly  for  lower-income  and 
vulnerable  groups,  who  rely  more  on  the NHS 
to meet their needs. The constraints are more 
prominent in some very populated regions, like 
Lisbon-Tagus  Valley,  and  in  remote  areas, 
where  incentives  are  not  sufficient  to  attract 
the  needed  workforce  (see  Annexes 15  and 
19). 

accessibility 

to 

Graph 4.1: Doctors and nurses in the NHS 

(1) 2022 data. Medical doctors and nurses, in full-time 
equivalent, per thousand inhabitants. 
Source: PLANAPP (Centre for Planning and Evaluation of 
Public Policies), Study on the NHS Healthcare Workforce 
in Portugal - Overview and Recent Evolutions 

Despite  measures  to  remediate  the 
shortage  of  healthcare  staff,  staffing 
needs  are  still  significant.  Portugal  has 
increased the number of places in education to 
study  for  medical  jobs,  created  more  places 
for  doctors  in  training  and  the  government 
agreed  on  gradual  pay  raises  for  doctors  and 
nurses  until  2027.  However,  it  is  estimated 
that  an  additional  6 100  doctors  and  3 900 
nurses are still needed to end the high reliance 
on  overtime  and  agency  work,  and  3 000 
additional  doctors  and  14 000  nurses  are 
needed  to  address  regional  disparities  in  the 

density of the workforce (see Annex 15). While 
ensuring the sustainability of the NHS (34), new 
measures  to  attract  and  retain  professionals 
could help address the shortages and regional 
healthcare, 
access 
inequalities 
particularly  by  improving  working  conditions 
and  the  work-life  balance  for  NHS  staff, 
accelerating career progression and supporting 
mobility to remote areas. 

to 

in 

to 

long-term  care 

rapidly  ageing  population  poses 
A 
challenges 
(LTC) 
provision. In 2025 Portugal received a CSR to 
ensure equal access to long-term care, but has 
made  limited  progress  in  addressing  it.  Home 
and  community-based  care  remain  largely 
insufficient  and  are  failing  to  keep  pace  with 
rapid  population  ageing.  Portugal  had  the 
second-largest  percentage  of  people  aged  65 
and  over  in  the  EU  in  2024,  yet  public 
investment  in  LTC  is  well  below  the  EU 
average (see Annex 12). LTC spending remains 
skewed  towards  residential  care,  while  home 
(see 
services  are  chronically  underfunded 
Annex 12).  Access  to  homecare  is  strikingly 
low,  with  only  15.9%  of  older  people  with 
severe  LTC  needs  using  such  services  in 
Portugal,  compared  to  28.6%  across  the  EU 
(35).  This  constrains  people’s  ability  to  live 
independently  and  participate  fully  in  their 
communities. Geographic disparities compound 
the  problem,  with  rural  areas  particularly 
underserved (see Annex 12). 

Despite  some  actions,  gaps  remain, 
including  on  home  and  community-based 
care. A pilot project for home support services 
(SAD+Saúde)  was  launched  in  five  mainland 
regions  in  late  2025  with  potential  for  scale-
up.  A  separate  pilot  on  respite  care  for 
informal carers has also started, but is limited 
to 
broader 
implementation  still  delayed.  The  LTC  action 
plan  is  an  opportunity  to set  clear  targets  for 
expanding 
community-based 
and 
services,  alongside  effective  governance  and 

18 municipalities, 

home 

with 

(34)  See Annex 2 for more details on public expenditure 

levels in the NHS. 

(35)  EU Monitoring Framework on the Council 

Recommendation on access to affordable high-quality 
long-term care, 2025 

25 

012345678910NorteCentroLisboa eVale doTejoAlentejoAlgarveNursesDoctors 
   
 
the 

adequate  financing,  while  supporting  gradual 
rebalancing  of  the  care  offer.  Expanding  and 
improving  working  conditions  of  the  formal 
care  workforce,  as  well  as  providing  training 
and  assistance  for  both  formal  and  informal 
carers could help addressing staff constraints. 
Accelerating 
implementation  of 
full 
informal  carer  support  measures,  including 
respite  care  and  income  aid,  and  ensuring 
access  to  the  independent  living  model  for 
people  with  disabilities  by  tackling  existing 
backlogs  and 
the 
‘Movement  of  Support  to  Independent  Life’ 
programme  could  also  offer  an  essential 
contribution (see Annex 12). 

regional  disparities 

in 

is  behind  to  meet 

Strengthening the effectiveness of social 
protection  could  help  reduce  poverty. 
Despite below EU average and declining rates 
of people at risk of poverty or social exclusion, 
its  poverty 
Portugal 
reduction target (36), with only 178 000 people 
lifted  out  of  poverty  or  social  exclusion  since 
2019,  against  the  goal  of  765 000  by  2030. 
Risk of poverty or social exclusion is higher in 
the  outermost  regions  and  social  transfers 
ineffective,  reducing 
remain  comparatively 
(see 
poverty  by  26%  (33% 
Annexes 12 and 18). Under its RRP, Portugal is 
planning to introduce a single social benefit to 
reduce  fragmentation  of  social  transfers. 
However, as the current minimum income with 
its  insufficient  adequacy  is  expected  to  be 
incorporated,  support 
remain 
inadequate.  At  the  same  time,  coverage  gaps 
in  social  protection  for  certain  workers  could 
continue  to  hinder  further  poverty  reduction 
and raise equality concerns (see Annex 12). 

in  the  EU) 

levels  may 

(36)  European Commission, European Pillar of Social Rights 

Action Plan, 2021, target on poverty reduction 

26 

 
 
KEY FINDINGS 

In  areas  covered  by  existing  country-
specific  recommendations,  Portugal  would 
benefit from: 

•  taking  action  to  ensure  the  medium-
term  sustainability  of  the  pension 
system, 
promoting 
supplementary pensions; 

including 

by 

•  decreasing inefficient tax expenditures 
to reduce the complexity of the tax system 
and free up resources; 

• 

• 

increasing  housing  affordability  and 
accessibility,  by  targeting  vacant  and 
derelict  buildings  in  high  demand  areas; 
ensuring  that  the  housing  tax  mix  creates 
better  incentives  to  use  the  housing  stock 
effectively;  improving  the  governance  and 
coordination  of  housing  policies,  together 
with  urban,  spatial  and  transport  planning; 
increasing 
the  stock  of  social  and 
affordable  housing;  and  addressing  the 
growing  number  of  people  experiencing 
homelessness; 

capital  and 

improving  firms’  ability  to  innovate 
and  scale  up,  through  better  access  to 
venture 
equity; 
increased financial literacy; sustained, more 
in 
targeted 
effective,  and 
into 
innovation, 
research  and 
account regional specificities; 

investment 
taking 

private 

•  reducing  administrative  burden,  single 
market  barriers  and  obstacles  to 
investments, 
firms’  operations  and 
licensing  and 
including  by  streamlining 
permitting 
late 
payments  (most  notably  in  the  healthcare 
sector  and  the  Azores  region),  enhancing 
coordination  across  all  levels  of  public 
administration  (especially at  municipal  and 
tax  and 
level),  and  making 
regional 
administrative courts more efficient; 

procedures, 

reducing 

• 

• 

• 

improving  law-making  quality  through 
greater  transparency  and  more  systematic 
evaluations 
and 
strengthened stakeholder participation; 

assessments, 

and 

capacity 

improving  electricity  system flexibility 
and 
accommodate 
to 
increased  renewables,  by  providing  a 
streamlined,  predictable  and  digitalised 
permitting  process  for  renewables  and 
energy 
improving  grid 
capacity  and  reducing  connection  queues; 
investing  in  energy  storage  capacities  and 
promoting flexibility market instruments; 

infrastructure; 

energy 

improving 
efficiency  and 
reducing  energy  poverty  by  attracting 
private  investment,  strengthening  forward 
removing 
planning  of 
regulatory 
targeting 
support  to  households  experiencing  energy 
poverty; 

funding 
bottlenecks 

calls, 
and 

•  accelerating  the  decarbonisation  of 
transport,  by  phasing  out  fossil-fuel 
subsidies, while encouraging investments in 
public transport and railway infrastructure; 

• 

in 

water 

and 
investing 

waste 
improving 
management,  by 
the 
resilience  of  the  water  sector  to  climate 
in  southern  regions; 
change  especially 
improving  water  management 
and 
streamlining  water  governance;  expanding 
waste  management 
and 
implementing  the  national  and  local  level 
action  plans  for  waste  management  and 
the circular economy; 

capacity, 

•  addressing  skills  mismatches  and 
improving human capital, by investing in 
adult  learning  and  reskilling  and  upskilling 
of  adults,  making  education  and  training 
more  relevant  to  the  needs  of  the  labour 
market, including through skills intelligence; 

27 

 
 
•  ensuring equal access to quality health 
and  long-term  care,  by  tackling  staff 
shortages  and  by  ensuring  adequate 
provision of long-term care, including home 
and community-based care. 

In other areas, Portugal would benefit from: 

•  decarbonising  its  industry,  in  particular 
energy  intensive  industries,  by  improving 
the  regulatory  framework,  including  for 
carbon  capture  and  storage,  and  by 
continuing  to  promote  the  deployment  of 
low-carbon 
the 
processes 
manufacturing of net zero technologies; 

and 

• 

in  forest  and 

improving  climate  preparedness  by 
advancing  reforms 
land 
management  practices,  enhancing  coastal 
resilience  of 
protection,  strengthening 
critical 
promoting 
adequate  insurance  coverage  for  natural 
catastrophes; 

infrastructure 

and 

•  ensuring 

quality 
by 

and 
addressing 

inclusive 
teacher 
education, 
shortages  and 
tackling  challenges  for 
disadvantaged  students  and  students  of  a 
foreign background; 

• 

improving  the  integration  of  young 
people  in  the  labour  market,  including 
by  delivering  more  effective  and  targeted 
active labour market policies. 

28 

 
ANNEXES 

 
 
 
 
LIST OF ANNEXES 

A1.  CSR implementation 

Fiscal 

A2.  Fiscal developments and debt sustainability 

A3.  Taxation 

Productivity 

A4. 

Innovation to business 

A5.  Single market and industry 

A6.  Savings, investment and access to finance 

A7.  Effective institutional framework 

Sustainability 

A8. 

Industry decarbonisation, circularity and climate mitigation 

A9.  Affordable energy transition 

A10.  Climate adaptation, preparedness and environment 

Fairness 

A11.  Labour market 

A12.  Social policies 

A13.  Education and skills 

A14.  Social scoreboard 

A15.  Health and health systems 

A16.  Housing 

Horizontal 

A17.  Sustainable development goals 

A18.  Competitive regions 

A19.  Transport 

LIST OF TABLES 

A1.1. 
A2.1. 
A2.2. 
A2.3. 
A3.1. 
A4.1. 

CSR implementation 
Projected change in ageing-related expenditure in 2025-2040 and 2025-2070 
Supplementary pension schemes - Scope for expansion 
Fiscal governance database indicators and public accounting maturity 
Taxation Indicators 
Key innovation indicators 

31 

34 

41 

41 

45 

50 

50 

56 

66 

74 

80 

80 

88 

95 

101 

101 

105 

109 

114 

115 

119 

125 

125 

128 

136 

43 
43 
44 
46 
55 

 
 
 
Single Market and Industry 
Savings and Investment Union summary diagnostic 
Financial sector indicators 
Portugal. Selected indicators on better regulation practices for primary legislation 
Digital Decade key performance indicators: availability of digital public services 
Key clean industry and climate mitigation indicators: Portugal 

A5.1. 
A6.1. 
A6.2. 
A7.1. 
A7.2. 
A8.1. 
A10.1.  Key Adaptation Indicators 
A14.1.  Social Scoreboard for Portugal 
A15.1.  Key health indicators 
A18.1.  Main development trends, challenges and the concentration of resources 
A18.2.  Key regional indicators (at NUTS 2 level) for Portugal 
A19.1.  ERTMS deployment in Portugal. 

LIST OF GRAPHS 

Composition of non-financial companies' funding 
Capital markets and financial intermediaries 
Composition of households' financial assets 
Trust in justice, regional / local authorities and in government 

Contributions to the change in general government balance (% of GDP) 
Public investment evolution and composition (% of GDP) 
Primary spending evolution and compositional change 
Investment composition (% of GDP) 
Tax revenue by economic function in 2024, PT (outer ring) and EU-27 (inner ring) 
Housing taxes: revenues from transaction taxes and recurrent property taxes in Portugal, 2013-2024 
Tax wedge for single and second earners as a % of total labour costs, 2025 
VAT gap indicators 
Share of publications in the top 10% most-cited publications worldwide, 2012 and 2022. 
Patent applications to the EPO by country of applicants and inventors in 2024 

A2.1. 
A2.2. 
A2.3. 
A2.4. 
A3.1. 
A3.2. 
A3.3. 
A3.4. 
A4.1. 
A4.2. 
A5.1.  Manufacturing industry production: total and selected sector, index (2021=100), 2015-2024 
A6.1. 
A6.2. 
A6.3. 
A7.1. 
A7.2.  Most time-consuming aspects of service delivery 
A8.1. 
A9.1. 
A9.2. 
A9.3. 
A11.1.  Key labour market indicators 
A12.1. 
A13.1.  Low achievement and top performance in mathematics of Portuguese 15-year-olds, 2015-2022 
A13.2.  Adult participation in learning 
A15.1.  Treatable mortality 
A15.2.  Healthcare infrastructure investment by year 
A16.1.  House prices, rents and price-to-income evolution in PT and EU27 since 2005 
A16.2.  Housing supply indicators in PT since 2005 
A16.3. 
A16.4.  Housing affordability selected indicators 
A17.1.  Progress towards the SDGs in Portugal 
A18.1.  Labour productivity growth (2013-2023) and labour productivity (2023), Portugal (NUTS 2 regions) 
A19.1.  Portugal's road fatalities per million, 2024 

Greenhouse gas emissions in the effort sharing sectors, 2005, 2023, and 2024 
Electricity and gas prices for household and non-household consumers, first half of 2025 
Low-carbon electricity generation vs. electricity wholesale prices, 2025 
Portugal’s installed renewable capacity vs electricity generation mix 

Impact of social benefits (excluding pensions) on poverty reduction 

Increase in homelessness in mainland Portugal (2020-2024) 

65 
66 
73 
75 
77 
87 
100 
114 
117 
129 
135 
137 

41 
41 
42 
44 
45 
45 
47 
48 
51 
52 
63 
67 
68 
69 
74 
75 
82 
88 
89 
92 
101 
106 
109 
112 
115 
116 
120 
120 
123 
124 
125 
130 
138 

32 

 
 
 
 
 
 
ANNEX 1: CSR IMPLEMENTATION  

Table A1.1:   

(Continued on the next page) 

33 

Portugal faces challenges in a wide range of policy areas, as identified in the country-specific recommendations (CSRs). Portugal  was recommended, among other things, to ensure the medium-term fiscal sustainability of the pension system, reduce administrative burden and barriers for firms’ operations and scale up, foster investment in private equity, venture capital and research and innovation, reduce reliance on fossil fuels, strengthen electricity systems and grids, improve water and waste management, ensure equal access to health and long-term care, and address skills mismatches. The Commission has assessed the degree of implementation of the 2025 CSRs considering the policy action taken by Portugal to date*. To do so, the Commission has taken into account the information provided by Portugal in its Annual Progress Report as well as other information sources. This annex provides summary information on the policy actions taken or planned by Portugal for each CSR. More detailed information on these actions is included in the relevant chapters and other annexes of the report. *CSR 2 is not assessed in CeSaR. RRP 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. Recommendation text Main measures adopted or implemented  By 30 April 2026  Preparatory steps/ credibly announced measures By 30 April 2026 Assessm. of progress  1.1 Reinforce overall defence and security spending and readiness while ensuring debt sustainability in line with the European Council conclusions of 6 March 2025. Total general government defence expenditure in 2026 is projected at 0.8% of GDP, corresponding to a decrease of 0.1 ppt. compared to 2024.   Total general government defence expenditure in 2027 is projected at 0.8% of GDP, corresponding to a decrease of 0.1 ppt. compared to 2024. However, defence expenditure in nominal terms is projected to grow to levels higher than in 2024.  Limited progress 1.2 Adhere to the maximum growth rates of net expenditure recommended by the Council on 21 January 2025, while making use of the allowance under the national escape clause for higher defence expenditure. A budget surplus of 0.7% and a budget balance close to balance of -0.1% is recorded in 2025 and projected for 2026, respectively. Cumulated deviation in 2025 amounted to 0.4% of GDP and is not explained by the NEC flexibility (0.0 pps. of GDP). Cumulated deviation in 2026 projected at 0.6% of GDP and is not explained by the NEC flexibility (0.0 pps. of GDP).  Substantial progress 1.3 Take action to ensure the medium-term fiscal sustainability of the pension system.  - Establishment of a Working Group to define action lines for the sustainability of Social Security (incl. analysis of the sustainability of the pension system, studying partial retirement mechanisms and early retirement scheme).  - Final report of the Working Group was expected for 30 January 2026 but has been delayed until 30 June 2026. No progress 3.1 Simplify regulation, improve regulatory tools and reduce administrative burden on businesses, mainly by reducing barriers to industrial licensing and removing other obstacles to their capacity to scale up and boost innovation and productivity. - New environmental licensing law approved under the RRP (currently under assessment). - Virtual Citizen’s shop integrating services for citizens and businesses (available as of November 2025) - Initiatives for better implementation of "tacit approvals"; - Automation and Digitalisation, phase-in by 2027 of "LicencIA" program; - Urban planning and edification act (presented to Parliament), streamlining and shortening processes and deadlines; - Inter-operability regime across national/regional/municipal level to ensure harmonization of rules and better coordination. Limited progress 3.2 Foster private investment into venture capital and private equity for local businesses, including public-private risk sharing,  - Large programs developed by the national promotional bank (BPF); - Some tax incentives had been introduced in 2024 to support the development of this market.  Limited progress  3.3 and improve financial literacy.  National Plan for financial education, including - New program in school, including financial literacy as part of study programs across 12 years of studies; - New 5-year program prepared by financial supervisors. - Online interactive programs to    Some progress  
 
 
 
  
 
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34 

Recommendation text Main measures adopted or implemented  By 30 April 2026  Preparatory steps/ credibly announced measures By 30 April 2026 Assessm. of progress  provide on basic financial literacy topics (targeted to adults). 3.4 Further increase the efficiency of administrative and tax courts, to decrease the length of proceedings.  - Working group set up to promote speed, simplification of tax courts presented its report with legislative proposals on September 2025; - More trainings for magistrates, including those in tax and administrative courts; - Integration of the Information System of Tax and Administrative Courts in (SITAF) in the single court information system; - Urgent recruitment process with 50 vacancies. - Creation of a specialized tax and administrative procedure for cases under EUR 15,000; - Legislative proposal in line with the report presented by the working group on September 2025; - New recruitment processes. Limited progress 3.5 Improve the effectiveness of the tax system, particularly by strengthening the efficiency of its administration and reducing the associated administrative burden. - Approval of the Tax Simplification Agenda;  - Ongoing digitalisation of the tax administration, including through the implementation of behavioural approaches and a digital dashboard (supported by the TSI); - Implementation of IT systems related to pre-filing of tax declarations (including those implemented under the RRP); - Creation of a permanent technical tax policy unit (U-TAX) and publication of U-TAX's Assessment Report on Tax Expenditure in Portugal (implemented under the RRP). - A second legislative package under development, aimed at implementing five additional measures outlined in the Tax Simplification Agenda - Elimination of the indirect leg of SIFIDE Some progress 3.6 Foster evidence-based policy making including by conducting ex post public policy evaluations.  - New competencies provided to PLANAPP, also setting up the new national evaluation agenda (currently running a pilot project); - Set up of new DG on studies, evaluation and planning in the ministry of education and research; - U-TAX, created in 2024, is supporting the ex-ante and ex-post evaluation of tax expenditures. - National Evaluation Agenda to be implemented  Some progress 3.7 Sustain the focus of investment-related economic policy on research and innovation. - Large schemes are in place to support R&I expenditure, including under the RRF (EUR 2.9 bn support to the mobilising/green agendas,  EUR 950mn "business innovation" subsidy scheme); - Very large tax exemptions support spending in R&I (worth EUR 1bn in 2023) through the SIFIDE program.   Some progress 3.8 Strengthen stakeholders' involvement and increase transparency in the preparation of public policies. - Law No. 5-A/2026 (Lobbying Law), which regulates lobbying activities and creates the Transparency Register for the Representation of Interests, published on 28 January. The rules adopted will enter into force in July 2026;  - Creation of a Division for the Support to the Legislative Process (DALP) in June 2025, which is responsible for ensuring the implementation of the Legislative Footprint Registry.   Some progress 4.1 Reduce overall reliance on fossil fuels in the transport sector -Decree-Law 93/2025 establishes a new legal framework for electric mobility, aligned with AFIR;   Limited progress  
 
 
  
 
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35 

Recommendation text Main measures adopted or implemented  By 30 April 2026  Preparatory steps/ credibly announced measures By 30 April 2026 Assessm. of progress  - Strategic Vision “PORTOS 5+” published on 12 August 2025. 4.2 in particular by phasing out fossil-fuel subsidies,   - Partial reversal of the extraordinary ISP discount (Entry into force of OE 2026 provisions (Law Lei n.º 73-A/2025): Portaria n.º 427-A/2025/1 (28 November 2025); - The partial reversal has been halted due to energy price hikes as of March 2026. Instead, the government introduced a temporary mechanism to reduce ISP rates and return additional VAT tax revenues whenever the price increase, compared with the week of 2-6 March, exceeds 10 cents for unleaded petrol and road diesel.  - Further phase out the remaining temporary ISP relief measures -Tax exemptions for natural gas in certain industrial processes  - Entry into force of OE 2026 provisions (Law Lei n.º 73-A/2025) on CO₂-surcharge exemptions - Tax reductions and exemptions for diesel used by freight companies, railway locomotives, public transport and agriculture machinery; - Resumption of the annual update of the carbon tax in 2026; - Entry into force of biofuels exemption reversal as of 1 January 2026. -   Limited progress 4.3 and by investing in sustainable transport, particularly in rail, taking into account regional disparities. - New transport passes, including  discounted or free passes for youth, seniors, students, and vulnerable groups; - Portugal is still implementing the Ferrovia 2020 projects and the national investment plan from 2023 was left unchanged.   Some progress  4.4 Further accelerate the roll-out of renewables by providing a predictable, regulatory framework with clear and digital procedures for permitting including for collective self-consumption and renewable energy communities. - Reform of the public administration through the creation of the National Energy for Geology and Energy (AGE); phased implementation until June 2027; - Environmental Impact Assessment exemptions for certain energy storage projects to accelerate permitting (2025- 2026); - "Simplex Ambiental" programme to simplify environmental licensing procedures (2023); - The Clawback Adjustment mechanism (Mecanismo de Equilíbrio Concorrencial), considered a barrier to investment, was removed in December 2025; Measures expected in 2026: - Review of the relevant legislation on self-consumption projects and energy communities to facilitate their set up; - Development of a digital one-stop-shop for the licensing of renewable energy projects, self-consumption, energy communities and storage (RRP investment); - Establish Renewable Energy Acceleration Zones (Go-to Areas) for faster permit procedures, in line with REDIII; - Revision of the compensation mechanism for municipalities - A National Plan for Energy Literacy  - Study on total system costs will be conducted to support long-term energy policy. Limited progress 4.5 Enhance stability in the electricity market through long-term contracts,  - Registration of PPAs in a dedicated platform is mandatory for bilateral contracts with a duration longer than one year (2024) - Portugal is developing a Power Purchase Agreement (PPA) State Guarantee aimed at derisking RES projects and improve bankability. Limited progress  
 
 
  
 
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36 

Recommendation text Main measures adopted or implemented  By 30 April 2026  Preparatory steps/ credibly announced measures By 30 April 2026 Assessm. of progress  4.6 investment in energy storage capacities and demand-side response tools. - Piloted demand response in the balancing market - Introduction of a scheme to support investment in energy storage capacity (supported by the RRP/REPowerEU investment) - A National Energy Storage Strategy is under preparation (expected to be adopted during the first semester of 2026) - A Battery Energy Storage Auction of 750 MVA to be launched in Q1 2026 Some progress  4.7 Strengthen the capacity of the electricity transmission and distribution grid,  - Planned investment of EUR 137 million for grid modernisation, part of the Resilience Package following the (ES/PT) blackout of 2025. - The approval process of the Grid Investment Development Plans (PDIR) is ongoing;  Some progress 4.8 including in cross-border electricity interconnections, - Interconnection project Ponte de Lima-Fonterfría double-circuit 400kV (ongoing). The project is delayed, and finalisation is now expected by end of Q2 2026.    Some progress  4.9 improve connection procedures and increase their transparency to incentivise investments in the national network.  -  Portugal temporarily replaced the "first come, first served" model with the introduction of "high demand zones" (ZGP - Zonas de Grande Procura) capacity allocation mechanism with financial guarantees to allow the release (and subsequent allocation) of unused capacity (2023); - Portugal expects to open new High Demand Zones and assess reform options to improve the general grid connection regime. - Exception mechanisms will be launched to allow promoters to adjust projects in the context of their Grid Injection Reservation Titles - New procedures to allocate capacity are planned for 2026 - Portugal plans to start systematically publishing expected grid connection dates on a project-by-project basis as of 2026 Some progress 4.10 Step up policy efforts aimed at the provision and acquisition of skills, and competences needed for the green transition, particularly for the public administration.  -Trainings and programs to promote green skills were implemented, some with the support of the RRP, including: - Green Competences (long-term vocational training, recognition/certification of green skills); - The Training Center for the Energy Transition; - ADENE Academy; - EMER training sessions (the Mission Structure for Licensing Renewable Energy Projects 2030); - ECO.AP Program (promotes energy and resources efficiency in the public administration). - A detailed study on green jobs and skills in the energy sector in Portugal is currently underway. Some progress 4.11 Accelerate investment in energy efficiency by promoting financial schemes to attract private investment and  - E-lar programme, launched in 2025, (digital vouchers to households for replacing fossil-fuel appliances); - Creation of over 100 Citizen Energy Spaces; - Transposition of the Energy Performance of Buildings Directive (Directive EU 2024/1275): A working group was established under Order n.º 8023/2024, with Phase I completed and Phase II underway to ensure full transposition by May 2026.  - National Building Renovation Plan (PNRE): under public consultation in February 2026;  - Expansion of “E-LAR” into a permanent voucher scheme for electrification of heating and cooking systems;  - Development of hybrid financing mechanisms;  - Tax incentives and green mortgage schemes to attract private investment in deep renovations;  - Promotion of the deployment ofrenewable energy communities and net-positive energy districts.  Some progress 4.12 supporting households experiencing energy poverty. - National awareness campaign and integration of statistical and administrative data on energy poverty, studies promoted by the National Observatory of Energy Poverty, the municipal-level Map of Energy - Measures to mitigate/tackle energy poverty have a multi-year time horizon  and are integrated into the Action Plan to Tackle Energy Poverty (PACPE) 2025-2030 and the Social Climate Plan 2026-2032. Limited progress  
 
 
  
 
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37 

Recommendation text Main measures adopted or implemented  By 30 April 2026  Preparatory steps/ credibly announced measures By 30 April 2026 Assessm. of progress  Poverty, and the Atlas of initiatives to combat energy poverty. These tools will continue to inform policy design and implementation through 2026.  - National Long-Term Strategy to combat Energy Poverty (ELPPE) has been recently materialized in the Action Plan to Tackle Energy Poverty (PACPE) 2025-2030;  - State-backed loan schemes for building rehabilitation and energy-efficient upgrades, together with programs such as the Efficiency Voucher Program, the Program for More Sustainable Buildings and the E-Lar support scheme;  - Reduced VAT rates applicable to a range of technologies and services; - Support for the purchase of bottled LPG – in Portuguese, Programa “Botija Solidária” – for vulnerable households; - Measures ensuring access to affordable energy, including the Social Electricity and Social Natural Gas Tariffs.  4.13 Improve the conditions for the transition towards a circular economy, particularly by increasing waste prevention, recycling and reuse to reduce landfill and incinerator waste.  Waste prevention - Pay-As-You-Throw (PAYT) system mandatory in 2025 for services and catering sector; - A communication and awareness campaign started in December 2025 and is ongoing (until end 2026);  Recycling and reuse - Deposit and return system to be implemented in April 2026 (beverages made of plastic, ferrous metals and aluminium);  Landfill and incinerator waste - TERRA plan 2025 published in 2025 (emergency landfill measures + measures for reduction of landfill) - Increase of landfill tax by €5 per tonne for the years 2026, 2027, 2028, 2029 and 2030 (Despacho n.º 15554-A/2025) Horizontal measures - New 5-year Circular Economy Action Plan (CEAP 2030, approved by the government in January 2026), replacing the 2017 CEAP; - Close to 100% of municipalities have a municipal waste plan (PAPERSU) approved. - A monitoring tool (dashboard) is being developed to provide real-time data on selective collection at national, regional, and municipal levels; - New extended producer responsibility will enter into force (hazardous municipal waste, mattresses, and furniture); - Transposition of revised waste framework directive (directive 2025/1892) has already begun. Study in place to establish the value chain and evaluate proper destinations for this kind of waste (textiles); - PAYT system mandatory in 2030 for the domestic sector . Some progress 4.14 Improve water management to strengthen climate change adaptation and ensure long-term economic and environmental resilience. Implement an integrated water management strategy and streamline water governance.  -Agua que Une: National Water Strategy (9.1 billion euro until 2050, out of which 5.5 billion euro until 2030) structured around three main pillars: Efficiency, Resilience, and Intelligence.  - Water Tariff Regulation: a draft regulation, currently in public consultation, aims to standardise the setting and revision of tariffs across the country. It remains to be seen whether this can be implemented; - Challenges persist in water management: Licensing (planned suspension of new water abstraction), mandaroty reporting of volumes abstracted, guarantee ecological Some progress  
 
 
  
 
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38 

Recommendation text Main measures adopted or implemented  By 30 April 2026  Preparatory steps/ credibly announced measures By 30 April 2026 Assessm. of progress  flows.  4.15 Promote investments in wastewater collection and treatment, the reduction of leaks and water monitoring, Leak reduction: 111 measures for reduction of losses by 269 hm3, and 122hm3 of treated wastewater, increase water safety by 310 hm3    Limited progress 4.16 develop nature-based solutions, water body rehabilitation and improve water efficiency and reuse.  - Pro-Rios 2030 announced on 16 January 2026 to address river restoration: - PENSAARP 2030 (plan for water supply, wastewater and pluvial water management) forecasts investment needs of EUR 3.159 billion for sanitatuin and EUR 400 mln for rainwater;  - RBMP plan submitted in 2025 with investment needs of EUR 935 million to achieve "good" status of water bodies.  Limited progress 5.1 Ensure equal access to quality health and long-term care, while preserving the sustainability of the National Health Service. - RRP measures: expansion of the capacities of the integrated continuous care network, the palliative care network and the mental health network, a new cost accounting methodology and other actions to improve management efficiency in the NHS; - Improved salary conditions of healthcare workers; - Creation of the National Interministerial Coordination Commission for Long-Term Care, encompassing the Ministry of Health and the Ministry of Labour, Solidarity and Social Security; - Informal caregivers: increase in the allowance by EUR 50.93 in 2025 and extended the classification to people without family ties to the person; -  A specialised "Electronic prescription regime for medicines and diagnostic aids" was established for LTC institutions in December 2024. - Review of the CAVI (Independent Living Support Center), to address waiting lists and broaden coverage; - Plans to move from recruitment-focused policies towards retainment of workers in the NHS (pay and career adjustments, work–life balance, strengthening occupational health) - yet details are  missing; - Restructuring of the RNCCI information system is underway to ensure interoperability with Social Security IT systems. Since July 2025, a new management system has been piloted, featuring an automated patient referral algorithm based on identified "LTC Needs Clusters"; - SAD+Saude pilot project. To be tested in 5 regions, with a public investment of EUR 1.5 million; - Pilot project on Integrated Continued Care Teams, combining health and social security services to provide care at home to high-dependency patients. Limited progress  5.2 Address skills mismatches by improving the skills level of the population and by making education and adult learning more relevant to the needs of the labour market. - RRP measures: support to adult learning, courses with digital and technological elements, expansion of specialised technology centres in the VET network, new courses in STEAM areas, among others; - Measures to promote digital skills: ‘Upskill - Digital Skills and Jobs’,  ‘Emprego+Digital (RRP)’, ‘Lider+Digital’, ‘Cheque-formacao + Digital’, ‘Formador + Digital’. - PRO_MOV: partnership between the public employment service and some companies to support the adaptation of workers to a new job; - Adult learning initiatives and trainings like: Recognition, Validation and Certification of Competences (RVCC), microcredentials, Acelerador Qualifica; - Measures to support the integration of foreign-born workers: ‘Portuguese as a Welcome Language’, ‘INTEGRAR’. - Green skills: trainings of EMER, - New skills forecasting mechanism for higher education is currently being developed with TSI support. Full operationalisation is expected only after mid-2026; - The update of the National Qualifications Catalogue and VET offer is ongoing; - An update of the regional module of SANQ (Skills Needs Anticipation System) is expected in June 2026. An update of the VET network for 2026/27 is also expected; - PT is evaluating short-term technical higher education programmes (CTeSP); - A study on skills needed in the energy sector is ongoing and should lead to the adaptation of training offer to the identified needs; - PT has announced the expansion of the school library network and a new training programme for teachers focused on reading teaching (“PEDAL”); - A revision of the Legal Framework Some progress  
 
 
  
 
Table (continued) 

Source: Portugal’s reporting and Commission assessment 

39 

Recommendation text Main measures adopted or implemented  By 30 April 2026  Preparatory steps/ credibly announced measures By 30 April 2026 Assessm. of progress  Training Center for the Energy Transition, reform of Green Competences, Gren Skills and Jobs training (all with RRP support);  - Targeting the skills of young people: INICIAR, vocational training offer; - Measures to address teacher shortages: retention incentives for near-retirement teachers; recruitment and in-service professionalization of professionals with advanced non-teaching degrees; opening of additional places for teacher training and provision of scholarships to 2 500 students entering teaching degrees;  - The revision of the “Teaching Career Statute” is ongoing. for Degrees and Diplomas (RJGDES) is expected in 2026, integrating micro-credentials and establishing a national graduate tracking system; - Expansion of the free provision of ECEC, Aprender+, Working group on Digital and AI in Education (to define a national strategy through 2030), Inclusion and integration of Migrant Students, tertiary education reform.  5.3 Address housing affordability and availability in high demand areas, by eliminating barriers to renting vacant houses and renovating derelict buildings - Update of taxable property values through a rise in the reference used for construction costs in taxable property values  to EUR 570 EUR/m² in 2026; - RRP investments on public housing, more than 30 000 dwellings to be built, purchased or renovated for affordable housing purposes, going up to 59 000 by 2030 announced by the government; - Granting special support to first time young buyers, offering tax exemptions from IMT and stamp duty on their first home purchase, provided it is their primary residence; - Several rent support programs (like Porta 65+, Programa de Apoio ao Arrendamento and others). - New revision of ‘Simplex Urbanistico’, to speed up permitting processes for construction; - Approval by parliament, in general terms, of the Government’s proposal for legislative authorisation in the housing sector, as part of the “Construir Portugal” programme.  Limited progress  5.4 and promote efficient public transport connections to reduce the pressure on house prices in urban centres and improve the attractiveness of other territories. - Portugal has implemented a number of measures to incentivise the use of public transport (particularly on ticketing for transportation in and around metropolitan areas);  - In 2025, only Porto launched new UNIR bus lines for inter-municipal express connections, no similar expansions have been reported for Lisbon; - The first phase of the new high-speed line between Lisbon and Porto was contracted. -Reform on single ticketing, with a ticketing system linked to the ID and the gov.pt app, more integration of operators, payments and fare interoperability. Limited progress   
 
  
 
FISCAL 
ANNEX 2: FISCAL DEVELOPMENTS AND DEBT SUSTAINABILITY 

in 

developments 

This annex discusses selected topics in public 
finance  and 
fiscal-
structural  country-specific  recommendations 
(CSRs)  addressed  to  Portugal  in  July  2025. 
These  CSRs  include  a  call  to  strengthen  defence 
spending  and  readiness  while  implementing  a 
the  Council 
fiscal 
Recommendation  of  21 January 2025.  Portugal 
also received a recommendation in 2025 to ensure 
that  the  pension  system  is  sustainable  in  the 
medium term.   

line  with 

strategy 

in 

Union 

adopted 

endorsing 

On  21 January 2025,  the  Council  of  the 
European 
the 
Portugal’s 
Recommendation 
medium-term  fiscal-structural  plan  (37).  The 
plan  includes  a  fiscal  adjustment  over  four  years. 
On 8 July 2025, the Council activated the national 
escape  clause  for  Portugal  to  facilitate  the 
transition to higher levels of defence spending (38). 

Developments in the government 
balance, debt and public 
expenditure(39) 

surplus 

government 
to 

was 
Portugal’s 
of  GDP and the 
0.7% 
equivalent 
government  debt-to-GDP ratio  had  fallen 
to 89.7%  by  the  end  of 2025. Based  on  the 
Commission Spring 
2026 
surplus is 
Forecast, Portugal’s government 
projected  to turn  into  a  deficit  of  0.1%  of  GDP  in 
2026 and  0.4%  of  GDP  in  2027. The  better-than-
expected  surplus  in  2025  was  supported  by 
strongly  performing  tax  revenues  and  social 
contributions  on  the  back  of  sustained  economic 
activity  and  a  dynamic  labour  market.  However, 
fiscal  policy  measures  are  set  to  permanently 

(37)  OJ C, C/2025/641, ELI: 

http://data.europa.eu/eli/C/2025/641/oj.  

(38)  Compliance by Portugal with the maximum growth rates of 
net expenditure recommended by the Council is assessed in 
[COM(2026)200]. 

(39)  Figures underpinning fiscal surveillance (net expenditure 
growth) are provided in the Fiscal Statistical Tables 
(SWD(2026)200) providing background data relevant for the 
assessment of the budgetary policies of the Member States. 

40 

weigh  on  both  direct  tax  revenues  and  current 
expenditure. 

Graph A2.1: Contributions to the change in general 
government balance (% of GDP) 

Source: European Commission Spring Forecast 

Graph A2.2: Public investment evolution and 
composition (% of GDP) 

Source: European Commission Spring Forecast 

of 

the 

recovery  and 
Implementation 
resilience  plan  (RRP) 
is  boosting  public 
investment.   Public  investment is  expected  to 
reach 4.3% of GDP in 2026, up from 1.8% in 2019 
(see Graph A2.2). However, it is set to decline as of 
2027  when  the  Recovery  and  Resilience  Facility 
(RRF) 
to  an  end,  as  accelerated 
implementation  of  other  EU  funds  is  expected  to 
only  partially  compensate  the  decline.    Nationally 
financed  public  investment  has  picked  up  since 
2020  compared  to  previous  years,  supported  by 
the  execution  of  RRF-financed  investments.  In 

comes 

-3-2-10123452021202220232024202520262027RevenueExpenditureChange in budget balance% of GDP0.00.51.01.52.02.53.03.54.04.5201920202021202220232024202520262027% of GDPDefenceRRF grants and other EU fundsOther nationally-financed 
 
 
 
        
 
       
 
2025, this investment reached 2.3% of GDP and is 
set to peak in 2026 before returning to that same 
level in 2027. 

Graph A2.3: Primary spending evolution and 
compositional change 

total 

consumption 
tax 

the  EU  average of 39.9%. Total 

Portugal’s tax  revenues  as  a  percentage  of 
GDP are well  below the EU average and  rely 
taxes. In 
heavily 
on 
2025, Portugal’s 
revenues  as  a 
percentage  of  GDP  (including  compulsory  social 
contributions)  amounted  to  35.4%, significantly 
below 
tax 
revenues   are projected  to remain at that  level in 
in  2027 
2026  before  decreasing  to  35.0% 
according  to  the  Commission’s  Spring  2026 
Forecast(40). The  tax  mix  in Portugal  relies  heavily 
on  consumption  taxation  compared  with  the 
EU, while the proportion of labour taxes in the tax 
mix  is  below  the  EU  average.  Portugal  makes 
heavy use of reduced VAT rates, thereby narrowing 
the tax base (see Annex 3). 

Cost of ageing 

Total  ageing-related  spending  in  Portugal  is 
projected  to  rise  by  about  3 percentage 
points  (pps)  of  GDP  by  2040,  to  around 
26.5%  of  GDP,  though  declining  by  about 
0.5 pps  by  2070  (see  Table  A2.1).  The  overall 
decline in the long term is the result of a projected 
fall  in  pension  spending,  which  would  more  than 
offset  the  expected  rise  in  healthcare  and  long-
term care spending.  

Public  pension  spending  as  a  percentage  of 
GDP  is  projected  to  increase  by  about  2 pps 
between  now  and  2040  but  decline  after 
that. Pensions currently represent close to 30% of 
total government spending. Following the expected 
rise  over  the  next  decades,  Portugal  would  have 
the third highest pension expenditure-to-GDP ratio 
of  all  Member  States  in  2040.  In  2025,  Portugal 
received  a  CSR  to  act  to  safeguard  the  medium-
term fiscal sustainability of the pension system. So 
far,  only  preparatory  steps  have  been  taken  to 
address this, notably through the establishment of 
a  dedicated  expert  working  group.  In  2026,  the 
working group is expected to deliver a report which 
will include a reassessment of the early retirement 
scheme,  and  a  study  of  partial  retirement 
mechanisms and complementary schemes.  

(40)  Data  retrieved  from  the  AMECO  database  (https://economy-

finance.ec.europa.eu/economic-research-and-
databases/economic-databases/ameco-database_en).  

Source: Eurostat 
Note: Based on economic literature, the categories considered 
to have the highest growth impact include education, R&D, 
health, transport and communication (See Barbiero and 
Cournede (2013), Gemmel et al. (2016), Lupu et al. (2018), 
Cepparulo and Mourre (2020) and OECD (2025)).  

After  declining  around  2010,  the  type  of 
expenditure  that  has  a  greater  impact  on 
GDP  remained  broadly  stable,  rising  slightly 
after 2019 before decreasing again in recent 
years. Zooming in on the composition of spending, 
social protection accounts for the largest share of 
total  expenditure  (around  40%),  followed  by 
health,  economic  affairs,  general  public  services 
and  education,  which  each  account  for  at  least 
10%  of  total  spending.    Since  2019,  public 
expenditure  on  health  has  increased  significantly 
(see  Graph  A2.3).  Spending  on  social  protection, 
housing,  environment,  communication,  general 
public  services  and  defence  has  risen  more 
modestly.  By  contrast,  spending  on  transport  and 
R&D has remained broadly stable, while education 
expenditure  has  declined.  This  trend  deserves 
attention,  as  these  categories  are  generally 
considered growth-friendly spending categories. 

41 

510152035404550200720082009201020112012201320142015201620172018201920202021202220232024a) Evolution (% of GDP)Primary expenditureSpending with higher impact on GDP (rhs)-2.00-1.50-1.00-0.500.000.501.001.50Interest spendingEducationCultureOther economicPublic orderR&DTransportGeneral servicesDefenceEnvironmentCommunicationHousingSocial protectionHealthb) Compositional change 2024-2019 (% total spending)  
      
 
Table A2.1:  Projected change in ageing-related expenditure in 2025-2040 and 2025-2070 

Source: 2024 Ageing Report (EC/EPC). 

Table A2.2:  Supplementary pension schemes - Scope for expansion 

Source: European Commission. 

Supplementary pension schemes can increase 
the  resilience  of  the  pension  system  by 
diversifying  retirement  income  sources.  In 
Portugal,  however,  uptake  of  such  schemes 
remains  limited:  at  the  end  of  2024,  private 
pension  assets  amounted  to  around  13%  of  GDP 
while  participation 
in  supplementary  schemes 
covered  around  only  6%  of  the  working-age 
population.(41)  This  coincides  with  both:  (i)  rising 
medium-term  pressures  on  public  pension 
spending;  and  (ii)  a  projected  increase  in  the 
replacement  rate  by  17 pps  between  2025  and 
2040 (Tables A2.2 and A2.3).(42)  

Public healthcare expenditure is projected to 
be 6% of GDP in 2025 (below the EU average 
of  6.6%)  and  is  expected  to  increase  by  0.7 
pps between now and 2040 and by a further 
0.5 pps between 2040 and 2070. This increase 
in  healthcare  expenditure  contributes  significantly 
to  fiscal  risks.  However,  the  Portuguese  RRP 
included  reforms  and  investments  that  aim  to 
improve  the  cost  effectiveness  of  the  health 
system that may reduce the fiscal risks. 

Public  expenditure  on  long-term  care  is 
projected at 0.5% of GDP in 2025 (below the 
EU  average  of  1.7%)  and  is  expected  to 
increase by 0.2 pps of GDP between now and 
2040  and  by  a  further  0.2  pps  of  GDP 
between 2040 and 2070. 

National fiscal framework 

The  Portuguese  Public  Finance  Council  (CFP) 
is  a  relatively  well-resourced  independent 
fiscal institution with a wide mandate. Two of 
the five members of the senior board can be (and 
often  are)  non-Portuguese  nationals,  who 
therefore  help  to  bring  in  new  perspectives. 
However, 
to 
autonomously make recruitment decisions and set 
salaries. 
specific 
communication strategy since July 2025, and it is 
quite  active  on  traditional  and  social  media.  The 
CFP is so far the only independent fiscal institution 
in the EU to provide an independent assessment of 
national-level green budgeting practices. 

the  CFP  has 

limited  ability 

The  CFP 

had 

has 

a 

(41)  Source: OECD Pension Market in Focus 2025. The highest 

participation rate in at least one supplementary pension plan 
is reported.  

(42)  The (gross) replacement rate refers, depending on data 

availability, to both public and private pensions. It is based 
on projections from the 2024 Ageing Report.  

The institutional setting of spending reviews 
has  gained  credibility  despite  past  setbacks. 
A Decree Law designed to improve the process for 
performing  spending  reviews  was  approved  in 
2025  following  support  from 
the  Technical 
Support  Instrument.  This  follows  challenges  in 

42 

PT23.51.90.70.20.12.926.4PTEU24.30.50.30.4-0.30.925.2EUPT23.5-2.41.20.40.1##22.8PTEU24.30.20.60.8-0.31.325.6EUageing-related expenditure change in 2025-2040 (pps GDP) due to:ageing-related expenditure pensionshealthcarelong-term careeducationtotalageing-related expenditure change in 2025-2070 (pps GDP) due to:ageing-related expenditure pensionshealthcarelong-term careeducationtotalAssets in 2024 (% GDP)Participation in 2024 (% working-age population)PT12.917.15.6PTEU32.4-2.855.9EUGross replacement rate at retirement: (pps change 2025-2040)  
 
 
        
 
 
      
 
Table A2.3:  Fiscal governance database indicators and public accounting maturity 

Source: Fiscal governance database, European Commission 

coordinating 

implementing  and 
the  budget 
process,  which  have  been  hindered  by  long-
standing  issues  related  to  the  complexity  of  the 
process, loose monitoring and lack of participation 
from  line  ministries.  The  system  is  evolving  from 
an  approach  focused  on  cutting  and  controlling 
spending to one that is oriented towards improving 
the quality of public spending.  

Graph A2.4: Investment composition (% of GDP) 

integrate  it  into  the  medium-term  budgetary 
framework are critical. A common methodology for 
project  assessment  is  currently  only  used  for  a 
limited  number  of  sectors  (for  example,  public 
order  and  safety,  agriculture).  These  sectors  also 
benefit  from  central  support  for  training  on 
developing 
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. 

implementing 

and 

Accrual  accounting  makes  a  public  body’s 
financial  position  and  performance  more 
transparent and can boost sustainability and 
intergenerational  equity.  Most  (14)  Member 
States  have 
implemented  accrual  accounting 
across  the  general  government  sector  and  a 
further five, including Portugal, are set to do so by 
2030(43).  At  present,  Portugal  is  close  to  the  EU 
(see  Table  A2.3)  but  has  not  yet 
average 
implemented  accrual  accounting 
for  central 
government and social security funds(44).  

Source: Eurostat. 

Public  investment  planning  has  improved, 
while  other  best  practices  are  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  other).  For  this  10-year 
investment plan to be effective, ongoing efforts to 

(43)  Report on public accounting in the EU (COM(2025)746 and 
accompanying staff working document SWD(2025)396). 
Countries with an accounting maturity of 70% or more in 
relation to International Public Accounting Standards are 
deemed to apply accrual accounting. 

(44)  Annexes 3.1 and 3.4 of SWD(2025)396. 

43 

2.71952.217.716.40510152025202410-y averages% of GDPgovernmentnon-government2024PortugalEU AverageCountry Fiscal Rule Strength Index (C-FRSI)17.4014.81Medium-Term Budgetary Framework Index (MTBFI)0.720.722025 Public accounting maturity of general government64%65%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. The score for public accounting reflects the degree of maturity in relation to the International Public Sector Accounting Standards (IPSAS). Countries with an accounting maturity of 70% or more in relation to IPSAS are deemed to apply accrual accounting. For more information, see the report on public accounting in the EU (COM(2025)746 and accompanying Staff Working Document SWD(2025)396). 
 
  
 
 
      
 
ANNEX 3: 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.  In  the  area  of 
taxation,  the  2025  CSRs  for  Portugal  highlighted 
challenges  in  improving  the  effectiveness  of  the 
tax  system,  particularly  by  strengthening  the 
efficiency  of  its  administration  and  reducing  the 
associated  administrative  burden.  They  also 
recommended  further  increasing  the  efficiency  of 
administrative  and  tax  courts  and  phasing  out 
fossil-fuel subsidies. 

Graph A3.1: Tax revenue by economic function in 
2024, PT (outer ring) and EU-27 (inner ring) 

Source: Taxation Trends Data, DG TAXUD 

The  tax  burden  in  Portugal  is  more  than 
4 percentage  points  (pps)  below  the  EU 
average.  In  2024,  tax  revenues  in  Portugal 
(including  social  security  contributions)  reached 
35.2% of GDP, marginally below the previous year 
(35.3%)  (see  Table  A3.1)  (45).  The  difference  with 
the  EU  average  reached  4.4 pps,  up  from  3.7  in 
2023.  The  share  of  labour  taxes  in  Portugal’s  tax 
mix  (43.8%  of  total  tax  revenues)  is  considerably 
below  the  EU  average  (51.5%,  see  Graph  A3.1) 
due  to  a  comparatively  low  implicit  tax  rate  on 
labour  and  low  level  of  salaries.  Meanwhile,  the 
share  of  consumption  taxes  (34.7%  of  total)  was 
above  the  EU  average  (26.8%)  on  the  back  of 
above-average value-added tax (VAT) revenues. As 
regards  capital  taxes,  their  share  in  the  tax  mix 
(21.5% in 2024) is in line with the EU  average. It 
has increased in recent years thanks to the growth 
of  corporate  income  tax  (CIT)  revenues,  which 
reached a record high in 2024. 

(45)  Preliminary Eurostat data point to a tax-to-GDP ratio of 

35.4% in 2025. 

products 

Revenues  from  environmental  taxes  have 
decreased  in  recent  years.  Revenues  from 
environmental  taxes  (2.0%  of  GDP  in  2024) 
remain  close  to  the  EU  average,  despite  the 
decline  from  2.5%  of  GDP  in  2019  and  the 
persistence  of  discounts  on  the  tax  on  fuel  and 
energy 
produtos 
(imposto 
petroliferos e energéticos - ISP). The temporary ISP 
relief measures introduced in 2022 in a context of 
high  energy  prices  have  not  yet  been  fully  rolled 
back and have no clear phase-out date. These tax 
expenditures  have  both  fiscal  and  environmental 
Commission 
2025 
implications. 
recommended  that  Portugal  phase  out  its  fossil-
fuel  subsidies. 
In  January  2026  the  biofuel 
exemption  ended  and  the  annual  update  of  the 
carbon tax resumed (see also Annex 8). 

sobre 

the 

In 

Graph A3.2: Housing taxes: revenues from 
transaction taxes and recurrent property taxes in 
Portugal, 2013-2024 

Recurrent taxes include the local real estate tax (imposto 
municipal sobre imóveis - IMI). Transaction taxes include 
different stamp duties (sobre operações de endividamento, 
escrituras e hipotecas and operações de compra e venda) and 
the real estate transfer tax. 
Source: DG TAXUD, from National Tax Lists 

Recurrent  property  taxes  are  comparatively 
low.  Revenues  from  property  taxes  are  on  a 
downward  trend  (from  2.2%  of  GDP  in  2019  to 
2.0% in 2024), amid increases in deductible stamp 
duties  and  outdated  cadastral  values.  Revenues 
from  recurrent  immovable  property  taxes  remain 
stagnant  at  0.6%  of  GDP  (EU:  0.9%),  and  below 
the  2019  levels  (0.8%  of  GDP).  The  evolution  of 
recurrent  property 
vis-à-vis  housing 
taxes 
transaction  taxes  is  partly  a  consequence  of  the 
misalignment  between  cadastral  and  market 

44 

51.526.821.643.834.721.5Taxes on labourTaxes on consumptionTaxes on capital0.0%0.2%0.4%0.6%0.8%1.0%1.2%1.4%1.6%1.8%0%10%20%30%40%50%60%70%80%90%100%Transaction taxesRecurrent taxesTransaction + recurrent prop taxes (% GDP, rhs) 
 
      
 
      
 
 
Table A3.1:  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 2024. EU-27 refers to the median value. For more data on tax revenues as well as the methodology 
applied, see the Data on Taxation Trends webpage. 
Source: European Commission, OECD, ISORA. 

values.  In  2013,  recurrent  taxes  represented  69% 
of  the  combined  revenues  from  recurrent  and 
transaction  property  taxes,  decreasing  to  43%  in 
2024 (see Graph A3.2). 

to  29.5% 

Portugal  is  lowering  statutory  CIT  rates  to 
competitiveness,  but 
improve  business 
applicable  rates  vary  widely.  The  top  CIT  rate 
has  decreased  further 
in  2026. 
Additional  reductions  of  1 pp  per  year  have  been 
legally  established  for  2027-2028,  which  will 
eventually  result  in  a  top  CIT  rate  of  27.5%. 
However, CIT rates still vary greatly, depending on 
the  size,  type  and  location  of  a  company.  This 
from  various  state  and 
complexity 
municipal 
influence 
could 
businesses’ decisions on location and growth while 
hindering  economies  of  scale.  Portugal  has  a 
comparatively  high  effective  average  CIT  rate 
(23.9%  in  2024,  4.6 pps  above  the  EU  average). 
However,  the  extensive  use  of  tax  incentives 
accounts for foregone CIT revenues worth 0.8% of 
GDP, further contributing to the complexity of the 
system and increasing the administrative burden. 

results 
surcharges  and 

Portugal  is  reforming  R&D  tax  incentives 
raising 
that 
competitiveness.  It  has the  highest implied  tax-

effective 

are 

not 

in 

subsidy  rate  on  R&D  expenditures  in  the  EU  (46), 
although its overall spending on R&D remains well 
below  the  EU  average.  In  particular,  the  ‘indirect 
SIFIDE’  (part  of  the  ‘SIFIDE II’  system  of  tax 
incentives  for  business  R&D)  considered  the 
following as R&D  expenditure qualifying for a tax 
credit:  (i) contributions  to  the  capital  of  R&D 
institutions;  and  (ii) contributions  to  public  or 
private  investment  funds  that  finance  companies 
mainly  engaged  in  R&D.  This  provision  has  led  to 
significant  flows  of investment  into  the  capital  of 
these entities that have not translated into actual 
corporate  R&D  expenses,  posing  questions  on  the 
effectiveness  of  the  scheme (47).  As  a  result,  the 
scheme will not be further extended at the end of 
2025,  though  a  five-year  phasing-out  period  is 
envisaged  and  the  requirement  of  the  seal  of 
recognition of R&D practices will be removed. The 
government  is  currently  preparing  to  reform  the 
‘direct SIFIDE’, as it is due to expire by the end of 
2026. 

The  tax  wedge  for  low-wage  earners  is 
relatively low  in  Portugal,  except  for  second 
earners.  Graph  A3.3  shows  that  in  2025  the 

(46)  2025 Country Report for Portugal and OECD Data Explorer. 
(47)  U-TAX, Assessment Report on Tax Expenditure in Portugal. 

45 

Median (EU-27)2019202220232024202520192022202320242025Tax structureTotal taxes (including compulsory actual social contributions) (% of GDP)34.535.935.335.235.439.939.739.039.4Taxes on labour (% of GDP)14.815.815.815.420.620.119.920.3of which, social security contributions (SSC, % of GDP)9.610.210.310.513.012.712.713.0Taxes on consumption (% of GDP)12.612.512.012.211.210.910.510.6of which, value added taxes (VAT, % of GDP)8.89.48.99.17.17.47.17.1Taxes on capital (% of GDP)7.17.67.57.68.18.78.58.5Personal income taxes (PIT, % of GDP)6.36.96.86.19.69.49.39.6Corporate income taxes (CIT, % of GDP)3.13.33.43.82.63.23.23.1Total property taxes (% of GDP)2.22.32.12.02.22.11.91.8Recurrent taxes on immovable property (% of GDP)0.80.70.60.61.21.00.90.9Environmental taxes (% of GDP)2.51.92.02.02.62.12.12.1Effective carbon rate in EUR per tonne of CO2 equivalentsnana80.3nanana84.8naTax wedge at 50% of average wage (single person) (*)28.127.328.128.128.132.431.631.531.531.6Tax wedge at 100% of average wage (single person) (*)36.937.538.536.636.840.139.739.939.940.0Corporate income tax - effective average tax rates (1) (*)23.923.923.923.920.019.219.019.3Difference in Gini coefficient before and after taxes and cash social transfers (pensions excluded from social transfers) (2) (*)8.38.38.07.87.88.07.97.8Outstanding tax arrears: total year-end tax debt (including debt considered not collectable) / total revenue (in %) (*)36.741.839.6na31.832.630.7naVAT gap (% of VAT total tax liability, VTTL) (**)7.94.13.64.610.57.38.2naEU-27PortugalProgressivity & fairnessTax administration & complianceBy tax baseSome tax types 
 
 
      
 
labour-tax  wedge (48)  for  Portugal  was  noticeably 
lower  than  the  EU  average  at  50%,  67%  and 
100%  of  the  average  wage,  while  being  equal  to 
the EU average for high-income earners at 167% 
of  the  average  wage.  Second  earners  at  a  wage 
level of 67% of the average wage, whose spouses 
earn  the  average  wage,  were  subject  to  a  tax 
wedge  above  the  EU  average.  The  difference 
between  the  tax  wedge  for  second  earners  and 
that for single persons at the same wage level in 
Portugal  was  substantially  higher  than  the  EU 
average. This indicates particularly weak incentives 
for  second  earners  (who  are  often  women)  to 
enter the labour market.  

in  detail 

other  measures  are  discussed 
in 
Annex 16. A persistently large proportion of homes 
remains vacant, despite potential aggravated rates 
of  recurrent  tax  on  immovable  property  due  to 
limited  enforcement  and  narrow  definitions  of 
vacant property. 

Graph A3.3: Tax wedge for single and second 
earners as a % of total labour costs, 2025 

benefit 
income 

Despite  the  inequality-reducing  effect  of 
system, 
and 
Portugal’s 
tax 
disposable 
remains 
household 
unequally distributed. Portugal’s tax and benefit 
system  helped  reduce  inequality  as  measured  by 
the difference in Gini coefficients before and after 
taxes and benefits (49) by 7.8 pps in 2024, which is 
equal 
(see 
Table A3.1).  Despite  this,  inequality  of  disposable 
as 
after 
household 
measured by the Gini coefficient  (50) is,  at  31.9%, 
relatively high in Portugal (EU: 29.1%). 

the  EU  average 

redistribution 

reduction 

income 

to 

is 

implementing  temporary  tax 
Portugal 
measures  in  the  area  of  housing  in  an 
attempt  to  address  affordability  challenges. 
Portugal  is  adopting  a  reduced  6%  VAT  rate  for 
the  construction  or  rehabilitation  of  homes  that 
will be for sale at up to EUR 660 982, or for long-
term  let  with  rents  up  to  EUR 2 300.  This  and 

(48)  The  tax  wedge  is  an  indicator  of  the  tax  burden  on  labour 
that  can  be  assessed  at  various  levels  of  earnings.  It  is 
defined as the sum of personal income taxes, employee and 
employer  social-security  contributions  and  other  mandatory 
contributions,  expressed  as  a  percentage  of  total  labour 
costs  (composed  of  the  net  wage,  personal  income  tax, 
social 
contributions,  and  other  mandatory 
contributions).  Tax  wedge  data  in  the  2026  country  reports 
are calculated by the Joint Research Centre of the European 
Commission and based on the EUROMOD model, but in past 
reports  they  were  based  on  the  OECD’s  Tax  and  Benefit 
model.  While  the  underlying  methodology  is  very  similar, 
differences  in  the  assumptions  can  lead  to different  results 
between both models. 

security 

(49)  European Commission based on EU-SILC data.  

(50)  The  Gini  coefficient  measures  the  extent  to  which  the 
distribution  of  income  within  a  country  deviates  from  a 
perfectly  equal  distribution.  A  coefficient  of  0  expresses 
perfect equality where everyone has the same income, while 
a coefficient of 100 expresses full inequality where only one 
person has all the income. 

Note: The second earner tax wedge shows a household’s tax 
wedge resulting from the wage that a second earner taking 
up a job at 67% of the average wage receives. It does not 
show the total tax wedge of the household. The household is 
assumed to have a first earner at 100% of the average wage 
and no children. For the methodology of the tax wedge for 
second earners, see OECD (2024), Taxing Wages 2024. 
Source: European Commission 

of 

use 

Portugal’s  widespread 
tax 
expenditures (TEs) adds to the complexity of 
the  tax  system (51).  National  authorities (52) 
report  781  types  of  TEs  that  result  in  foregone 
revenue for 7.2% of GDP, in a context of persistent 
gap in total tax revenues vis-à-vis the EU average. 
EUR 11.3 billion  of  EUR 20.4 billion  of  foregone 
revenue  estimated  in  2024  came  from  reduced 
VAT rates. 

Portugal has a relatively large VAT rate gap 
and  national  policy-driven  exemption  gap.  In 
2023, Portugal had a VAT rate gap of 14.2% (EU: 
10.6%) and a national policy-driven exemption gap 
of 11.8% (EU: 9.7%) (Graph A3.4). This resulted in 
an actionable VAT policy gap (53) of 31.5%, 4.3 pps 

(51)  See  Portugal  –  Country  Fiche,  in  European  Commission 

(2025), Mind the Gap Report. 

(52)  Relatorio Despesa Fiscal 2024 

(53)  The  theoretical  VAT  revenue  loss  due  to  the  application  of 
reduced rates and exemptions that are theoretically possible 
to discontinue. The actionable VAT policy gap consists of the 
sum of (i) the VAT rate gap, (ii) the national policy-driven VAT 
exemption  gap,  and  (iii)  the  EU  policy-mandated  VAT 
exemption gap.  

46 

28.131.836.844.140.52025303540455050100150Tax wedge, % of total labour costsEarnings as % of the average wageSingle earner - PTSingle earner - EU averageSecond earner -  PTSecond earner -  EU average 
 
      
 
above the EU average (54). The recent reduction of 
the  VAT  rate  for  construction  works  will  further 
increase  this  gap.  Reduced  VAT  rates  remain  in 
place  for  goods  and  services  with  substantial 
budgetary  impact,  limited  redistributive  capacity 
and  sometimes  unclear  policy  objectives,  such  as 
restaurants,  hotel  accommodations  and  housing 
maintenance and renovations (55). 

In  the  area  of  income  taxation,  the  ‘non-
habitual  residence’  regime  continues  to  be 
the main  TE.  This inpatriate  scheme  (revoked  by 
the  2024  State  budget  with  a  phasing-out  period 
of  up  to  10 years)  has  an  estimated  cost  of 
EUR 1.7 billion  per  year (56).  New  personal  income 
tax deductions and exemptions have been created 
in  recent  years.  Foregone  revenues  in  excises  on 
fuel  and  energy  products  remain  close  to  record-
high  values.  An  ongoing  reform  under  the  RRP  to 
simplify  Portugal’s  TEs  will  follow  up  on  the 
to 
from  U-TAX’s 
recommendation 
discontinue the indirect leg of SIFIDE. 

report 

reporting 

Portugal  has  a  well-established  workstream 
tax 
and 
on  monitoring 
expenditures.  Portugal’s  Ministry  of  Finance 
reports  on  tax  expenditures  since  2014,  with 
disaggregated information since 2021 (relative to 
2020) prepared by the Tax and Customs Authority 
(‘AT’).  The  governance  framework  provides  for 
evaluation  procedures  and  monitoring  obligations. 
The recently created U-TAX unit within the AT has 
reinforced  the  framework  for  assessing  new  and 
existing  tax  expenditures.  Despite  this,  the  recent 
decision  to  reduce  the  VAT  rate  for  construction 
works  was  made  without  an  impact  assessment 
report. 

Monitoring  of  compliance  gaps  is  at  present 
limited  to  VAT.  Portugal  does  not  yet  produce 
compliance  gap  estimates  for  CIT,  PIT  or  excise 
duties.  However,  U-TAX  is  currently  studying  and 
assessing  the  feasibility  of  and  appropriate 

(54)  European  Commission,  Directorate-General  for  Taxation  and 

Customs Union, VAT gap in the EU - 2025 report.  

(55)  European Commission (2026), Fiscal Costs and Redistributive 
Effects  of  Reduced  VAT  Rates:  A  Detailed  Analysis  by 
Product and Population Groups. 

(56)  Banco de Portugal (2026) estimated foregone revenues from 
this  regime  at  EUR  1 741  million  in  2024,  with  128 958 
beneficiaries  in  total.  The  main  beneficiaries  of  the  regime 
appear  to  be  individuals  with  very  high  incomes  (99.997th 
percentile of the active population distribution). 

methodology 
estimates for CIT and PIT. 

for  producing  compliance  gap 

Graph A3.4: VAT gap indicators 

The rate gap and the national policy-driven exemption gap are 
measured as percentage of notional ideal revenues. 
Compliance gap is measured as a percentage of VAT total tax 
liability. EU refers to median values. 
Source: European Commission, Directorate-General for 
Taxation and Customs Union, VAT gap in the EU - 2025 report. 
https://data.europa.eu/doi/10.2778/7868422 

The VAT compliance gap in Portugal remains 
relatively low, thanks among other factors to 
the  extensive  use  of  e-invoicing.  In  2023, 
Portugal  had  an  estimated  VAT  compliance  gap 
equivalent  to  3.6%  of  the  VAT  total  tax  liability, 
compared  to  a  median  of  7.6%  in  the  EU  (see 
Graph  A3.4).  In  2023,  the  VAT  compliance  gap  in 
Portugal remained very close to the record-low of 
2021 (3.5%) and has decreased by 4.3 percentage 
points since 2019. Portugal launched the e-Fatura 
system  (e-invoicing)  in  2013,  preceded  by  the 
early  deployment  of  the  Standard  Audit  File  for 
Tax  (SAF-T)  in  2008.  These  developments  have 
been  followed  by  further  measures  to  strengthen 
compliance,  such  as  integrating  foreign  entities 
with  VAT  obligations  in  Portugal  in  the  e-Fatura 
system 
Commission’s 
estimates  suggest  that  Portugal’s  CIT  compliance 
gap is in line with the EU average (57). 

(2023).  Meanwhile, 

Portugal is making efforts to strengthen the 
efficiency  of  its  tax  administration  and 
reduce  the  administrative  burden.  To  address 

(57)  Corporate  Income  Tax  Gap.  Towards  a  common  European 
approach  to  measuring  losses  in  corporate  tax  revenues 
Final Report. https://data.europa.eu/doi/10.2778/0541549  

47 

0%2%4%6%8%10%12%14%16%Rate gapNational policy-driven exemptiongapCompliance gapPTEU 
 
      
 
for 

this  area,  Portugal 

the  2025  CSR 
in 
is 
the  digital 
strategy 
implementing  a 
transformation of its tax administration. Moreover, 
the  Simplification  Agenda  adopted  in  early  2025 
put  forward  30  measures  to  improve  compliance 
by  streamlining  and  digitalising  tax  procedures, 
with  eight  measures  added  later.  Some  of  the 
measures are already being implemented, such as 
simplification  of  invoicing  rules  or  automatic  pre-
filling  of  tax  returns.  Portugal’s  cost-of-tax-
collection ratio is following is on a downward path 
(0.88%  of  total  tax  collected  in  2023  against 
1.10%  in  2020).  Meanwhile  ICT  operating  costs 
are  increasing  (from  5.0%  of  total  operating 
expenditure in 2020 to 13.3% in 2023).  100% of 
CIT, PIT and VAT returns are e-filed. 

Several challenges remain. The age structure of 
the  staff  at  the  service  of  the  tax  administration 
poses  significant  challenges  in  the  medium  term, 
with 53.6% older than 54 and only 7.1% under 45 
(2023).  At  19%  in  2023,  Portugal  has  one  of  the 
lowest  shares  of  full-time  equivalents  in  the  tax 
administration assigned to audit, investigation and 
other  verification  functions  (EU  average:  33%).  At 
39.6% at the end of 2023, outstanding tax arrears 
remained above pre-COVID-19 values and 8.9 pps 
above  the  EU-27  average,  despite  a  steady 
reduction  from  45.6%  in  2021.  In  addition,  the 
percentage of tax arrears considered collectable at 
the  end  of  the  year  is,  at  30.6.%,  roughly  half  of 
the EU-27 average. 

the  number  of  magistrates 

Portugal  is  implementing  some  measures  to 
increase  the  efficiency  of  its  tax  courts.  To 
address  the  2025  CSR  in  this  area,  Portugal  has 
created  two  specialised  tax  courts,  introduced 
simplified  procedures  for  low-value  disputes,  and 
increased 
(see 
Annex 7).  The  complexity  of  the  tax  system, 
including  the  proliferation  of  tax  expenditures,  is 
seen  as  a  driver  of  high  litigation.  In  2025,  a 
working  group  established  by  the  government  for 
legislation 
tax 
the 
submitted  a  set  of  technical  recommendations, 
which are pending implementation. 

review  of 

litigation 

the 

48 

 
PRODUCTIVITY 
ANNEX 4: INNOVATION TO BUSINESS  

in 

yet 

innovation 

stagnating 

performance 

limits  the  potential  of 

Portugal’s 
is 
improving  modestly,  driven  by  business 
investment, 
public 
its 
expenditure 
research  excellence.  For  Portugal,  the  2025 
country-specific recommendation (CSR) highlighted 
regulatory  and  administrative 
challenges 
burdens for businesses, limited innovation capacity 
and  the  need  to  sustain  the  focus  of  investment-
related  economic  policy  on 
research  and 
innovation. Portugal remains a moderate innovator 
according  to  the  European  Innovation  Scoreboard 
(58),  drawing  closer  to  the  EU  average  with  an 
index  of  90.7%,  which  is  three  percentage  points 
higher than in 2024 and nine points up from 2018. 
However,  innovation  performance  differs  largely 
across  regions  (59)  (see  Annex  18).  While  R&D 
intensity  has  shown  consistent  growth  over  the 
last  decade,  reaching  1.73%  of  GDP  in  2024,  it 
remains  below  the  EU  average  of  2.24%.  Public 
R&D  intensity  has  remained  stagnant,  hindering 
progress  in  strengthening  the  country’s  public 
science  base,  despite  a  growing  pool  of 
researchers.  By  contrast,  business  R&D  intensity 
has  nearly  doubled  since 2013,  although this  has 
not yet translated into stronger innovation output. 
as 
Structural 
underdeveloped  venture  capital  markets  and 
limited  public-private  cooperation  despite  ongoing 
progress.  Public  policy  has  supported  business 
innovation  by  providing  strong  tax  incentives,  but 
additional  efforts  are  needed 
improve 
innovation-friendly regulation.   

challenges 

persist, 

such 

to 

Excellent science 

Portugal  boasts  a  robust  public  research 
base,  yet  stagnant  public  investment  over 
the last decade has constrained its research 
excellence.  Portugal  has  a  good  science  base, 

(58)  2025 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). 

(59)  Innovation is often concentrated in Lisbon and in coastal 
areas, with some regions slowing down in their innovation 
performance according to the 2025 Regional Innovation 
Scoreboard. 

in 

Portuguese  universities  remain  attractive  for 
international students (60) and are successful in EU 
funding calls (61). The public sector can count on a 
good  number  of  researchers  that  is  higher  than 
the  European  average  and  still  growing  (6.4 
researchers  per  thousand  active  population  in 
2024,  against  the  EU  average  of  4.3).  Specific 
programmes,  such  as  the  Tenure  programme  (62), 
are  in  place  to  support  the  hiring  of  doctoral 
researchers  for  permanent  positions 
the 
national science and technology system and make 
research careers more attractive. However, limited 
public  expenditure  on  R&D  affects  the  excellence 
of its science. Public R&D intensity has followed a 
declining  trajectory  over  the  past  decade,  settling 
at 0.60% of GDP in 2024 – below the EU average 
of  0.72%.  Consistent  and  sustained  progress  is 
necessary,  as  the  2025  CSRs  also  noted,  to  fully 
unlock the system’s potential. Unpredictable public 
R&D  investment,  based  on  yearly  programming, 
creates  uncertainty  for  the  research  community 
and  undermines  Portugal’s  research  excellence, 
and this is reflected in the shrinking proportion of 
the country’s scientific publications in the top 10% 
most-cited  globally  (7.68%  in  2022  vs  9.44%  for 
the  EU).  Additionally,  while 
international  co-
publications  have  risen  steadily  over  the  last 
decade,  reaching  55.47%  of  total  publications  in 
2024,  this  remains  below  the  EU  average  of 
57.24%,  underscoring  the  need  to  further  expand 
and  strengthen  international  collaboration  within 
the  public  research  system.  Ensuring  a  change  of 
pace and working on an upward trajectory in public 
R&D intensity will be critical to securing long-term 
competitiveness. 

to 

tackle 

The  efficiency  of  the  public  science  base  is 
also  affected  by  fragmented  governance;  a 
reorganisation  of  the  system  is  currently 
ongoing 
this  challenge.  The 
Portuguese  R&I  system  is  characterised  by  a 
multitude  of  entities  such  as  universities,  R&D 
units,  associated  and  collaborative  laboratories, 
technology  and  innovation  centres  and  other 
structures.  This  diversity  has 
in 
fragmentation, overlapping mandates, and uneven 

resulted 

(60)  2025 edition of the EIS, Country profile: Portugal.  

(61)  R&I Country Profile - Key Figures - | Sheet - Qlik Sense 

(62)  FCT-Tenure | 1st Edition - FCT 

49 

 
 
 
 
 
 
Graph A4.1: Share of publications in the top 10% most-cited publications worldwide, 2012 and 2022. 

Source: Science-Metrix data using the Scopus database. 

the  creation  of 

funding  mechanisms  (63).  A  reform  is  currently 
to  streamline  R&I  governance  and 
ongoing 
the  government  has 
funding. 
In  particular, 
announced 
the  Agency  for 
Research  and  Innovation  (AI²)(64),  which  merges 
the current Foundation for Science and Technology 
(FCT)  and  the  National  Innovation  Agency  (ANI). 
The  new  Agency  will  operate  on  a  five-year 
contract-programme  with  the  aim  of  ensuring 
predictable  multiannual  funding.  The  decision  to 
streamline public administration and facilitate the 
relation between research and innovation activities 
has  the  potential  –  if  well  implemented  –  to 
increase  the  efficiency  of  the  R&I  ecosystem  and 
increase the predictability of funding. 

Business innovation 

Business  R&D 
intensity  has  gradually 
increased over the past decade, but this has 
not  yet  translated  into  stronger  innovation 
performance. Business R&D intensity has almost 
doubled in the last ten years, from 0.60% of GDP 
in  2014  to  1.09%  in  2024.  However,  innovation 
output remains limited, as evidenced by patenting 

remains 

activity.  This  is  measured  as  patent  applications 
filed  under  the  Patent  Cooperation  Treaty  per 
billion  GDP,  which 
rather  modest 
compared  to  the  EU  average  (1.05  compared  to 
2.81  in  2022)  despite  some  slight  improvements 
over  the  last  decade.  Medium  and  high-tech 
manufacturing  value  added  is  growing  modestly 
(65),  but  high-tech  exports  are  still  limited.  The 
impact of the investments under the Recovery and 
Resilience Facility (RRF)  is expected to materialise 
gradually  in  the  coming  years  and  bring  new 
innovative  products  and  services  to  the  market. 
Early indications show that the Mobilising Agendas 
for  Business  Innovation  large-scale  collaborative 
research  agendas  have  fostered  a  strong  culture 
of collaboration across sectors and contributed to 
concrete business growth. For example, four firms 
in  the  automotive  sector  reported  EUR 20  million 
in  additional  revenue  each  through  new  product 
development (66). 

The uptake of digital technologies by firms in 
Portugal  is  increasing,  although  progress  is 
constrained  by  the  predominance  of  micro 
and small enterprises with limited innovation 
capacity.  Portugal  performs  below 
the  EU 
average  in  terms  of  basic  digital  intensity  among 

(63)  OECD (2019), OECD Review of Higher Education, Research 

manufacturing value added) | Data 

and Innovation: Portugal, OECD Publishing, 
Paris, https://doi.org/10.1787/9789264308138-en 

(64)https://www.portugal.gov.pt/pt/gc25/comunicacao/noticia?i=go

verno-apresenta-a-agencia-para-a-investigacao-e-
inovacao-ai  

(66)  European Commission: Directorate-General for Research and 
Innovation, Study on the R&I measures in the Recovery and 
Resilience Facility – Country fiches, Publications Office of the 
European Union, 
2025, https://data.europa.eu/doi/10.2777/2973150 

(65)  Medium and high-tech manufacturing value added (% 

50 

0%2%4%6%8%10%12%14%16%2022 (citation window: 2022-2024)2012 (citation window: 2012-2014) 
 
 
     
Graph A4.2: Patent applications to the EPO by country of applicants and inventors in 2024 

(1) Per million inhabitants 
Source: Eurostat 

technologies  by  businesses, 

SMEs, reaching only 64% in 2025 compared to the 
European  average  of  71%.  The  adoption  of 
artificial  intelligence  by  businesses  also  remains 
well below the EU average (11.5% compared with 
20%). Similarly, cloud adoption lags behind the EU 
level  (34%  vs  47%).  By  contrast,  the  use  of  data 
analytics  exceeds  the  EU  average,  standing  at 
45%  compared  with  40%.  Portugal  continues  to 
implement measures to encourage greater use of 
digital 
including 
comprehensive  advisory  services (e.g.  through the 
Innovation  Hubs),  employee 
European  Digital 
upskilling  supported  by 
the  RRF  and  more 
specialised initiatives such as vouchers to support 
deep-tech  projects  in  applying  for  funding  from 
Innovation  Council  Accelerator. 
the  European 
Moreover, a National  Artificial  Intelligence Agenda 
was  approved  in  January  2026,  with  the  aim  to 
boost  AI  adoption  and  increase  its  use  across 
sectors,  especially  among  SMEs  and  public 
services. 

Portugal's  public  policy  provides  strong 
innovation,  mainly 
support  for  business 
through  tax  incentives  and  is  working  to 
improve the efficiency of such measures. The 
government provides significant public support for 
business  R&D,  the  second  highest  in  Europe  as  a 
proportion  of  GDP,  mainly  in  the  form  of  tax 
incentives.  The  proportion  of  GDP  spent  on  public 
support  for  business  expenditure  on  R&D  has 
increased  significantly  over  the 
last  decade, 
reaching  0.49%  in  2022,  more  than  twice  the  EU 

to  discontinue 

average  of  0.21%.  However,  an  evaluation  (67)  of 
the Portuguese R&D tax incentive scheme SIFIDE II 
by the technical unit for the evaluation of tax and 
customs  policies  (U-TAX)  concluded  that  while 
direct  corporate  R&D  incentives  are  effective,  a 
substantial  portion  of  capital  allocated  through 
indirect  funds  remained  unused  without  being 
deployed  into  actual  R&D  activities,  indicating  a 
disconnect  between  tax  benefits  claimed  and  real 
economic  impact.  This  assessment  underpinned  a 
legislative  proposal 
indirect 
contributions  after  2025,  while  direct  corporate 
R&D incentives are currently extended until 2026. 
The  economic  impact  of  indirect  SIFIDE  support 
will require further assessment to guide the design 
of future tax incentives policies. In terms of overall 
taxation  policy,  Portugal  has  reduced  parts  of  its 
tax  burden  with 
intention  to  stimulate 
economic  growth,  including  by  lowering  statutory 
corporate  income  tax  rates,  and  in  2024  the 
country  adopted  a  series  of  measures  of  which 
over 
enhancing 
competitiveness  and  prosperity  (68)  (see  Annex  3). 
The impact of such measures should be assessed 
in the coming years.  

80%  were 

aimed 

the 

at 

(67)  *U-TAX Assessment Report on Tax Expenditure in Portugal - 

June2025 

(68)  European Commission: Directorate-General for Taxation and 
Customs Union, Annual report on taxation 2025 – Review of 
taxation policies in the EU Member States, Publications 
Office of the European Union, 
2025, https://data.europa.eu/doi/10.2778/6367826 

51 

050100150200250300350400450500SELUFIDKNLDEATBEIEFREU27MTITSICYEEESPTLTCZLVPLHUSKHRELBGRO 
 
     
is  making 

improvements 

Portugal 
in 
fostering  academia-business  collaboration 
through  targeted  initiatives,  yet  challenges 
remain. Significant resources are being dedicated 
to  knowledge  valorisation  and  enhancing  public-
private  collaboration.  Under  the  recovery  and 
resilience plan (RRP), the network of "collaborative 
laboratories"  (COLABs)  has  been  expanded,  while 
the  implementation  of  the  mobilising  and  green 
agendas for business innovation has helped create 
public-private  consortia  for  the  development  of  a 
specific 
innovation  agenda.  Additionally,  since 
2023  a  programme  for  PhD  studentships  in  non-
academic environments (69) encourages researcher 
mobility  from  academia  to  the  private  sector, 
signalling  a  proactive  approach  to  bridging  the 
public-private divide. These policies have started to 
have  some  visible  impact,  even  if  challenges 
remain.  While  remaining  behind  the  EU  average, 
public-private 
co-publications  have 
shown  a  steady  upward  trend  (from  4.86%  in 
2014  to  6.35%  in  2024  vs  an  EU  average  of 
7.62%).  However,  the  proportion  of  public  R&D 
expenditure  financed  by businesses  has  remained 
constant in the last decade and well below the EU 
average  (0.02%  of  GDP  in  2024  vs  0.06%), 
showing  that  firms  have 
inclination  to 
contract  with  public  research  labs.  Addressing 
these gaps will require sustained  policy efforts to 
amplify  the  impact  of  existing  initiatives  and 
further 
academia-business 
collaboration. 

incentivise 

scientific 

little 

Entrepreneurial dynamism  

Portugal  has  a  promising  entrepreneurial 
ecosystem  with  a  good  birth  rate  for 
startups.  The  enterprise  birth  rate  of  Portugal  is 
higher than the EU average (70). Additionally, there 
was  robust  expansion  of  the  startups  ecosystem, 
with  the  number  of  startups growing by  8% 
compared to 2024 and reaching the target of over 
5 000  active  startups,  or  5 091  in  2025  to  be 

(69)  2025 Call for PhD Studentships – Specific Line of Application 

in a Non-academic Environment - FCT 

(70)  2025 edition of the 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). 

in 

Portugal, 

companies 

precise(71).  Startups  account  for  around  1%  of  all 
collectively 
active 
generating EUR 2.8 billion in turnover (a 9% year-
on-year  increase  from  2024)(72).  The  system  is 
supported  by  several  incubators  and  accelerator 
programmes,  although  the  focus  is  mainly  on 
startup creation and less on scale-up. The number 
of  national  university  spin-off  is  still  limited, 
despite the presence of incubators and technology 
interface centres across all universities. In 2025, a 
new  Portuguese  company  reached  unicorn  status 
and  there  are  currently  seven  unicorn  companies 
created  in  Portugal,  of  which  only  two  are  still 
headquartered there(73). 

for 

instrument 

companies  are 

to  growth.  To  mitigate 

still 
Opportunities 
in 
hampered  by  persistent  challenges 
accessing  venture  capital  financing.  On  the 
whole, availability of funds for scaling up activities 
is limited. Venture capital as a percentage of GDP 
reached  0.02%  in  2023,  well  below  the  EU 
average  of  0.06%  (see  also  Annex  6).  This 
highlights  a  persistent  financing  gap  for  early-
stage  innovative  firms,  which  struggle  to  access 
this 
capital  critical 
challenge  and  in  line  with  the  2025  CSR,  a 
financial 
and 
competitiveness (IFIC) has been created, managed 
by  the  Portuguese  development  bank,  Banco 
Português de Fomento and financed by the RRF. It 
combines  instruments  under  a  system  of  grants 
include 
capital 
and 
supporting  business 
in 
innovative  and  qualified  activities  and  in  research 
and  development  processes  (74).  In  terms  of 
foreign  direct  investment  (FDI),  the  benefits  for 
Portuguese  companies  are  still  limited.  While  FDI 
in Portugal has grown rapidly over the last decade, 
resulting in one of the highest levels of inward FDI 
the  overall 
stocks  among  OECD  countries, 
investment levels remain relatively low (75).  

Its  aims 
investment  projects 

investments. 

innovation 

for 

(71)  Startup & Entrepreneurial Ecosystem Report 2025 – Startup 

Portugal 

(72)  Startup & Entrepreneurial Ecosystem Report 2025 – Startup 

Portugal  

(73)  Unicorns | Dealroom.co 

(74)  Instrumento Financeiro para a Inovação e Competitividade - 

Banco Português de Fomento 

(75)  OECD (2023), The Impact of Regulation on International 

Investment in Portugal, OECD Publishing, 
Paris, https://doi.org/10.1787/688b30c8-en. 

52 

 
 
 
has 

room 

significant 

free  zones 

Portugal 
for 
improvement in fostering innovation-friendly 
legislation.  Despite  progress  in  the  past  years, 
the  country  still  has  some  burdensome  business 
regulations,  for  example  in  terms  of  product 
market  restrictions  (76)  and  barriers  to  market 
entry  (see  Annex  5.  While  innovation-focused 
innovation  procurement  and 
policies  such  as 
(TFZs)  have  been 
technological 
introduced, their scope remains limited. Innovation 
procurement,  in  particular,  shows  partial  progress 
but  substantial  gaps  remain.  Portugal  ranks  20th 
in  the  EU  with  a  26.08%  score  on  its  innovation 
procurement  policy  framework,  well  below  the 
European  average  of  33.05%  (77).  The  main 
challenges  relate  to  the  absence  of  a  dedicated 
innovation  procurement  action  plan,  no  R&D 
spending  targets,  an  underdeveloped  monitoring 
system and a lack of financial incentives for public 
buyers.  Additionally,  the  legal  framework  remains 
ambiguous,  hindering  clarity  and  accountability  in 
procurement  practices.  The  four  TFZs,  covering  (i) 
security  and  defence  systems,  (ii)  mobility  aiming 
at 
(iii) 
neutrality 
communication  and  electronic  technologies  and 
(iv) renewable energies of oceanic origin, designed 
to  accelerate  regulatory  experimentation  and 
support agile, innovation-friendly policies, have yet 
to  deliver  tangible  outcomes.  They  were  set  up 
only  recently,  two  in  2025,  and  they  will  need 
close  monitoring  to  assess  whether  there  have 
been any measurable improvements in intellectual 
or industrial property development, job creation or 
broader  enhancements  to  Portugal’s  innovation 
ecosystem.  

carbon 

cities, 

the 

of 

The  country  can  count  on  a  good  pool  of 
talent, but there is scope to further improve 
talent  retention  and  the 
integration  of 
skilled  immigrants.  Like  their  European  peers, 
Portuguese businesses report difficulties in finding 
skilled  staff  (78)  and  suffer  from  brain  drain. 
However, Portugal has one of the highest numbers 
of  new  graduates  in  science  and  engineering  per 
thousand population (20.64 in 2023, compared to 
the EU average of 16.82). In contrast, the number 
of graduates in the field of computing is relatively 

(76)  Portugal_PMR country note 

modest  compared  to  the  EU  average  (2.45  in 
2023,  compared  to  the  EU  average  of  3.84). 
National  campaigns  are  in  place  to  boost  STEMs 
skills  and  qualification 
through  experimental 
science  teaching,  such  as  the  one  promoted  by 
Ciência  Viva  (79).  Additional  resources  could  be 
pooled by better integration of immigrant workers. 
It  is  estimated  that  over  40%  of  immigrants  (80) 
with  higher  education  are  overqualified  for  the 
jobs  they  perform.  This  disparity  even  increases 
those  holding  degrees  obtained  outside 
for 
Portugal 
(see  Annex  13).  Specific  schemes, 
although  sometimes  lengthy,  are  in  place  to 
attract  foreign  entrepreneurs,  such  as  the  startup 
visa  programme,  designed  to  welcome  foreign 
entrepreneurs  who  intend  to  develop  projects 
capable  of  generating  startups  based  on  new 
ideas  and  business  models  (81),  or  the  tech  visa 
programme  aimed  at  attracting  professionals  in 
the field of technology from non-EU countries (82) .  

In  Portugal,  entrepreneurship  education 
remains  an  emerging  policy  area  that  is 
becoming  more  structured  through  recent 
curricular  reforms.  Under  the  revised  national 
strategy  on  citizenship  education  (83),  adopted  in 
2025, financial literacy and entrepreneurship have 
been  integrated  as  core  topics  of  the  citizenship 
education  curriculum  and  became  mandatory 
across  all  cycles  of  compulsory  education. 
Additionally,  each  school  will  be  required  to 
their  own  strategy  on  citizenship 
develop 
education,  covering  entrepreneurship  transversally 
through interdisciplinary projects and school-based 
activities  promoting  creative  problem-solving, 
personal  agency  and  economic  understanding.  In 
2024, 
for 
entrepreneurship 
developed 
through  close  collaboration  between  education 
authorities and key stakeholders, in alignment with 
the  EntreComp  framework.  However,  Portugal's 
approach remains less structured than in countries 
education 
entrepreneurship 
with 
largely 
implementation 
strategies, 
dependent on school-level capacity.   

dedicated 
and 

first  Portuguese 

education  was 

framework 

the 

is 

(79)  Homepage Ciência Viva 

(80)  Eurostat: [lfsa_eoqgan] Over-qualification rates by 

(77)  Portugal COUNTRY PROFILE – Benchmarking of national 
policy frameworks for innovation procurement, country-
report-2024-policy-benchm-portugal.pdf 

(78)  EIB Investment Survey 2024: Portugal overview, EIB 

Investment Survey 2024: Portugal overview 

citizenship 

(81)  Startup Visa - Visa 

(82)  Tech Visa  

(83)  enec-2025.pdf 

53 

 
 
 
Table A4.1:  Key innovation indicators 

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

54 

R&D intensity (gross domestic expenditure on R&D as % of GDP)1.531.251.611.691.681.73:2.243.44Public expenditure on R&D as % of GDP0.680.650.660.60.590.6:0.720.64Scientific publications of the country within the top 10% most-cited publications worldwide as % of total publications of the country 10.228.758.287.68:::9.4412.31Researchers (FTEs) employed by public sector (Gov+HEI) per thousand active population5.35.46.26.36.46.4:4.3:International co-publications as % of total number of publications45.5250.2954.1253.3452.955.47:57.24:Business enterprise expenditure on R&D (BERD) as % of GDP0.70.580.921.051.051.09:1.492.69Business enterprise expenditure on R&D (BERD) performed by SMEs as % of GDP0.230.270.460.510.530.55:0.470.3Researchers employed by business per thousand active population2.12.44.55.305.55.90:5.9:Patent applications filed under the Patent Cooperation Treaty per billion GDP (in PPS €)0.761.201.201.05:::2.812.20Employment share of high-growth enterprises measured in employment (%):::1.15*1.19*::0.87:SMEs with at least a basic level of digital intensity% SMEs (EU Digital Decade target by 2030: 90%)::::53.61:63.9471.39:Data analytics adoption% enterprises (EU Digital Decade target by 2030: 75%)::::38.56:44.9839.85:Cloud adoption% enterprises (EU Digital Decade target by 2030: 75%)::::32.29:34.1146.69:Artificial intelligence adoption % enterprises (EU Digital Decade target by 2030: 75%)::::7.868.6311.5419.95:Public-private scientific co-publications as % of total number of publications4.805.075.726.386.566.35:7.62:Public expenditure on R&D financed by business enterprises (national) as % of GDP0.000.010.010.010.010.02:0.060.02Total public sector support for BERD as % of GDP0.130.150.430.49:::0.21:R&D tax incentives: foregone revenues as % of GDP0.090.110.350.4:::0.10:BERD financed by the public sector (national and abroad) as % of GDP 0.040.040.080.100.120.12:0.11:Venture capital (market statistics) as % of GDP (calculated as a 3-year moving average)0.020.020.020.020.020.02:0.06:Seed stage funding share (% of GDP)0.000.000.000.010.010.01:0.01:Start-up stage funding share (% of GDP)0.010.020.010.010.010.01:0.03:Later stage funding share (as % of GDP)0.000.000.000.000.000.01:0.03:New graduates in science & engineering per thousand population aged 25-3412.6016.3319.5420.5020.64::16.82:Graduates in the field of computing per thousand population aged 25-340.670.701.982.042.45::3.84:Science and innovative ecosystemsPortugal2010201520202022202320242025EU average (1)USHeadline indicatorInnovative talentR&D investment & researchers employed in businessesInnovation outputsDigitalisation of businessesAcademia-business collaboration Public support for business innovationFinancing innovation 
 
   
 
ANNEX 5: SINGLE MARKET AND INDUSTRY 

its 

its 

financial 

improving 

late  payments, 

further  developing 

can  unleash 
by 

Portugal 
competitive 
business 
improving 
potential 
environment,  increasing  its  Single  Market 
integration  and 
its 
industry  and  economic  security.  Portugal’s 
business  environment  shows  high  business 
dynamism  and 
remains  strong. 
investment 
However, productivity and scalability of companies 
are  still  hindered  by  several  structural  barriers, 
level  of 
with  persistent  uncertainty,  a  high 
administrative  burden, 
skill 
shortages  and 
to  alternative 
limited  access 
finance.  In  this  regard,  Portugal’s  2025  country-
specific  recommendations  called  for  measures  to 
simplify  regulation,  improve  regulatory  tools  and 
reduce  administrative  burden  on  businesses, 
notably by lowering barriers to industrial licensing 
and removing obstacles to firms’ capacity to scale 
up,  innovate  and  enhance  productivity.  They  also 
urged  Portugal  to  foster  private  investment  in 
including 
venture  capital  and  private  equity, 
through  public-private  risk-sharing  mechanisms, 
alongside 
literacy. 
Furthermore,  the  recommendations  emphasised 
policymaking, 
evidence-based 
strengthening 
through  systematic  ex  post  policy  evaluations, 
sustaining 
investment-related 
economic  policy  on  research  and  innovation,  and 
reinforcing 
and 
transparency  in  the  preparation  of  public  policies 
(see  Annex  7).  In  this  context, Portugal is  taking 
some  steps  to  improve  its  business  environment 
and  dynamism,  by  designing  and  implementing 
several  simplification  measures,  like  Licensing 
Platform, LicencIA. Also, Portugal is one of the EU 
frontrunners on connectivity and it was very close 
to  meet  the  EU  targets  for  very  high-capacity 
networks (VHCN), fibre to the premises (FTTP) and 
5G  coverage  in  2025.  Nevertheless,  Portugal  has 
regressed  in  its  integration  to  the  Single  Market. 
Incomplete  transposition  of  EU  directives  and 
pending  infringements  are  increasing,  and  high 
barriers to entry and competition remain for retail 
regulated  professions.  Portugal’s 
and  certain 
energy-intensive industries are yet to recover from 
the  pandemic 
consequences  and  net-zero 
industries have a strong potential for development 
(including 
through 
permitting).  With  a  good  access  to  critical  raw 
materials and low-cost renewables, Portugal is in a 
position  to  seize  the  opportunity  to  support  the 
development of competitive net-zero value chains 
and the scalability of industry. 

involvement 

instruments 

stakeholder 

focus  of 

right 

the 

the 

Business dynamics 

Portugal’s  high  business  dynamism  is  not 
matched  by  an  increase  in  productivity.  In 
2024, SMEs in Portugal represented 67.9% of GVA 
and 76.3% of employment (84). Small business size 
is  one  of 
the  main  challenges  hindering 
productivity  in  Portugal.  Not  only  they  are  mostly 
SMEs, but also most of them are micro-companies, 
mostly  family  businesses.  Business  productivity 
per  company  size  is  significantly  lower  among 
SMEs  than  larger  companies,  especially  among 
micro and small ones (85). Portugal’s business birth 
rate  was  16.82%  in  2023,  which  together  with  a 
death rate of 11.48%, gives a total business churn 
rate  of  28.30%.  Thus,  Portugal’s  business 
dynamism  is  significantly  higher  than  the  EU 
average, which has an 18.97% churn rate (EU birth 
rate  10.46%;  EU  death  rate  8.51%)  (86).  While 
start-ups  grow  slower 
in  other  OECD 
countries,  Portugal  has  a  reasonably  supportive 
regulatory 
for 
incentive 
entrepreneurs,  strengthened  by  recent  reforms. 
Thus,  it  includes  relatively  more  self-employed 
workers compared to the rest of the OECD. This is 
partly due to Portugal’s economic structure, where 
small  firms  account  for  relatively  high  shares  of 
total  employment 
in  the  manufacturing  and 
knowledge-intensive  services  sectors,  as  small 
firms include self-employed workers (87). The low-
added  value  of  the  products  and  services  offered 
by  most  Portuguese  businesses  is  also  a  major 
barrier  to  increasing  productivity.  Furthermore, 
substantial  regional  disparities  persist  (see  Annex 
18). 

environment 

than 

and 

Labour  productivity  remains  at  the  bottom 
quartile  of  the  EU  with  mild  increases  over 
time. The labour productivity level in Portugal has 
reached  68.4%  of  the  EU  average  in  2024, 
reaching its peak since 2020 after a mild increase 
over  the  last  two  decades.  However,  projections 
show  it  will  start  declining  relative  to  the  EU 
average  in  the  coming  years,  to  reach  66.5%  of 
the  EU  average  in  2027.  This  ranks  Portugal  23rd 

(84)  European Commission, 2025, SME Performance Review - 
Internal Market, Industry, Entrepreneurship and SMEs 

(85)  OECD, OECD Economic Surveys: Portugal 2023 (EN). 

(86)  Eurostat, [bd_size] Business demography by size class and 

NACE Rev. 2 activity. 

(87)  OECD, OECD Economic Surveys: Portugal 2023 (EN). 

55 

 
 
 
 
 
out  of  the  27  EU  Member  States.  In  particular, 
to 
capital  deepening 
productivity  growth  over  the  past  decade.  TFP 
growth  has  been  stagnating  but 
recovering 
somewhat lately (88). 

contributing 

stopped 

Business 

productivity. 

thus  gone  below  2021 

Increasing  private  investment  is  key  for 
improving 
private 
investment in Portugal has decreased to 13.3% of 
GDP  in  2025,  0.5  pp  less  than  the  previous  year, 
and  has 
levels. 
Nevertheless,  it  remains  above  the  EU  average 
(12.6%).  On  the  other  hand,  public  investment 
represented 3% of the GDP in 2025, increasing 0.3 
pp  from  2024.  This  places  Portugal  0.9  pp  below 
the  EU  average  of  3.9%  (89).  Low  levels  of 
capitalisation  in  Portugal  are  accompanied  by  a 
mismatch  between  what  companies  should invest 
in versus what they can invest in.  

(36%)  and  business 

Despite of its decrease, FDI remains strong in 
Portugal,  most  notably 
in  the  business 
services  sector.  After  two  consecutive  years  of 
FDI increase, FDI in Portugal decreased by 11% in 
2023,  down  to  221  FDI  projects,  ranking  7th  in 
Europe  with  a  market  share  of  3.9%.  This 
reduction  follows  the  slowdown  trend  felt  in 
Europe.  The  main  recipients  were  software  &  IT 
services  & 
services 
professional  services 
they 
accounted for 57% of total  FDI projects. In terms 
of  origin,  the  United  States  leads  with  17.6%  of 
total  FDI  share  in  Portugal,  followed  by  France 
(13.1%),  Germany  (10.9%),  Spain  (10.0%),  the 
United  Kingdom 
(6.8%). 
Nevertheless,  the  EU  as  a  whole  represents  more 
than half of Portugal’s total FDI (51.6%). In terms 
of distribution across the country, the Lisbon area 
is  still  the  main  recipient  of  FDI  in  Portugal 
(29.5%),  followed  by  Central  Portugal  (23%)  and 
Northern Portugal (12.5%) regions (90). 

(9.0%)  and  Brazil 

(21%).  Together, 

Investors  see  Portugal’s  potential  and 
investment plans at an all-time high. 84% of 
investors surveyed intended to establish or expand 
operations  in  Portugal  over  the  next  year  in 
comparison  to  just  72%  in  overall  European 
countries.  77%  of  investors  expected  Portugal’s 

attractiveness to improve over the following three 
years,  compared  to  only  49%  in  2021.  The  three 
major risk factors for investors were: high interest 
rates  and  tightening  financial  conditions  (32%), 
political  instability  (29%)  (91),  and  high  inflation 
and  slow  growth  in  Portugal  (28%).  Investors 
made the following recommendations for Portugal 
to  maintain  a  competitive  position  globally  in 
attracting  FDI:  (1)  Allow  regulation  to  keep  pace 
(2) 
with  technological  and  other  disruptions; 
Develop  education  and  skills  and  facilitate  access 
to  talent;  (3)  Invest  in  major  infrastructure  and 
urban  projects;  (4)  Support  high-tech  industries 
and  innovation;  (5)  Develop  competitive  energy 
solutions  and  sourcing;  (6)  Protect  supply  chains 
and industrial sovereignty (92). 

business 

the  main 

regulation 

long-term  obstacles 

Skills  shortages,  uncertainty  about  the 
future, 
(including 
permitting) and labour market regulation are 
highlighted  by  firms  as  main  investment 
Investment 
obstacles.  According  to  the  EIB 
Survey, 
to 
investment  reported  by  Portuguese  firms  in  2025 
were: (1) availability of skilled staff (PT 88% vs EU 
79%) (2) uncertainty about the future (PT 88% vs 
EU  83%),  (3)  business  regulation  (PT  82%  vs  EU 
69%)  and  (4)  labour  market  regulations  (PT  77% 
vs  EU  64%).  Taking  a  closer  look  to  the  business 
regulation  barrier,  49%  of  Portuguese  businesses 
report  it  as  a  major  obstacle  to  investment, 
compared to the EU average of 34%. Also, by firm 
size, a slightly lower percentage of SMEs perceive 
the  abovementioned  obstacles 
for 
uncertainty  about  the  future),  compared  to  large 
firms (93). 

(except 

Business environment 

and 

regulatory 

administrative 
The 
improvement. 
framework  has  room  for 
According  to  the  2025  EIB  Investment Survey,  a 
large  proportion of  firms  stated  that  business 
regulations represented an  obstacle  to  investment 

(88)  European Commission. 

(91)  This survey was conducted in 2024. In May 2025, legislative 
elections took place and gave a clearer political picture. Thus, 
current numbers would most probably be significantly lower. 

(89)  Eurostat, [sdg_08_11] Investment share of GDP by 

(92)  EY Attractiveness Survey Portugal 2024 | EY Portugal 

institutional sectors. 

(93)  European Investment Bank, 2025, EIB Investment Survey 

(90)  EY Attractiveness Survey Portugal 2024 | EY Portugal 

2025: Portugal overview. 

56 

 
 
 
(82% vs 69% in the EU). As regards labour market 
regulation,  41% deemed it  a  major  obstacle,  well 
the  EU  average  of  27%.  A  higher 
above 
percentage 
perceive 
large 
regulations as an obstacle, compared to SMEs.  

companies 

of 

Several  structural  barriers  prevent  SMEs 
from  scaling  up.  These 
include  a  high 
administrative  burden  (including  permitting),  high 
energy prices, skills shortages, limited demand for 
the products/services and limited access to finance 
domestically.  However,  these  barriers  are  less 
prominent  than  in  the  rest  of  the  EU  on  average 
(94)  (CSR  2025.3  and  CSR  2025.5).  Portugal’s  21 
(95), 
recognised 
embedded  in  the  national  Smart  Specialisation 
framework,  provide  services  to  SMEs,  including 
collaborative innovation support, access to funding 
and  internationalisation,  which  may  help  address 
some of these scale-up constraints. 

Competitiveness 

Clusters 

to 

leading 

industrial 

(especially 

large  upfront  costs, 

Permitting  is  rising  as  the  main  bottleneck 
for  Portuguese  businesses’  growth  (CSR 
2025.3). Delays in decision-making on permitting 
hamper  business  development,  requiring  them  to 
bear 
the 
postponement or cancellation of initially profitable 
projects 
ones).  Also, 
stakeholders  claim  there  is  no  possibility  of 
simultaneity 
in  permitting  procedures.  The 
Portuguese  government,  through  the  2026-2027 
Action  Plan  of  the  National  Digital  Strategy,  is 
digitalising  the  entire  licensing  process,  with  the 
creation  of  a  single  digital  entry  point,  ensuring 
sectoral homogeneity and monitoring of the entire 
process,  and  the  use  of  artificial  intelligence 
(LicencIA) to substantially reduce processing times 
for  industrial,  environmental  and  urban  licencing. 
Also, it is implementing an interoperability regime 
to  ensure  information  exchange  across  all  public 
entities  and  prevent,  for  example,  duplicities  in 
permitting procedures. 

Overall,  Portugal  is  undergoing  a  broad 
review of its legislation with the intention to 
simplify  it  (CSR  2025.3).  Among  other  things, 
this review will give legal value to decisions made 
through  administrative  silence  and  will  allow  for 
collaboration  across  agencies.  Also,  the  Public 
Procurement Act is under reform with the intention 

(94)  European Commission Startups, scaleups and 

entrepreneurship - July 2025 - - Eurobarometer survey. 

to  simplify  its  procedures,  and  a  decree-law  will 
simplify  the  governance  model  for  European 
funds. 

Access  to  alternative  financing  is  key  to 
enhance  entrepreneurship  and  innovation.  In 
Portugal,  49%  of  firms  considered  access  to 
finance  to  be  an  obstacle  to  investment.  47%  of 
SMEs  versus  53%  of  large  companies  had  this 
view (96). Despite significant improvements, access 
to  alternative  financing 
in  Portugal  remains 
limited,  mainly  due  to  lack  of  financial  literacy, 
lack of private capital based in Portugal and high-
risk  aversion  of  businesses  and  banks  to  finance 
start-ups  and  highly 
innovative  projects.  The 
availability  of  venture  capital  financing  is  low, 
in  2024. 
representing  only  0.02%  of  GDP 
Moreover, there is a wide gap in the availability of 
funds  between  early  stage  and  later  stage  start-
ups, that is significantly larger in Portugal than in 
other European countries, reflecting a lack of later 
stage  financial  options  for  start-ups  to  scale  up. 
Access  to  venture  capital  and  other  alternative 
financing 
financing 
entrepreneurship and innovation due to higher risk 
profiles that banks struggle to properly assess (97) 
(98).  To  tackle  low  financial  literacy,  Portugal  is 
updating the National Plan for Financial Education 
and,  since  2025,  has  made  financial  literacy 
mandatory  across  all  years  of  compulsory 
schooling. 
is 
complemented  by  adult 
initiatives, 
including  an  e  learning  platform  accessible  to the 
general  public  and  public  awareness  campaigns. 
(See CSR 2025.3) (See Annex 6). 

structural  measure 
focused 

sources  are 

This 

key 

for 

challenge 
in 

The  late  payments  situation  has  worsened 
for 
and 
remains  a  major 
Portuguese  SMEs,  particularly 
the 
autonomous  region  of  the  Azores  and  in  the 
health  sector  (99).  Both  business-to-business 
(18.75  days)  and  government-to-business  (15.16 
days)  payment  gaps  are  above  the  EU  average 
(B2B  17.44  days;  G2B  13.63  days);  worsening 
in  B2B 
from 

the  previous  year,  especially 

(96)  European Investment Bank, 2025, EIB Investment Survey 

2025: Portugal overview. 

(97)  OECD, OECD Economic Surveys: Portugal 2023 (EN) 

(98)  OECD, OECD Data Explorer • Venture capital investments 

(market statistics) 

(99)  Part of the barriers highlighted in the 2025 Single Market 

(95)  European Cluster Collaboration, Country factsheet Portugal 

Strategy (“Terrible 10”), Single market strategy. 

57 

 
 
 
payments. Overall, the share of SMEs experiencing 
late  payments  in  B2B  transactions  (40.29%)  and 
G2B  transactions  (12.25%)  are  below  the  EU 
average  (B2B  41.13%  and  G2B  15.94%)  in  2025 
(100).  Moreover,  49%  of  Portuguese  SMEs  (vs  EU 
39%) identified late payments as a major problem 
for  their  company,  ranking  it  2nd,  just  after  high 
administrative  burdens  (101).  When  looking  at  the 
main  contributing  factors,  60%  of  Portuguese 
companies say that sanctions are not a sufficient 
deterrent (vs EU 37%). Another major cause is that 
existing  rules  are  not  systematically  enforced  (PT 
38%  vs  EU  32%).  Finally,  16%  attribute  late 
payments  to  a  lack  of  clarity in  the existing  rules 
(vs EU 8%) (102). According to official data from the 
Portuguese  authorities,  the  situation  appears 
especially  problematic  in  the  health  sector  and  in 
the  autonomous  regions  of  Madeira  and  the 
Azores.  Against  the  background  of  systemic 
payment  delays 
in  the  public  health  sector, 
reassignments  of  credits  provide  additional  form 
of external finance which is vital for the survival of 
businesses.  Practices  whereby  the  assignment  of 
credits  are  systematically  banned,  despite  the 
contractual obligations having been fulfilled by the 
creditor  and  accepted  by  the  debtor,  complicate 
the  financial  management  of  suppliers,  and 
especially SMEs. Therefore, Portugal would benefit 
from  ensuring  that  either  payments  to  suppliers 
are performed according to the statutory payment 
terms  or  that  refusals  to  assign  the  credit  to  a 
third party are justified by objective reasons linked 
to the performance of the contract.  

In a recent development, the government has 
aligned  the  definition  of  arrears  to  the 
definition  of  late  payments  laid  down  in 
Directive 2011/7/EU. According to this definition 
the  threshold  for  a  government  arrear  is  any 
payment referring to a commercial transaction not 
settled in 30 days (or 60 days for public hospitals), 
reducing the threshold from 90 days, thus allowing 
for  automatic 
late 
payments  from  that  that  moment  onwards.  This 
measure is part of Portugal’s compliance with the 
European Court of Justice judgement of July 11th, 
2024  (Case  C-487/2023),  which  declared  that 

interest  calculation  on 

Portuguese  authorities  had  failed  to  fulfil  their 
obligations under Article  4 of Directive 2011/7/EU 
(103). 

companies’ 

Portuguese 
payment 
performance is amongst the worst in the EU. 
In  terms  of  payment  punctuality,  Portuguese 
companies remain one of the weakest performers 
in B2B transactions in the EU. Continuing the trend 
observed  in  2023,  Portugal  exhibits  the  greatest 
disparity  among  EU  countries  between  micro  and 
large  companies  in  2024,  with  the  former  being 
nearly six times more likely to pay on time that the 
larger  counterparts.  Remarkably,  large  companies 
in Portugal recorded the lowest share of payments 
made on time in the EU, with only 4% of payments 
made  by  due  date in  2024,  while  it  was  23%  for 
micro companies (104). 

regarding 

Portugal  is  at  the  forefront  of  the  EU 
connectivity 
countries 
infrastructure.   In  2025,  Portugal’s  coverage  of 
Very High-Capacity Networks (VHCN) reached 95% 
while  the  fibre  to  the  premises  (FTTP)  coverage 
stood  at  93%,  marking  a  sustained  growth  and 
bringing  the  country  to  the  level  of  the  EU 
frontrunners  on  connectivity.  Overall  5G  coverage 
stood  at  99% while coverage  in  the  3.4-3.8GHz 
band,  considered  strategic  for  advanced  5G 
performance, reached 71%, standing above the EU 
average. In 2025, publicly co-funded works began 
to  connect  more  than  400  000  households  and 
businesses from so-called ‘white areas’ to gigabit 
VHCN  network  by  2026  2027.  This  will  broaden 
access  and  allow  more  agile  online  presence  for 
businesses and consumers.   

Ensuring  Portugal  has  a  well-developed 
transport  infrastructure,  for  both  road  and 
rail transport is key for investors. According to 
the  EIBIS  survey (105),  51%  of  Portuguese 
businesses  considered  the  state  of  transport 
infrastructure  an  obstacle  to  investment  in  2025 
(vs 45% in the EU). For example, it is ranked 38th, 
together  with  India,  Lithuania,  Saudi  Arabia  and 

(100) Intrum, 2025, European Payment Report 2025 | Intrum. 

(101) European Commission Startups, scaleups and 

entrepreneurship - July 2025 - - Eurobarometer survey. 

(102) EU Payment Observatory: Annual Report 2025, Observatory 
Analysis - Internal Market, Industry, Entrepreneurship and 
SMEs 

(103) Council of Ministers decisions February 26th, 2026, approved 

by the Parliament on April 10th. 

(104) EU Payment Observatory: Annual Report 2025, Observatory 
Analysis - Internal Market, Industry, Entrepreneurship and 
SMEs 

(105) European  Investment  Bank,  2025,  EIB  Investment  Survey 

2025: Portugal overview. 

58 

 
 
 
Turkey,  out  of  the  139  countries  covered  by  the 
World Bank Logistic Performance Index (106).  

Single Market 

Portugal  can  deepen  its  participation  in  the 
in  goods  and 
EU’s  Single  Market,  both 
services.  Portugal’s  intra-EU  trade  integration  in 
2025 was 22.3% (ratio of trade  volumes to GDP) 
in goods, and 8.2% in services. This is well above 
the  EU  average  of  18.7%  for  goods  and  7.6%  in 
services  (107).  On  the  one  hand,  this  implies  a 
notable  and  continuous 
trade 
integration  of  goods  in  the  last  few  years  (from 
26.4% 
in  2022).  On  the  other  hand,  trade 
integration in services remains at 2024 levels, but 
it  still  presents  a  large  margin  for  improvement. 
Moreover,  72%  of  Portuguese  firms  are  engaged 
in international trade (108).  

regression 

in 

The transposition of Single Market directives 
has significant margin for improvement  (109). 
Portugal  ranks  third  to  last  among  the  EU27  in 
transposing  EU  directives  into  national  law,  with 
2%  of  all  directives  not  being  transposed  versus 
the  EU  average  of  1.1%.  This  doubles  Portugal’s 
2024 numbers, that now exceed the 1% target set 
up  by  the  EU  Council.  In  contrast,  Portugal  ranks 
below  the  EU  average  on  the  percentage  of  all 
directives being transposed incorrectly (PT 0.7% vs 
EU  1.1%).  Regarding 
in 
transposing directives, Portugal  ranks close to the 
EU  average  (9.9  months  vs  EU  9.7  months).  The 
situation  has  worsened  in  the  number  of  pending 
infringements (PT 34 vs EU 25). On the other hand, 
the  average  duration  of  infringement  proceedings 
is the lowest in the EU. Moreover, it is important to 
single  out  that  new  legislation  should  follow  the 
simplification  principle  at  all  times  to  avoid 
creating  a  much  larger  amount  of  administrative 
burden  than  the  one  that  is  being  reduced.  In 
2025,  Portugal  resolved  90.1%  of  the  SOLVIT 

the  average  delay 

cases it handled as lead centre, which is above the 
EU  average  of  84.6%  (110).  This  is  a  remarkable 
performance,  because  the  SOLVIT  centre  had  to 
deal  with  350  cases  related  to  the  difficulties  of 
EU  nationals  and  non-EU  family  members  in 
obtaining  an  appointment  with  AIMA  (ex-SEF)  to 
complete 
(registration 
certificates,  permanent  residence  cards  and  their 
renewal).  

residence  procedures 

Compliance  of  products circulating  in  the 
Single Market (111) is key to ensuring a level-
playing  field  for  law-abiding  companies  and 
the  safety  of  consumers. In Portugal, 
the 
number  of  market  surveillance  investigations  has 
increased  compared  with  2019.  In  2025,  national 
authorities  reported  in  the  EU  system  for  market 
surveillance  (ICSMS)  a  total  of 29.5 investigations 
per one million inhabitants, which is lower than the 
EU median 
of 
in  absolute  terms, 
notifications remains limited 
which  may  also  be  the  result  of  insufficient  IT 
national interoperability to the ICSMS system. The 
upcoming  revision  of  the  Market  Surveillance 
fully 
Regulation  will  upgrade 
interoperable EU digital platform.  

of 136.2. The 

number 

ICSMS 

to  a 

Regulatory and administrative barriers to the 
single  market  persist  in  Portugal,  affecting 
trade in goods. For goods, businesses report that 
packaging  and  labelling  rules  —  such  as  the 
mandatory  origin  labelling  for  food  products  and 
recycling  instructions  (112)    —  create  compliance 
burdens.  

limited  resources  of  the  national 
The 
standardisation 
system  are  negatively 
affecting  the  functioning  of  the  single 
market,  and  the  competitiveness  of  SMEs  in 
national 
manufacturing. 
standardisation  body,  the  Instituto  Português  da 
Qualidade  (IPQ),  is  limited  in  its  work  by  serious 
resource constraints and, consequently, is not able 
role  of  providing 
to  fully  comply  with 

Portugal’s 

its 

(106) World Bank Logistic Performance Index 2023 | Logistics 

Performance Index (LPI) 

(107) Eurostat, Intra-EU trade in goods - main features - Statistics 

Explained - Eurostat, International trade in services - 
Statistics Explained - Eurostat. 

(108) European Investment Bank, 2025, EIB investment survey. 

(109) Part of the barriers highlighted in the 2025 Single Market 

Strategy (“Terrible 10”), Single market strategy. 

(110) European Commission, 2025, Single Market and 

Competitiveness Scoreboard, Country data: Portugal | Single 
Market and Competitiveness Scoreboard 

(111) Part of the barriers highlighted in the Single market 

strategy (‘Terrible Ten’) and the 2026 Annual Single Market 
and Competitiveness Report. 

(112) European Round Table for Industry (ERT), Single Market 
Compendium of Obstacles, 21 May 2025, Single Market 
Compendium of Obstacles. 

59 

 
 
 
information  on  and  facilitation  of  access  to 
standards  for  SMEs.  In  addition,  it  is  difficult  for 
the IPQ to promote and facilitate the involvement 
of  Portuguese  firms 
in  the  development  of 
European  harmonised  standards  and  to  make 
them  available  in  Portuguese  language.  These 
limitations  in  IPQ’s  work  create  obstacles  to  the 
accessibility  and  use  of  European  harmonised 
standards  by  companies,  generating  additional 
costs (e.g. for translation, for consultancy services 
and  for  external  conformity  assessment  services) 
and  making  it  more  difficult  for  companies  to 
anticipate  and  prepare  for  future  changes  that 
have an impact on their production systems. 

it  has 

(0.050),  although 

Regulatory  restrictiveness  remains  low  in 
services,  but  barriers  to  entry  and  to 
competition in the retail sector are high. (113). 
Services  trade  restrictiveness  in  Portugal  remains 
low  (0.048  in  2025)  and  well  below  the  EU 
increased 
average 
compared  to  2024  (114).  In  retail,  the  OECD’s 
Product  Market  Regulation  indicator  (PMR)  (115) 
highlights  Portugal’s  retail  market  as  highly 
restrictive,  most  significantly  in  retail  distribution 
(score of 2.29 in Portugal vs 1.17 EU average) and 
the  retail  sale  of  medicines  (3.38  vs  2.96  EU 
average). 
its  Retail  Restrictiveness 
Indicator  (RRI)  score  (116)  of  1.51  was  lower  than 
the EU median of 1.70. The restrictive environment 
was  particularly  pronounced  in  the  operational 
pillar,  where  Portugal  scored  2.25  (significantly 
higher  than  the  EU  median  of  1.20),  partially  due 
to  the  existence  of  retail-specific  taxes  and 
regulation of sales promotions. 

In  2022, 

For  many  professions,  regulatory  barriers  to 
entry  and  competition  remain  high 
in 
Portugal.  Portugal  ranks  relatively  well  on  the 
OECD  Product  Market  Regulation  (PMR)  indicator, 
which  measures  regulatory  barriers  to  firm  entry 
and  competition,  although  the  detailed  sub-
indicators  point 
to  specific  sectors  where 
regulations  remain  relatively  stringent,  including 
some  professions  and  the  retail  sector.  There  are 
253  specific  regulated  professions  in  Portugal, 

(113) Part of the barriers highlighted in the 2025 Single Market 

Strategy (“Terrible 10”), Single market strategy. 

(114) OECD, 2026, Services Trade Restrictiveness Index: Portugal  

(115) OECD, Product market regulation | OECD 

(2.5 

ranking it seventh in the EU (117). Many professions 
to  entry  and 
present  very  high  barriers 
competition,  such  as  civil  engineers 
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  (118). 
Given their recent introduction, the effects are yet 
to  be  reflected  in  Portugal’s  OECD  PMR  scores, 
which are expected to improve. So far, progress in 
addressing  barriers 
in  the  field  of  business 
services  has  remained  limited.  In  answer  to  a 
survey  carried  out  by  the  Commission  between 
December  2025  and  February  2026,  Portugal 
reported  it  fully  implemented  7,  and  partially 
the  2021 
implemented  5, out  of  12  of 
(119). 
Commission 
The 
is  currently  assessing  Portugal’s 
Commission 
answer,  so 
it  can  measure  actual  progress 
in implementing the 2021 recommendations.  

recommendations 

Portuguese  SMEs  have  difficulties  to  scaling 
up  in  other  EU  countries  due  to  several 
Single  Market  barriers  (120).  The  three  main 
ones are (compared to EU average): (1) Permitting 
and  authorisations  (PT  40%  vs  EU  28%),  (2) 
Taxation  and  Value  Added  Tax  (VAT)  (PT  31%  vs 
EU  30%),  (3)  Posting  of  workers  (PT  29%  vs  EU 
17%).  Another  barrier  that  stands  out  in  the  case 
of  Portugal  is  “Territorial  supply  constraints  (PT 
19% vs EU 16%)” (121). There is on-going dialogue 
between  Portugal  and  Spain  to  establish  an 
“Iberian Regime”, which aims at analysing barriers 
to trade, services and investment between the two 
countries  within  the  framework  of  cross-border 
cooperation, with a view to their possible removal 
through  strengthened  administrative  cooperation 
and tackle market fragmentation barriers between 
the two countries. 

(117) OECD, Product market regulation | OECD 

(118) EC, Communication on updating the reform 

recommendations for regulation in professional services, 
COM(2021) 385. 9/7/2021; OECD, 2024 Portugal_PMR 
country note 

(119) European Commission, 2021, Communication on updating 
the reform recommendations for regulation in professional 
services, COM(2021)385. 9/7/2021, Eur-lex.europa.eu. 

(120) Part of the barriers highlighted in the 2025 Single Market 

Strategy (“Terrible 10”), Single market strategy. 

(116) European Commission, Retail Restrictiveness Indicator – 

Portugal, Microsoft Power BI 

(121) European Commission Startups, scaleups and 

entrepreneurship - July 2025 - - Eurobarometer survey. 

60 

 
 
 
While  such  contracts  remain  subject  to  the 
preventive  control  by  the  Court  of  Auditors,  the 
suspensive  effect  of  a  check  on  projects  was 
limited to exceptional instances (127). Stakeholders 
pointed  out  that  the  new  rules  may  lead  to  an 
increase in corruption risks (128). 

the 

and 

need 

stronger 

procurement 

fragmented 

underscores 
interoperability 

Portugal’s 
eProcurement 
landscape  and  data  quality  issues  highlight 
the need for interoperable systems, common 
standards, 
data 
governance.   Given  Portugal’s  decentralised 
eProcurement landscape, with two to five separate 
Procurement  services in  operation  (129),  economic 
operators  must  use  several  systems  to  access  all 
procedures, 
public 
creating 
to  participation.  This 
complexity  and barriers 
fragmentation 
for 
introducing 
common 
standards. The once-only principle is only partially 
implemented  at  national  level  (see  Annex  7),  and 
buyers  across  the  EU  still  lack  digital  access  to 
relevant  evidence.  However,  Portugal  is  the  first 
Member  State  that  has  started  a  pilot  for  the 
tool 
Business  Wallet,  a  digital 
supporting the qualification of economic operators. 
Portugal’s  authorities  have  reported  data  quality 
concerns, pointing to the need for robust validation 
system 
rules. 
public 
would benefit from a 
procurement 
analysis 
data 
service within  the  government to  support  data-
driven oversight of the procurement lifecycle (130). 

Portuguese 
dedicated 

Therefore, 

credential 

collection 

and 

and 

the 

Portugal  benefits  from  its  participation  in 
the  unitary  patent  system.  It  offers  key 
advantages  in  promoting  innovation  and  boosting 
competitiveness.  

into 

Also, 

improve 

implementing 

Recent  RRP  reforms  are  expected  to  help 
its  public  procurement 
Portugal 
environment.  In  Portugal,  42%  of  total  public 
tenders were single bids (vs EU median 27%), and 
2%  were  direct  awards  (vs  EU  median  6%)  (122). 
Under  the  RRP,  an  action  plan  to  strengthen 
centralised  purchasing  mechanisms  for  medicines 
has  entered 
the 
force, 
recommendations  of  the  independent  assessment 
in 
of  centralised  procurement  of  medicines 
Portugal. 
systems 
12 
(databases)  for  the  national  central  procurement 
system  are  now  in  use  contributing  to  different 
policy 
administrative 
such 
simplification. Overall, Portugal is well advanced in 
the digitalisation of its public procurement services 
(123).  Moreover,  Portugal  has  announced 
its 
intention  to  modernise  its  administrative  and 
simplify 
public  procurement 
procedures, 
restore 
confidence  in  public  decision-making.  In  this  vein, 
measures  have  been  recently  announced  to 
streamline public procurement. 

reduce  bureaucracy,  and 

information 

framework; 

objectives, 

as 

to 

Businesses’  views  on  corruption  risks  in 
public  procurement  are  below  the  EU 
average.  In  Portugal,  78%  of  companies  (EU 
average: 53%) consider conflicts of interest in the 
evaluation  of  bids 
in  public  procurement 
procedures, and 74% (EU average: 45%) abuse of 
emergency  reasons  to  justify  non-competitive 
procedures,  “very”  or  “fairly  widespread”  practice. 
Among  companies  that  have  experience  in  and 
participated  in  a  public  procurement  procedure, 
20%  think  that  corruption  has  prevented  them 
tender  or  a  public 
from  winning  a  public 
procurement  contract  in  practice  (EU  average: 
25%) (124). 68% of companies perceive the level of 
independence  of  the  public  procurement  review 
body  (Administrative  and  Tax  Courts)  as  very  or 
fairly good when it is reviewing public procurement 
cases  (125).  Portugal  introduced  new  rules  which 
amended the Court of Auditors’ preventive control 
financed  or  co-financed  by 
over  contracts 
European  funds,  with  no  time  or  value  limit  (126). 

(122) European Commission, 2026, Country data: Portugal | Single 

(127) Rule of Law Report- Country Chapter Portugal (2025), p. 13. 

Market and Competitiveness Scoreboard 

(128) Rule of Law Report- Country Chapter Portugal (2025), p. 13. 

(123) The Digital Decade 2025. European Commission. 

(129) As reported in the eProcurement matrix. 

(124) Flash Eurobarometer 557, p.133. 

(125) Justice Scoreboard (2025), p. 53; Flash Eurobarometer 555, 

p. 39. 

(126) Rule of Law Report- Country Chapter Portugal (2025), p. 12. 

(130) European Court of Auditors, Special Report 28/2023: Public 
Procurement in the EU. Less competition for contracts 
awarded for works, goods and services in the 10 years up to 
2021, 2023, Special report 28/2023: Public procurement in 
the EU 

61 

 
 
 
capacity.  Thus,  Portugal 

fiscal  measures  in  other  EU  Member  States,  final 
prices in Portugal end up being significantly higher, 
harming  not  only  industrial  competitiveness,  but 
decarbonisation 
is 
evaluating  the  need  to  introduce  fiscal  and/or 
political  measures  to  return  to  competitive  final 
electricity  prices.  In  the  meantime,  Portugal  has 
issued  a  Joint  Ministerial  Letter  calling  for  a 
greater  coherence  between  national  energy  price 
support schemes, to safeguard the internal energy 
market.  On  another  note,  Portugal  already  has  a 
high  proportion  of  renewables  in  its  energy  mix 
(36.3% in 2024 vs EU average of 25.2%) (133) and 
would  benefit  from  leveraging  its  favourable 
climate to further increase energy generation from 
renewables. (CSR 2025.4) (See Annex 9). 

Graph A5.1: Manufacturing industry production: 
total and selected sector, index (2021=100), 
2015-2024 

Industry and economic security  

industries 

Energy-intensive  industries  (EIIs)  have  been 
struggling  to  recover  from  the  pandemic 
crisis.  In  2024,  manufacturing  production  of 
energy-intensive 
in  Portugal  has 
decreased  by  1.6%  since  2021  and  5.8%  below 
pre-Covid-19 levels. Manufacturing of chemicals is 
the sector that suffered the most in the pandemic 
and has not been able to recover, accumulating a 
drop  of  -56.5%  since  its  peak  in  2017  (-47.5% 
since 2021) (see graph A2.2). Also, manufacturing 
of wood has an accumulated loss of -21.1% since 
(131). 
the  end  of 
the  pandemic 
Manufacture  of  the  rubber  sector  has  been  the 
only energy-intensive industry to fully recover with 
a 6.1% increase since 2021. To help EIIs, Portugal 
has  introduced  an  Electro-Intensive  Consumer 
Statute  in  April  2025,  which  introduces  partial 
reductions  in  charges  related  to  Costs  of  General 
Economic  Interest  (by  75%-85%),  directly  linking 
support 
to 
decarbonisation  commitments.  Also,  it  has  been 
implementing  an  indirect  CO2  cost  compensation 
scheme and a structural reduction of system costs, 
where  60%  of  EU  ETS  revenues  are  allocated  to 
reducing  tariff  debt  in  the  National  Electricity 
System,  contributing to  lower  structural  electricity 
costs.  

competitiveness 

in  2021 

electricity 

for 

Low and stable energy prices are key for the 
development  of  energy-intensive  industry 
and  its  decarbonisation.  Electricity  prices  for 
EIIs  in  Portugal  have  increased  by  17.11%  in  the 
last  year  and  remain  at  EUR/kWh  0.0917  by  the 
end  of  the  first  half  of  2025;  still  below  the  EU 
average  of  EUR/kWh  0.1117,  which  increased  by 
4.49% (132). Increasing energy costs, weak demand 
and  global  competition  put  pressure  on  energy-
intensive  industries.  Despite  these  prices  being 
significantly  lower  than  the  ones  experienced  in 
industry  still 
the  2022-2023  energy  crisis, 
perceives  current  prices  are  too  high  and  volatile, 
and 
which 
investment 
hampers 
production  output.  The 
this 
perception  is  that,  although  electricity  prices  for 
non-households  in  Portugal  appear  to  be  among 
the lowest in the EU, due to state-aid schemes and 

planning 
reason  behind 

(131) Eurostat. [sts_inpr_a] Production in industry - annual data 

(132) Eurostat. [nrg_pc_205] Electricity prices for non-household 
consumers - bi-annual data (from 2007 onwards) – band IF 

Source: Eurostat 

Portugal’s  net-zero  industry  could  benefit 
from  optimising  its  competitive  advantages. 
Portugal’s three largest industrial net-zero sectors 
by value are solar power (PV and thermal), with a 
production  amounting  to  EUR  638  million  (1%  of 
total  EU  production),  EUR  260  million  (1%  of  EU 
production)  for  heat  pumps  and  geothermal,  and 
EUR  220  million  (a  negligible  share  of  EU 
production)  for  wind.  Portugal  is  a  competitive 
exporter  of  grid  technologies,  including  non-glass 
electrical 
insulators,  relays,  ceramic  electrical 
insulators,  parts  of  electrical  devices,  and  small 

(133) Eurostat, [nrg_ind_ren] Share of energy from renewable 

sources 

62 

50607080901001101201302015201620172018201920202021202220232024ManufacturingWood and products of wood and cork, except furniture;  articles ofstraw and plaiting materialsPaper and paper productsChemicals and chemical productsRubber and plastic productsOther non-metallic mineral products 
 
   
 
crucial 

is 
and 

for 
coordination 

is  making  sound  progress 

Portugal 
in 
implementing  the  Net-Zero  Industry  Act.  It 
has  successfully  designated  a  single  point  of 
streamlining 
contact,  which 
communication 
among 
has 
stakeholders. 
established a national  contact  point to administer 
applications,  facilitating  the  advancement  of  Net-
Zero  Strategic  Projects.  So  far,  Portugal  has  no 
confirmed Net-Zero Strategic Projects and there is 
no specific indication of a designated or interest in 
Net-Zero  Acceleration  Valleys,  which  could  help 
attract further strategic projects. 

Furthermore, 

Portugal 

Portugal  has  the  largest  lithium  deposits  in 
Europe,  which  could  reduce  dependencies  on 
critical  raw  materials  for  European  battery 
manufacturers.  With  access  to  critical  raw 
materials  and  low-cost  renewables,  Portugal  has 
two  key  advantages  for  developing  competitive 
net-zero value chains. However,  a lack of scale in 
industry  and  government  support  as  well  as  a 
focus  on  low-added  value  uses  such  as  exporting 
hydrogen  and mined  and refined  lithium, leads  to 
missed opportunities for Portugal regarding higher 
value  activities  such  as  the  manufacturing  of 
batteries and electrolysers (136). Currently, Portugal 
has four projects under the CRMA, three on lithium 
and  one  on  copper.  These  projects  will  start 
operations  between  2027  and  2030,  and  will 
include  extraction,  processing  and  refining  hubs. 
Overall,  it  has  a  32.3%  of  dependency  on  critical 
(137). 
raw  material 
Moreover,  Portugal  has  one  of  the  lowest  circular 
material use rates in the EU (PT 3% vs EU 12.2%) 
(138).  According to industry  stakeholders, there  are 
no incentives for the recycling and use of second-
raw  material,  and  they  denounce  the  presence  of 
systemic  barriers.  Higher  materials  circularity 
would further reduce dependencies.  

(vs  EU  22.4%) 

imports 

electric  boards  and  panels,  with  an  estimated 
export  potential  of  EUR  1.1  billion  and  higher 
revealed  comparative  index  (RCA)  compared  to 
China and the USA. Portugal  is also a competitive 
exporter 
technology 
components,  including  iron  or  steel  structures  for 
wind  turbines  and  compressors  for  heat  pumps, 
outperforming China and the USA regarding export 
competitiveness in both categories (134). 

Net-Zero 

other 

of 

for 

shop 

length  of 

Industry  System 
factors, 

The  permitting  procedure 
for  net-zero 
technologies  is  the  same  as  for  any  other 
the 
industrial  production.  The 
industrial  permit  application  process  under  the 
(SIR)  Platform 
Responsible 
depends  on  several 
the 
including 
complexity  of  the  project  and  the  category  of the 
industrial  establishment.  This  platform  provides  a 
permitting 
one-stop 
applications 
integrates 
environmental and industrial permitting processes, 
but 
it  does  not  specifically  target  net-zero 
technologies.  In  2024,  the  European  Commission 
has  approved  two  Portuguese  measures  (one 
under  the  RRP  for  a  value  of  EUR  350  million) 
the  Temporary  Crisis  and  Transition 
under 
Framework 
the 
in 
production  of  certain  net-zero 
technologies, 
namely batteries, solar panels, wind turbines, heat 
pumps,  electrolysers  and  equipment  for  carbon 
capture usage and storage (135). 

submitting 
It 

to  support 

investments 

2025.3). 

(CSR 

Portugal  wants  to  reinforce  the  country’s 
role  in  EU  value  chain  ecosystem  while 
advancing in the decarbonisation of industry. 
It  has  identified  four  challenges:  (1)  financing 
constraints,  (2)  exposure  to  global  supply  chain 
volatility,  (3)  market  uncertainty  for  emerging 
technologies, and (4) a need for a faster and more 
predictable  permitting  processes.  To  tackle  them, 
Portugal  envisages  a  new  Green 
Industrial 
Strategy  in  2026.  This  focuses  on  the  green 
transition  in  existing  industries  and  the  attraction 
and scaling up of new net-zero tech projects. It will 
combine 
competitiveness, 
innovation  and  investment  policies,  aligning  with 
EU initiatives, including NZIA. 

decarbonisation, 

(134) European Commission and ECORYS, 2025, The net-zero 

manufacturing industry landscape across the Member States. 
Annex 2, Country fiches - Publications Office of the EU 

(136) European Commission and ECORYS, 2025, The net-zero 

manufacturing industry landscape across the Member States. 
Annex 2, Country fiches - Publications Office of the EU 

(135) European Commission and ECORYS, 2025, The net-zero 

manufacturing industry landscape across the Member States. 
Annex 2, Country fiches - Publications Office of the EU 

(137) Eurostat, [cei_gsr030] Material import dependency 

(138) Eurostat, Circular material use rate[cei_srm030] 

63 

 
 
 
Table A5.1:  Single Market and Industry 

Source: (1) Eurostat, (2) EIB Investment Survey, (3) EIF SME Access to Finance Index, (4) Intrum Payment Report, (5) SAFE survey, 
(6) OECD, (7) data up to 2024: Single Market and Competitiveness Scoreboard, 2025: Commission calculation based on TED data, 
accessible at the Public Procurement Data Space (PPDS) (*) the value represented here under EU average is the median, (8) Single 
Market and Competitiveness Scoreboard, (9) European Commission calculations. 

64 

POLICY AREA20212022202320242025EU-27 average64.565.466.868.466.9100.013.814.114.113.813.312.62.62.42.62.73.03.9Business environment and simplification45.846.348.648.849.034.00.460.660.270.33-0.430.050.070.050.08-0.1911.813.615.414.618.817.411.910.416.815.015.213.6from private entities in the previous or current quarter---42.740.347.1from public entities in the previous or current quarter---13.712.315.930.234.032.030.930.540.70.0490.0490.0490.0480.0480.05020252238422775102261.41.30.41211.11.30.80.70.71.193.9893.28789.390.184.62832252734250.12250.19670.18600.13930.14330.146231.632.533.2--32.734.034.735.236.3-25.228.932.231.532.3-22.42.83.43.03.0-12.2PortugalINDICATOR NAMEBusiness environment and investmentProductivity and investmentLabour productivity (GDP per hour worked in PPP terms), % of EU271Business investment (share of GDP)1Public investment (share of GDP)1Impact of regulation on long-term investment, % of firms reporting business regulation as a major obstacle2SME liquidityEIF Access to Finance for SMEs index - loans3EIF Access to Finance for SMEs index - equity3Late paymentsPayment gap - corporates B2B, difference in days between offered and actual payment4Payment gap - public sector, difference in days between offered and actual payment4Share of SMEs experiencing late payments, %5Industry and economic securitySingle Market IntegrationEU trade integration, average(intra-EU imports + intra EU exports)/GDP, %1EEA Services Trade Restrictiveness index6Public procurementSingle bids, % of total contractors7*Direct awards, % of negotiated procedures7*ComplianceTransposition deficit, % of all directives not transposed8Conformity deficit, % of all directives transposed incorrectly8SOLVIT, resolution rate per country, %8Number of pending infringement proceedings8Energy-intensive industriesElectricity prices for non-household consumers1Electrification (electricity as a share of total energy consumption in industry)1Share of energy from renewable sources (renewable energy generation as a share of overall energy consumption)1Critical raw materialsMaterial import dependency, %1Circular material use rate1Operational cleantech manufacturing capacity in 20259 - Solar PV (c: cell, w: wafer, M:module), GW- - Electrolyzer, GW- - Heat pump assembly 0.1 - Battery, GW- 
 
      
 
ANNEX 6: SAVINGS, INVESTMENT AND ACCESS TO FINANCE 

Table A6.1:  Savings and Investment Union summary diagnostic 

Source:  OECD (pensions), Eurostat (households' financial wealth), FISMA CMU dashboard (VC and PE), national sources (capital 
taxation). End-2024. 

Non-bank 

bank-centric. 

demonstrates 

Portugal 
progress  along 
several  key  indicators  of  the  Savings  and 
Investment Union, though it remains mid-tier 
among  European  peers  (see  Table  A6.1).  The 
corporate sector is dominated by micro and small 
enterprises.  Local  firms  have  a  clear  preference 
for self-financing and bank lending. A reflection of 
that business structure is a financial sector that is 
financial 
very 
intermediaries  play  a  relatively  limited  role,  with 
investment funds and insurance corporations each 
holding  assets  valued  at  around  19%  of  GDP  in 
2024  (EU  average:  53%  for  insurers  and  133% 
investment  funds).  The  assets  of  public  and 
private  sector  pensions  were  worth  about  a 
quarter  of  2024  GDP,  but  private  pension  funds 
are fragmented, of modest size, and lack an auto-
enrolment  mechanism.  The  local  capital  market 
exhibits  a  limited  footprint  within  the  European 
context  with  a market  capitalisation  equivalent to 
in  mid-2025,  over  45 
just  22.5%  of  GDP 
percentage  points  (pps)  below  the  EU  average. 
Debt  securities  outstanding  are  worth  about  the 
remain  dominated  by 
national  output  and 
government  bonds  (61.6%  of  GDP)  and  credit 
institution  issuance  (19.5%  of  GDP).  Households’ 
financial assets, at 187% of GDP in late 2024, are 
heavily  skewed  toward  current  accounts  and 
deposits  (87.9%  of  GDP),  far  beyond  the  EU 
average.  Local  investors  seem  to  be  highly  risk 
averse  as  they  demand  products  with  capital 
guarantees,  which  structurally  limits  the  role  of 

equity in portfolios. Portuguese authorities wish to 
encourage  broader  capital  market  participation 
through  a  savings  and  investment  account  (SIA) 
and tax breaks on long-term holdings of securities, 
ETFs  and  other  market-based  products.  Local 
venture capital and private equity markets – where 
Portugal  has 
received  a  Country  Specific 
Recommendation  –  are  dynamic  and  promising, 
but  struggle  to  find  stable  and  abundant  private 
sources of financing.  

Business landscape and company 
funding 

Portugal’s  economy  is  categorised  by  a  high 
proportion  of  micro  and  small  enterprises. 
These  firms  are  responsible  for  most  of  the 
national employment and output (see Annex 5 for 
more  details).  This  structure  has  implications  for 
the  corporate  sector’s  demand  for  funding  with 
corporate  funding  being  defined  by  a  high 
dependency  on  traditional  banking  and  strong 
resilience in self-financing compared with the rest 
of  the  EU.  In  2024,  the  consolidated  corporate 
indebtedness  ratio  (comprising  loans  and  debt 
securities)  fell  to  76%  of  GDP,  bringing  it  below 
the  EU  benchmark  after  years  of  structural 
adjustment  following  the  global  financial  crisis. 
Bank  loans  (including  from  both  domestic  and 

65 

Main featuresRelative EU positioningAssets at 25.5% of GDP (32.3% in the EU)10-year real return of 0.4 (1.4% in the EU)Relatively low pension assets trailing the EU average and returns below half of the EU average reflecting very conservative asset management strategies.EUR 51 052 per capita (EUR 85 090 in the EU)o/w 2.9% in listed shares and bonds (7.6% in the EU)o/w 7.2% in investment funds (11.0% in the EU)o/w 7.2% in life insurance (13.4% in the EU)o/w 3.1% in  pension claims (13.6% in the EU)A low share of households' financial assets is invested in equity and in capital markets.VC at 0.021% of GDP (0.064% in the EU)PE at 0.164% of GDP (0.487% in the EU)Shallow venture capital and private equity markets.Capital gains are taxed at flat rate of 28%. Dividends received by residents are subject to a 28% withholding tax at source.No preferential tax treatment for equity investments, relatively high rates of capital taxation.1-34-1011-1718-2425-27Colours indicate the country's relative ranking based on five groups, ranging from the three best to the three worst performers. The relative ranking as regards an SIU diagnostic topic derives from a consistent cross-country comparison, the starting point of which is the average of the underlying main features.TopicAsset-backed pension schemesHouseholds' financial assetsVenture capital (VC)Private equity (PE)Capital taxation 
 
 
 
 
 
   
 
and 

structure 

indebtedness 

non-resident  financial 
institutions)  remain  the 
overwhelmingly  dominant  source  of  funding, 
equivalent to 51.7% of GDP in 2024, about half of 
which (equivalent to 25% of GDP) stemming from 
the  domestic  banking  sector.  While  this  is  lower 
than  the  EU  average  of  60.8%,  bank  lending 
remains essential  to the economy,  particularly for 
the  99.3%  of  firms  that  are  micro  or  small 
enterprises  and  rarely  tap  into  capital  markets. 
Overall,  cross-border  lending,  intra-group  loans, 
and shareholder loans play a significant role in the 
financing 
of 
  whereas  market-based 
Portuguese  NFC, 
instruments play  a much smaller role, with bonds 
issued  by  a  few  large  companies  to  finance 
themselves,  worth  14.7%  of  GDP,  slightly  above 
the  EU  average  (see  Graph  A6.1).  Unlisted  shares 
and  other  equity  are  equivalent  to  46.0%  and 
63.7%  of  GDP,  respectively.  This  highlights  a 
relatively high reliance on unlisted equity – among 
the many family-owned private firms – compared 
with  the  EU  average.  More  importantly,  in  2024, 
listed  shares  in  Portugal  were  equivalent  to  just 
24.1% of GDP, in stark contrast to the EU average 
of  42.5%,  highlighting  the  small  nature  of  the 
country's  public  capital  market.  This  financing 
structure  reflects  a  business  ecosystem  where 
internal  funding,  particularly  within  family-owned 
and  medium-sized  enterprises,  is  key.  Although 
most firms report that they invest adequately (139), 
some  continue  to  face  funding  constraints.  While 
25%  of  firms  that  undertook  investments  in 
Portugal had made use of external financing in the 
last  financial  year,  matching  the  EU  average,  the 
proportion of Portuguese firms that are ‘externally 
finance-constrained’ rose to 7%, surpassing the EU 
average  of  6.1%.  To  bridge  this  gap,  a  notably 
larger  proportion  of  Portuguese  businesses  relies 
on  government-backed  assistance  to  support 
investments, with 20% of investing firms receiving 
policy support compared with just 16% across the 
EU. 

Graph A6.1: Composition of non-financial 
companies' funding 

Source: Eurostat. End-2024. 

Size and structure of the financial 
sector 

Portugal’s  financial  sector  is  anchored  by  a 
robust  banking  system.  Portugal’s  financial 
system  relies  on  a  very  bank-centric  model.  By 
mid-2025, banking assets stood at 150% of GDP, 
below  the  EU  average  of  245.3%.  Foreign 
presence  in  the  banking  sector  has  been  on  the 
rise, especially since the global financial crisis, and 
currently  over  50%  of  the  sector’s  assets  are 
controlled by foreign investors. Non-bank financial 
intermediaries,  particularly  investment  funds  and 
insurance corporations, are notable, with assets at 
19%  of  GDP  each  in  2024.  The  Portuguese 
banking system is more concentrated (with a CR5 
concentration  ratio  standing  at  75%)  than  the  EU 
average,  while  the  insurance  sector  is  moderately 
concentrated  (CR5  at  65%),  in  line  with  many  EU 
peers.  The  local  private  pension  funds  manage 
assets  worth  slightly  below  6%  of  GDP.  However, 
these assets are spread over close to 250 pension 
funds. The small average size of the pension funds 
is  mostly  explained  by  the  low  incentives  for 
supplementation  of  the  pay-as-you-go,  lack  of 
auto-enrolment  and  the  relatively  low  financial 
awareness among Portuguese households. 

(139) EIB Investment Survey 2025: Portugal Outlook 

66 

0100200300PTEU% of GDPOther equityUnlisted sharesListed sharesBondsTrade credit and advancesLoans 
 
      
Graph A6.2: Capital markets and financial 
intermediaries 

Source: ECB, EIOPA, AMECO. End-2024. 

in  channelling  equity 

The  broader  capital  market  remains  only 
moderately  developed  when  compared  with 
the European average. It is integrated within the 
broader  European  stock  exchange  (140)  ecosystem 
but exhibits a limited footprint when benchmarked 
against  larger  European  markets.  Euronext  Lisbon 
stands  as  the  only  equity  trading  platform  in 
Portugal with a market capitalisation equivalent to 
22.5%  of  GDP  in  mid-2025,  over  45  pps  lower 
than  the  EU  average.  Non-financial  corporations 
(NFCs)  dominate 
local  market  capitalisation 
representing about 90% of the total and affirming 
the  market’s  role 
into 
Portugal's  corporates.  Euronext  Lisbon  remains 
one of the least active primary markets in the EU 
for  new  equity  listings,  highlighting  investors’ 
preference  for  private  placements  or  acquisitions 
over  public  offering.  Portuguese  authorities,  in 
collaboration  with  market  participants,  have  been 
pursuing  measures  to  revitalise  the  domestic 
capital  market, 
incentives  for  SME 
listings or simplification of listing procedures and a 
partial capital gain tax exemption. The introduction 
of a savings and investment account is also being 
discussed to further incentivise households’ capital 
The  CCP  and  CSD 
market 
infrastructure  of  the  market  is  typical  for  smaller 
EU  markets  i.e.  Portugal  leverages  Euronext's 
integrated  ecosystem  for  efficiency,  cost  savings, 
and compliance with EU regulations. 

engagement. 

including 

The  debt  securities  market  plays  a  more 
prominent  role.  With  an  outstanding  volume  at 

101.1%  of  GDP,  the  fixed  income  market  has 
traditionally  been  more  active  than  the  stock 
market 
local 
in  channelling  financing  to  the 
economy. Government-issued bonds, worth 61.6% 
of  GDP  (see  Graph  A6.2),  dominate  the  market. 
The private issuers market is led by bonds issued 
by  credit  institutions  (worth  19.5%  of  GDP)  and 
followed  by  NFCs  with  14%.  The  remaining  6% 
consists of debt securities issued by other financial 
intermediaries  and insurance  corporations.  Private 
sector  debt 
securities  are  overwhelmingly 
denominated in euro, reflecting a minimal FX risk. 
the 
This  market  structure  again  underlines 
importance  of  bank  lending  in  the  financing  of 
local  firms.  It  also  suggests  ample  room  for 
growth  for  financing  through  the  local  capital 
market.  

Households’ participation in capital 
markets 

Portuguese households prioritise  safety over 
performance.  Portuguese  households  exhibit  a 
financial profile characterised by relatively modest 
but  increasing  wealth  combined  with  a  strong 
preference for low-risk and highly liquid assets. As 
of  late  2024,  total  household  financial  assets 
amounted to 187% of GDP, slightly below the EU 
average of 212%. The composition of this wealth 
points  to  a  lot  of  risk  averseness  and  a  very 
cautious investment stance: currency and deposits 
amount to 87.9% of GDP (around EUR 23 900 per 
capita),  well  above  the  EU  average  of  67%  (see 
Graph  A6.3).  This  strong  concentration  in  bank-
based products is mirrored by limited participation 
in  capital  markets,  with  holdings  of  listed  shares 
and investment funds at 3.1% and 13.5% of GDP 
respectively, 
below 
corresponding  EU  averages.  Savings  allocated  to 
insurance products and pension funds also remain 
comparatively under-developed and are equivalent 
to only 20.4% of GDP, compared with 59% at the 
EU 
liability  side,  Portuguese 
households hold debt equivalent to 52.5% of GDP, 
mainly in the form of mortgage borrowing, slightly 
above  the  EU  average  of  49.9%.  Real  estate 
remains  however  one  of  the  preferred  ways  of 
allocating  savings  with  close  to  30%  (141)  of  all 

substantially 

level.  On 

both 

the 

(140) As part of the Euronext group 

(141) European Central Bank's Household Finance and 

Consumption Survey (HFCS). 

67 

Non-financial corporationsFinancial corporationsNon-financial corporationsMFIsInsurance  and pension fundsOther financialsGovernmentMFIsPension fundsInsurance corporationsInvestment funds020406080100120140160180   Listed equity               Bonds                        Assets by sector% of GDP 
      
 
 
Portuguese households owning multiple properties, 
many of which are used for investment.  

Graph A6.3: Composition of households' financial 
assets 

rising 

flowed 

largely 

sharply 

amounts 

to  12.5% 

There  has  been  persistent  conservatism  in 
wealth allocation. The saving rate of Portuguese 
in  Q3-2025, 
households  climbed 
approaching  the  EU  average  of  15.1%.  Yet,  these 
savings  continue  to  be  held  mostly  in  liquid,  low-
risk assets, a pattern that reflects both a legacy of 
economic  instability  as  well  as  limited  familiarity 
with  capital  market  related  products.  Household 
deposits  surged  during  the  pandemic  to  over 
100% of GDP (in 2020), before declining to around 
84.5%  by  Q3-2025.  Yet  this  gradual  reallocation 
has 
into  safe  government-
guaranteed products (certificados de aforro) – with 
from 
outstanding 
EUR 12 billion  in  2020  to  over  EUR 40 billion  by 
Q3-2025 – rather than into broader capital market 
instruments.  Overall,  household  savings  remain 
largely under-utilised  for productive, higher-return 
investments.  This  heavy  tilt  toward  liquidity  and 
principal  protection  heavily  limits  diversification 
and  exposes  households  to  opportunity  costs,  as 
the  near  absence  of  meaningful  exposure  to 
equities,  ETFs,  or  other  market-based  assets 
constrains  potential  risk-adjusted  returns  and 
long-term wealth accumulation in an environment 
of  moderate  inflation  and  low  deposit  yields. 
Limited capital market participation partly reflects 
gaps  in  financial  literacy  (see  the  paragraph  on 
financial 
insufficient 
below) 
availability of simplified, accessible products (such 
as third pillar pension funds) that often encourage 
a shift toward diversified portfolios. On this issue, 
and  to  encourage  more  market-based  allocation, 
Portuguese  authorities  are  contemplating  the 
savings  and 
introduction  of  a  dedicated 
investment  account 
the 
authorities  have  also  introduced  a  partial  capital 
gain 
long-term 
holdings  of  listed  securities  and  units  in  open 
ended funds. Increasing financial awareness could 
also play an important role in enabling households 
to  diversify  their  financial  wealth  and  potentially 
achieve higher risk-adjusted returns on savings.  

(142).  Additionally, 

tax  exemption 

incentivising 

literacy 

and 

Source: Eurostat. End-2024. 

Financial  literacy  has 
improved  but  the 
overall  picture  is  mixed  and  many  gaps 
persist.  The  Commission  has  recommended  that 
Portugal improve household financial literacy skills 
(CSR 3 2025). Building on the 2021–2025 cycle, a 
new  National  Financial  Literacy  Plan  for  2026–
2030  has  been  recently  launched.  It  is  structured 
around  two  main  pillars:  strengthening  financial 
literacy  skills  across  children,  young  people,  and 
adults    through  enhanced  school-based  initiatives 
developed  with  the  Ministry  of  Education  -  and 
improving  operational  efficiency  to  increase  the 
reach, quality, and impact of initiatives, The latest 
OECD 
International  Survey  of  Adult  Financial 
Literacy  (143)  places  Portugal  13th  out  of  39 
countries  surveyed.  This  performance  is  largely 
driven  by  the  relatively  sound  financial  attitudes 
and  behaviours,  while  gaps  persist  in  financial 
knowledge (144), with Portuguese adults remaining, 
on  average,  less  financially  knowledgeable  than 
their EU peers, which  limits effective engagement 
financial  products  and 
with  more  complex 
contributes  to  the  conservative  saving  habits. 
Recently,  the  Commission,  together  with  the 
European  University  Institute  and  the  Portuguese 
launched  an  EU-funded 
financial  supervisors, 
Technical  Support  Instrument  (TSI)  project  to 
assess  the  effectiveness  of  existing  financial 
literacy initiatives and support the design of future 
actions  under  the  PNFF.  In  addition,  in  August 
2025,  the  government  adopted  a  reform  of  the 

(142) In line with the Commission's Savings and Investments Union 

(SIU) initiative and its 2025 Recommendation (EU) 
2025/2384, which advocates for tax-advantaged vehicles 
offering broader eligibility to boost retail engagement. 

(143)OECD/INFE International Survey of Adult Financial Literacy 
2023 edition. 

(144) Eurobarometer: monitoring the level of financial literacy in 

the EU 2023. 

68 

0100200300050100PTEUPTEUper capita (000 EUR) (lhs)% of GDP (rhs)Other equityUnlisted sharesListed sharesBondsInvestment fundsInsurance and pension fundsCurrency and depositsHH Debt (liability) 
 
   
 
curriculum 

citizenship  and  development 
to 
life  skills, 
its  focus  on  essential 
strengthen 
including  the  mandatory  integration  of  financial 
literacy  across  all  education  cycles,  supported  by 
specialised  and  practice-oriented  input  from  the 
supervisors  and  higher  education 
financial 
institutions  (145).  Approaches  more  targeted  and 
tailored  to  each  age  group  (young,  adult,  elderly) 
and  a  number  of  measurable  interventions  are 
aimed at closing the gap with leading peers across 
the EU.  

The banking sector: resilience and 
financing of the economy 

Portugal’s  banking  sector  has  demonstrated 
remarkable  resilience  over  the  past  decade 
and  is  not  constrained  in  its  role  of  funding 
the  economy.  The  local  banking  sector  has  very 
strong  influence,  not  just  over  the  funding  of  the 
economy,  but  also  over  how  Portuguese  savings 
are  allocated.  Consequently,  Portuguese  asset 
managers and pensions funds managers display a 
high  degree  of  bank  dominance  with  only  a  few 
limited  independent  players  (146).  It  is  a  structural 
feature  that  reflects  the  country’s  bank-centric 
financial  system  and  the  consolidation  trends 
since  the  global  financial  crisis.  Indeed,  local 
lenders have overcome severe headwinds over the 
past  decade.  By  mid-2025,  the  sector  exhibited 
solid  capitalisation,  with  a  CET1  ratio  of  17.9% 
surpassing the EU average of 16.8%, underpinned 
by a focus on high-quality capital, alongside strong 
liquidity  and  profitability  metrics,  including  a  ROE 
of  15%  in  the  first  half  of  2025  and  14.4%  in 
2024. Major institutions have consistently met EU-
wide  stress  test  requirements,  affirming  their 
capacity to withstand adverse scenarios, while the 
aggregate  MREL 
ratio  comfortably  exceeds 
regulatory  thresholds.  Asset  quality  has  improved 
significantly  since  the  crisis  years,  with  the  non-
performing  loans  ratio  declining  to  2.3%  in  June 
2025,  still  above  the  EU  average  of  1.9%  but 
reflecting  substantial  progress 
in  addressing 
legacy  exposures  and  supported  by  a  high 

(145) Estratégia Nacional de Educação para a Cidadania, Direção-

Geral da Educação. 

(146) According to CMVM and ASF asset managers and pension 
funds affiliated with banks control about 80% and 70% of 
assets under management respectively. 

coverage ratio. Prudent provisioning, low loans-to-
deposits  ratio  ensure  continued  reliable  and 
affordable  access 
for 
Portuguese businesses. However, the banks’ asset 
quality  outlook is subject to increased uncertainty 
due  to  the  geopolitical  uncertainty  and  its  impact 
on energy prices and economic growth. 

to  bank 

financing 

Portugal’s  banking  sector  has  a  significant 
yet  prudently  managed  exposure  to  real 
estate. Mortgage loans to households account for 
around  27%  of  total  banking  sector  assets  and 
have  remained  broadly  stable  over  recent  years, 
fluctuating  within  a  narrow  range  of  26–27.4% 
between  December  2020  and  June  2025.  Risks 
remain  contained, 
reflecting  strong  borrower 
profiles: around 85% of housing loans have loan-
to-value  (LTV)  ratios  at  or  below  80%  and  loan-
service-to-income  ratios  (LSTI)  at  or  below  40%, 
while  high-risk  exposures  are  negligible  (around 
0.5%).  House  prices  continue  to  be  supported  by 
structural  supply  constraints,  high  construction 
costs 
demand. 
Complementing  this,  macroprudential  measures, 
including  borrower-based  measures  and  capital 
buffers  such  as  the  countercyclical  capital  buffer 
improve  both 
and  the  systemic  risk  buffer, 
household  and  bank 
to 
remains 
estate 
commercial 
comparatively limited, accounting for around 5.4% 
of  total  banking  sector  assets.  CRE  resilience  is 
supported by diversified sectoral allocation, higher 
capital requirements relative to residential lending, 
and positive market dynamics overall. 

resilience.  Exposure 
(CRE) 

sustained 

foreign 

real 

and 

Portugal’s  credit  landscape  remains  uneven. 
Credit  extension  to  households  and  corporate 
clients  in  Portugal  is  heavily  influenced  by  the 
prevailing economic conditions and remains highly 
sensitive  to  interest  rate  movements  given  that 
most  credit  is  still  contracted  at  variable  interest 
rates.  Household  lending  experienced  a  modest 
contraction  in  2023  and  early  2024  driven  by 
trend  changed 
higher  borrowing  costs.  The 
dynamically in the second half of 2024 and credit 
to households continued to grow rapidly into 2025, 
with year-on-year lending growth rising by 9.1% in 
November  2025.  Lending  to  NFCs  followed  a 
similar path, albeit with higher volatility. Corporate 
credit  dropped  sharply  in  2023-2024  and  started 
recovering from the second half of 2024 onward. 
Year-on-year  credit  growth  stood  at  4.5%  by 
October  2025,  reflecting  the  decline  in  interest 
rates  and  the  recovery  in  investment  financing 
needs.  This  confirms  that  Portuguese  firms  with 

69 

 
 
solid  business  cases  can  access  bank  financing 
despite  a  continuation  of  a  broader  deleveraging 
trend  running  in  the  background,  post-sovereign-
debt crisis. 

Role of non-bank financial 
intermediaries 

(EUR 12.7 bn). 

insurance  sector 

Portugal’s 
is  relatively 
compact and conservative. Portugal’s insurance 
sector  remains  small  by  EU  standards,  with  total 
assets  standing  at  18.4%  of  GDP  in  Q2-2025, 
compared  with  an  EU  average  of  53.3%  of  GDP. 
Portuguese  insurers  have  a  conservative  and 
income-oriented 
investment  profile.  Based  on 
EIOPA  data,  portfolios  are  heavily  concentrated in 
government  bonds  (EUR 19.4 bn)  and  corporate 
investment 
bonds 
undertakings  also  play  an  important  role,  with 
exposures  of  around  EUR 12 billion,  pointing  to  a 
significant  reliance  on  fund-based  intermediation. 
limited  at 
Direct  equity  holdings 
EUR 4.8 billion,  indicating  a  modest  risk  bearing 
capacity,  while  exposures  to  real  estate  through 
mortgages  and  loans  (EUR 0.6 bn)  and  property 
(EUR 0.6 bn)  are  comparatively  small.  Overall,  the 
asset  mix  underscores  a  prudent 
investment 
approach,  with  practically  no  exposure  to  private 
assets such as VC (venture capital) and PE (private 
equity) funds. 

Collective 

remain 

In  parallel,  Portuguese  pension  funds  are 
structurally conservative. Assets of private and 
public  pension  providers  amounted  to  around 
25.5%  of  GDP  in  2024,  below  the  EU  average  of 
32.3% of GDP, highlighting the still limited role for 
funded pensions relative to the public pay-as-you-
go system. According to the Insurance and Pension 
Funds  Supervisory  Authority  (ASF)  data,  total 
assets  managed  by  pension  funds 
reached 
EUR 19.9 billion    at  the  end  of  2025,  following  a 
gradual  recovery  from  the  sharp  contraction 
observed in 2022. While assets increased by 2.9% 
in  2025,  they  remain  below  pre-2022  levels, 
reflecting  valuation  effects  and  net  outflows  in 
parts of the sector. In aggregate terms, according 
to  the  OECD,  real  10-year  returns  for  Portuguese 
pension  funds  stood  at  0.4%  on  an  annual  basis, 
barely  above  the  inflation  figure,  not  enough  to 
attract  active 
the 
Portuguese  public.  Even  the  voluntary,  long-term 
savings  product  plano  poupança  reforma  (PPR) 

retirement  savings 

from 

remains  relatively  under-developed  with  limited 
household  uptake  despite  a  supportive  fiscal 
framework. While the current tax regime allows for 
a  20%  deduction  on  contributions  (capped  yearly 
between EUR 300 and EUR 400 based on age) and 
a  reduced  8%  rate  on  capital  gains  at  maturity, 
these  incentives  have  not  fully  compensated  for 
historically  modest 
returns.  Average  annual 
performance  for  many  funds  has  oscillated 
between 1% and 2.5% over 2020-2023 (147), often 
net 
struggling 
management  fees.  This  underperformance 
is 
to  a  market  structure  where 
partly 
distribution 
is  almost  exclusively  channelled 
through  retail  banking  networks,  which  tend  to 
favour 
capital-guaranteed 
products. 

conservative  and 

inflation 

outpace 

linked 

and 

to 

fund 

portfolios 

concentrated 

Portuguese  pension  funds  remain  small  in 
scale  and  spread  across  many  asset 
managers.  The  Portuguese  pension  fund  market 
is highly dispersed, comprising 238 pension funds 
managed  by  15  entities,  with  closed  funds 
accounting for the majority of assets (EUR 15 bn). 
Management  is  dominated  by  specialised  pension 
fund  management  companies,  which  account  for 
73.1%  of  total  assets,  while  insurance  companies 
manage the remaining 26.9%. This fragmentation 
does  not  allow  for  economies  of  scale,  proper 
diversification  and  efficient  governance.  From  an 
asset  allocation  perspective,  EIOPA  data  show  a 
strong  preference  for  low-risk  instruments,  with 
pension 
in 
government  bonds  (EUR 6.4 bn)  and  collective 
investment  undertakings 
(EUR 5.8 bn).  Defined 
benefit  schemes  rely  overwhelmingly  on  fixed-
income-based  asset-liability  matching  to  limit 
sponsors’  balance  sheet  risk.  Equity  exposure 
remains  very  limited  at  EUR 0.5 billion,  while 
represent  a 
property  holdings 
comparatively  larger  share.  Overall,  the  sector 
exhibits  a  very  risk  averse  investment  profile, 
consistent  with  its  modest  returns.  It  lacks  any 
significant exposure to local or foreign risk capital 
funds,  which  limits  the  sector's  contribution  to 
economic 
income 
and 
diversification.  Moreover,  there  is  no  active  auto-
enrolment  mechanism  in  supplementary  pensions 
and  a  lack  of  a  comprehensive,  user-friendly 
pension tracking system. These factors hinder both 
leaving  future 
participation  and  transparency, 
into  portfolio 
retirees  without  clear  visibility 

(EUR 1.4 bn) 

retirement 

growth 

(147) EIOPA Costs and Past Performance Report April 2025. 

70 

 
 
performance or the benefits of higher-risk, higher-
return  strategies.  Introducing  auto-enrolment  with 
opt-out  provisions,  developing  a  national  pension 
tracking  system (148)  (targeting  better  information 
for  households),  and  encouraging  a  gradual 
exposure  to  alternative  asset  classes  could  foster 
greater  scale, 
returns,  and  unlock 
meaningful  allocations  to  VC  and  PE,  thereby 
strengthening  both  retirement  outcomes  and 
domestic capital market depth. 

improve 

Venture capital ecosystem 

investors.  PE 

The  VC  and  PE  ecosystem  continues  to 
develop. Despite lagging behind some larger and 
more  developed  European  markets,  Portugal’s  VC 
and PE landscape is catching up (see Annex  4 for 
more  details)  It  has  been  gaining  traction  (see 
Table  A6.2)  and  interest  from  both  local  and 
international 
investment  has 
traditionally  focused  on  mid-market  industrial 
companies with strong positions in their respective 
niches and a dynamically  growing share in export 
markets.  Exit  opportunities  rarely  focus  on  IPOs 
with  most  firms  being  sold  to  international  peers 
or buyout investors. The VC market is bolstered by 
innovation policy, cultivating a start-up culture and 
positioning  Portugal  as  one  of  the  EU’s  emerging 
markets  in  tech  and  renewables.  It  leverages 
annual  events  like  the  Web  Summit  to  maintain 
momentum  and  draw  international  attention.  It  is 
a growing market that has attracted (both in 2024 
and 2025) cross-border capital inflows with about 
50%  of  VC  volume  being international  capital.  VC 
investments reached the equivalent of 0.021% of 
GDP  (against  an  EU  average  of  0.064%)(149),  still 
rather  under-developed  despite  doubling  in  size 
over  the  past  six  years,  whereas  PE  was  worth 
0.164%  of  GDP  (EU  0.487%  GDP)  and  remains 
significantly under-developed by EU standards.  

Despite  an  overall  positive  trend,  most 
assets under the management of local VC or 

(148) In line with the EU’s 2025 SIU Recommendation on 

supplementary pensions 

PE  firms  remain  linked  to  various  public 
programmes  or  tax  incentives  (150)  and  are 
rarely  genuine  players  on  the  local  growth 
market.  The  investment  programmes  of  the 
Portuguese  development  bank,  Banco  Português 
de Fomento (BPF), remain a key supplier of funds 
to  the  sector  and  effectively  support  local  start-
ups  and  technology  transfers.  The  BPF  functions 
predominantly  as  a manager  of  specialised  funds 
that invest in other funds, or it  directly co-invests 
alongside private investors. A new national fund of 
funds structure is currently under development by 
the  BPF  to  leverage  the  bank’s  position  as  fund 
manager.  Overall,  that  type  of  structure 
is 
perceived  positively  by  the  sector  and  will  help 
refill  local  funds  with  new  investable  assets  and 
become  a  catalyst  for  private  investment  as 
recommended  in  CSR3  from  2025  (151).  More 
recently,  funds  strictly  related  to  the  SIFIDE  R&D 
tax break (152) have been a major source of assets 
for  PE  funds,  though  this  large  inflow  has  not 
always  been  seen  as  a  positive  driving  force  by 
local  fund  managers,  given  it  may  only  be  for  a 
limited  time  and  its  impact  could  distort  the 
market.  Market  participants  believe  that  leaner 
programmes  built  jointly  with  the  sector  would 
benefit  both  investors  and  start-ups.  Lastly,  the 
a 
golden 
complementary source of new funding for local VC 
and PE players, though it remains strictly linked to 
the policies shaping the golden visa programme. 

programme 

been 

visa 

has 

Not  enough  risk  capital  and  persistent 
bottlenecks.  Despite  making  progress,  the  local 
VC  and  PE markets  still  face  bottlenecks that  will 
constrain the growth seen in recent years. Notably, 
there  is  a  scale-up  financing  gap  where  start-ups 
struggle at growth stages due to limited domestic 
funds  capable  of  leading  larger  rounds  (e.g. 
reliance  on 
EUR 50–100 mn).  This 
international  investors  and  heightens  relocation 
risks 
companies.  Portuguese 
institutional  investors  shy  away  from  VC  and  PE 

for  promising 

increases 

(150) Mainly the indirect SIFIDE mechanism. 

(151) 2025.CSR3.subpart2: ‘…Foster private investment into 
venture capital and private equity for local businesses, 
including public-private risk sharing..’ 

(149) Differences in VC/PE indicators across annexes reflect the 

use of distinct data sources. This Annex uses CMU Dashboard 
data for consistency across CMU indicators, while Annex 4 
uses InvestEurope data, which is disaggregated by 
investment stage. Variations in reported figures are therefore 
due to underlying source definitions. 

(152) SIFIDE (Sistema de Incentivos Fiscais à Investigação e 
Desenvolvimento Empresarial) indirect tax incentive 
mechanism. This incentive allowed Portuguese companies to 
claim a tax credit by investing in certified VC funds focused 
on R&D-intensive start-ups, rather than performing R&D 
directly. 

71 

 
 
 
Table A6.2:  Financial sector indicators 

(1) Annualised data. EU data for credit growth and pension funds refer to the EA average. 
Source: ECB, Eurostat, European Insurance and Occupational Pensions Authority, DG FISMA CMU dashboard, AMECO. 

Most  of  these  bottlenecks  have  been 
recognised both by the market as well as the 
local authorities, and measures are being put 
in  place  to  assist  the  growth  market.  There 
are  tax  incentives  for  reinvestments,  procedures 
for  new  listings  are  simpler  than  before  and 
various 
available. 
Nevertheless, VC/PE would certainly benefit from a 
more  sizeable  pension  funds  sector,  which  could 
apply  auto-enrolment  and  appropriate  strategies 
such  as  lifecycle  investment  in  order  to  better 
manage exposures to alternative asset classes. 

de-risking 

tools 

are 

markets.  The  long  lock-up  periods,  the  general 
illiquidity of these assets and valuation challenges 
fuel risk aversion, which in turn drives the lack of 
internal  expertise  and  familiarity  with  private 
assets.  Furthermore,  the  relatively  small  portfolio 
size  of  local  insurers  and  pension  funds  further 
limits  the  ability  of  investors  to  build  properly 
diversified alternative asset allocations. 

Consequently, 
local  VC  and  PE  asset 
managers  struggle  when  looking  for  new 
investors.  Furthermore, 
the  small  size  and 
subdued IPO activity of the Lisbon stock exchange 
complicates  exit  strategies  for  local  private  asset 
managers.  Lastly,  talent  acquisition  and  retention 
challenge 
Surveys 
consistently  show 
founders 
consider  relocating  their  company  or  themselves 
abroad  within  the  first  three  to  five  years,  often 
citing the inability to attract or retain senior talent 
as  a  key  driver.  Nevertheless,  studies  also  show 
that in actual fact only 10.7% of Portuguese start-
ups relocate abroad (153). 

scale-ups. 
that  Portuguese 

Portuguese 

(153) Venture capital and the international relocation of startup, S. 

Weik et al. 

72 

20182019202020212022202320242025-Q3EUTotal assets of MFIs, % of GDP190.8180.9205.6202.5176.6157.3153.3151.9246.1Common equity Tier 1 ratio13.214.115.415.515.317.118.017.716.8Total capital adequacy ratio15.216.718.118.018.119.620.620.520.2Overall NPL ratio, % of all loans9.46.14.93.63.02.72.42.31.9NPL ratio, loans to NFCs18.512.39.88.16.55.04.33.83.5NPL ratio, loans to HHs5.13.73.42.82.32.42.32.12.1Return on equity ratio12.74.30.04.98.713.814.414.59.6Loans to NFCs, % of GDP34.131.437.035.230.827.124.924.429.3Loans to HHs, % of GDP58.456.961.659.053.848.046.446.943.6NFC credit growth rate, %1.71.110.04.50.8-1.00.74.42.5HH credit growth rate, %0.81.11.53.73.4-0.54.08.42.6Stock market capitalisation, % of GDP23.625.625.126.124.324.120.423.869.9Initial public offerings, % of GDP0.010.000.000.230.000.000.00-0.06Market funding ratio43.945.546.146.447.148.750.6-49.7Private equity, % of GDP0.2230.1880.3160.3400.3470.2030.164-0.487Venture capital, % of GDP0.0120.0150.0180.0210.0230.0210.021-0.064Financial literacy, composite index-----42.5--45.5Bonds, % of HHs' financial assets2.92.72.41.61.21.21.3-2.8Listed shares, % of HHs' financial assets1.31.41.51.51.41.61.7-4.8Investment funds, % of HHs' financial assets4.55.25.57.06.36.67.2-11.0Insurance/pension funds, % of HHs' financial assets17.517.516.314.912.311.210.8-27.8Total assets of insurers, % of GDP25.625.826.624.621.919.719.119.053.9Pension assets, bn EUR---69.863.067.273.7-5813.8Pension assets, % of GDP---32.225.824.825.5-32.310y real return average of pension assets, %-----0.90.4-1.4Pension funds assets, ECB (% of GDP)-10.511.811.28.87.16.76.623.01-34-1011-1718-2425-27Colours indicate performance ranking among the 27 EU Member States.Banking sectorNon-banking sector 
 
 
      
 
ANNEX 7: EFFECTIVE INSTITUTIONAL FRAMEWORK 

institutional  framework 

An  effective 
is 
essential  for  competitiveness.  This  requires 
public  trust  built  on  integrity,  quality  legislation, 
regulatory  simplification  and  efficient  services  for 
people  and  businesses.  For  Portugal,  the  2025 
recommendations  highlighted 
country-specific 
challenges 
regulatory  and 
in 
administrative  burden,  improving  the  quality  of 
lawmaking,  and  the  efficiency  of  the  justice 
system. 

reducing 

the 

Public trust 

Public  trust  in  government  in  Portugal  is 
above the EU average and has improved over 
the  past  period  (Graph  A7.1).  However,  trust  in 
regional  or  local  public  authorities  and  in  the 
justice  system  fell  sharply  in  2025  and  the  latter 
is now below the EU average. Businesses trust the 
public administration’s ability  to handle their data 
securely  and  responsibly,  whereas  the  general 
public is more sceptical (154). 

Graph A7.1: Trust in justice, regional / local 
authorities and in government 

(1) EU-27 since 2019; EU-28 before 
Source: European Commission, Standard Eurobarometer 
surveys 

Quality of lawmaking 

to 

limited 

progress 

opportunity 

Portugal  made 
on 
the  2025  country-specific 
implementing 
recommendation  on  reducing  the  regulatory 
burden  (Table  A7.1). 
In  2025,  the  National 
Evaluation  Agenda  (ANAV)  was  developed  to 
institutionalise evaluation in the public policy cycle, 
but challenges remain. For example, for all primary 
laws, the proportion of impact assessments made 
during  the  legislative  development  process  is 
relatively  low  and  not  done  in  a  systematic 
manner  in  comparison  with  other  EU  countries. 
Also,  the  assessments  do  not  cover  effects  on 
regional  areas.  Furthermore,  regulators  are  not 
required  to  identify  and  quantify  the  benefits  of 
new  primary  laws.  Analysis  focuses  primarily  on 
the  costs  of  the  legislation  and  overall  benefits. 
Consideration of alternative non-legislative options 
is not required for primary legislation, thus missing 
the 
reduce 
legislation  without  compromising 
unnecessary 
formal 
are 
policy 
requirements 
to 
measure  progress  in  achieving  a  primary  law's 
objectives, 
identify  potential  enforcement 
mechanisms, or to assess the level of compliance. 
There are also no periodic reviews of legislation in 
specific  areas,  which  undermines  the  ability  to 
keep  the  legislation  fit  for  purpose.  Although  a 
body overseeing the quality of lawmaking exists, it 
covers  only  the  quality  of  impact  assessments, 
and  not  ex  post  evaluations,  which  weakens  the 
country’s  ability 
regulatory 
the 
framework.  As 
government  is  not  obliged  to  consider  submitted 
comments  or  include  the  views  expressed  during 
is  not 
the  formal  consultation  process,  and 
required to provide public feedback on the way the 
consultations  were  reflected  in  the  legislative 
proposal.  This  diminishes  public 
trust  and 
accountability in the legislative process. 

to  develop  a  methodology 

its 
transparency, 

to 
regards 

objectives. 

improve 

simplify 

There 

and 

no 

to 

Although  obstacles  remain,  Portugal  has 
taken steps towards improving transparency, 
in 
participation 
interactions  between  interest  groups  and 
public  entities. 
the 
Parliament  approved  the  Law  on  Transparency  in 
Interest  Representation  (155),  scheduled  to  come 

In  December  2025, 

accountability 

and 

(154) European Commission, 2026, Flash Eurobarometer surveys 
567 and 568 on satisfaction with administrative services. 

(155) Law No 5-A/2026 of 28 January. 

73 

00.20.40.60.8AutumnSpringAutumnSpringSpringAutumnWinterSummerWinterSpringWinterSummerAutumnSpringAutumnSpringAutumnSpring202520242023202220212020201920182017Justice,  legal system EU-27Justice,  legal system PTRegional or local public authorities EU-27Regional or local public authorities PTGovernment  EU-27Government  PT 
 
   
 
 
 
Table A7.1:  Portugal. Selected indicators on better regulation practices for primary legislation 

Source: OECD, 2025, Regulatory Policy Outlook 2025 [https://doi.org/10.1787/56b60e39-en] and Better Regulation across the 
European Union 2025  

into  force  in  July  2026.  It  establishes  rules 
applicable to private, national  and foreign entities 
involved  in  legitimate  interest  representation  with 
public entities, creates a code of conduct for these 
introduces  the  Transparency 
interactions,  and 
Register 
Representation 
Interest 
for 
(156).Parliament  will  create  a  governing  body  to 
manage the register and apply sanctions. However, 
there  are  concerns  about  the  feasibility  of 
implementing  the  new  rules,  the  transparency 
register and a legislative footprint process by July 
2026 (157). In parallel, new rules were introduced in 
December  2024  to  speed  up  implementation  of 
EU-funded  projects  by  changing  the  preventive 
control of contracts by the Court of Auditors (158).   

Public service delivery and 
digitalisation 

Challenges  remain  on  the  user-friendliness 
in  Portugal,  despite 
of  public  services 

(156) The Public and Mandatory Interest Representation 

Transparency Register will be attached to the Parliament and 
publicly accessible through its online portal.  

progress  (159).  People’s  level  of  satisfaction  with 
administrative  services  are  slightly  below  the  EU 
average 
(Portugal:  41%;  EU:  45%)  whereas 
businesses  are  more  positive  (Portugal:  48%;  EU: 
42%)  (160).  People  think  that  clearer  information, 
reminders  for  important  deadlines  and  pre-filled 
forms  would  improve  their  interaction  with  public 
services.  73%  of  people  report  being  repeatedly 
that 
asked 
administrative procedures are complex. 

the  same  data, 

indicating 

for 

Graph A7.2: Most time-consuming aspects of 
service delivery 

Source: European Commission, 2026, Flash Eurobarometer 
surveys 567 and 568 on satisfaction with administrative 
services. 

(157) European Commission, 2026 Rule of Law Report, Chapter on 

Portugal (forthcoming).  

(158) European Commission, 2025 Rule of Law Report, Chapter on 
Portugal. These contracts still need to be checked by the 
Court, but the effect of suspending control of projects was 
limited. 

(159) For example, the Virtual Citizen Shop consolidates multiple 
services for citizens and businesses into a single platform, 
including support through video calls, enhancing accessibility 
and user support in digital public services. 

(160) European Commission, 2026, Flash Eurobarometer surveys 
567 and 568 on satisfaction with administrative services. 

74 

0%10%20%30%40%50%Time forresponsesLegislationandobligationsDocumentspreparationTime forresponsesApplicationformsDocumentspreparationPeopleBusinessesEUTools for smart legislation: Share of possible impacts assessed for all primary laws when developing legislation 0Regulators are required to identify and quantify the benefits of a new primary law0Regulators are required to identify and assess the impacts of alternative non-regulatory options0Tools for effective implementation: when developing laws, regulators are required to:Assess the level of compliance0Identify and assess potential enforcement mechanisms0Specify the methodology of measuring progress in achieving the law's goals0Oversight of better regulation: There is an external  body responsible for reviewing the quality of RIAs and of ex post evacuations 1There are publicly available assessments of the effectiveness of RIA in modifying regulatory proposals 0There are reports on the level of compliance by government department with the requirements of RIA1There are indicators on the percentage of ex post evaluations that comply with guidelines0The effectiveness of ex post evaluations in improving the regulatory stock has been assessed in the last five years0 
 
 
      
 
 
      
 
of 

find 

people  who 

Portugal has made little progress in reducing 
the  administrative  burden,  particularly  for 
businesses.  While  perceptions  about  service 
delivery  have  not  changed  since  2023  (161),  the 
public 
percentage 
administration to be complex and burdensome fell 
from  37%  to  31%  in  2025  (162).  For  people,  the 
waiting time for responses and understanding the 
applicable  legislation  and  obligations  is  the  most 
time-consuming  aspect  of  administrative  service 
delivery (Graph  A7.2), while 44% engage with the 
administration  more  often  than  they  expected, 
highlighting complexity. Businesses are more likely 
to  face  challenges  with  response  times  than  the 
EU  average  (41%  vs  30%).  Although  49%  of 
businesses  report  facing  challenges 
in  their 
interactions  with  the  public  administration,  these 
lead to less frequent delays in business operations 
than the EU average (Portugal: 11%; EU: 36%). 

in 

and 

fiscal 

faces 

capacity 

to  weaknesses 

territorial  governance  and 
Fragmented 
overlapping competencies create uncertainty 
shattered 
for  businesses.  Portugal 
implementation  due 
the 
decentralisation  process,  marked  by  disparities  in 
across 
administrative 
municipalities  and  persistent  shortcomings 
in 
in  multi-level 
coordination  and  monitoring 
governance (163) (see also Annex 18). For example, 
on permits, the involvement of various authorities 
at  different  administrative 
in 
duplicated procedures, lengthy approval times and 
(164).  Regulatory 
inconsistent 
fragmentation  and  limited  coordination  between 
environmental  and  building  permit  frameworks 
further  compound  these  challenges,  increasing 
compliance 
investment 
costs  and  delaying 
decisions.  Gaps  in  digitalisation,  administrative 
capacity  and  inter-agency  information  sharing 
continue  to  constrain  efficiency,  despite  some 
progress (165). 

implementation 

results 

levels 

(161) European Commission, 2023, Flash Eurobarometer 526 on 

Understanding Europeans’ views on reform needs. 

(162) European Commission, 2026, Flash Eurobarometer surveys 
567 and 568 on satisfaction with administrative services. 

(163) Tribunal de Contas, 2024, Relatório de Auditoria à Dimensão 

Financeira do Processo de Descentralização de 
Competências – 2022.  

(164) World Bank, Subnational B-Ready in the EU | Regulatory 

Efficiency. 

(165) For example, through tools like the   Integrated 

Environmental Permit System (SILiAmb) and reforms 

75 

The  availability of  digital  public  services  for 
people  grew  in  2024  (Table  A7.2).  Most  people 
in Portugal find public administration services easy 
to  use  while  abroad  in  the  EU,  with  the  majority 
believing  it  is  important  for  public  administration 
services  to  be  fast  and  accessible  through 
different  channels,  and  for  information  to  be 
transparent  and  clear.  Portugal  has  made 
significant  progress  on  access  to  public  services 
for people from other EU countries, (up from 66 to 
72),  exceeding  the  EU  average  (71)  (166).  The 
availability  of  electronic  health  records  stands 
above  the  EU  average,  with  a  score  of  88  (167), 
while  the  country's  e-government  user  uptake 
(Portugal: 80%; EU: 74%) (168) points to success in 
digital  authentication  through  eID,  which  provides 
access to over 1 000 services via ePortugal.gov.pt 
(169).  There  has  been  progress  on  expanding 
integrated  digital  service  delivery  through  gov.pt, 
reflected  by  the  75%  of  people  expressing  that 
digital  public  administration  services  significantly 
reduce the time and effort needed to access these 
services.  However,  70%  would  like  to  have  the 
possibility of obtaining help quickly, while 52% ask 
for  user-friendly  designs  (170).  Under the  Recovery 
and  Resilience  Facility  (171)  and  cohesion  policy 
funds programmes, Portugal has been investing in 
digitalising  various  public  services  –  for  example, 
by  making  the  gov.pt  app  available  on  all  mobile 
phones. 

introduced under the SIMPLEX 2024 initiative aimed at 
streamlining processes. The Technical Support Instrument 
(TSI) also supports Portugal as regards contractualisation 
between levels of government.  

(166) European Commission, DESI dashboard for the Digital 

Decade. 

(167) European Commission, 2025, Digital decade e-health 

indicator study: final report. 

(168) European Commission, 2025, eGovernment Benchmark. 

(169) European Commission, 2026, Simplification of key life 

events. 

(170)European Commission, 2026, Flash Eurobarometer surveys 
567 and 568 on satisfaction with administrative services. 

(171) Component 19 (Digital Public Administration) of Portugal’s 

Recovery and Resilience Plan. 

 
 
 
 
Table A7.2:  Digital Decade key performance indicators: availability of digital public services 

(1) Digital Decade target by 2030: 100. (2) Publishing year, data were collected in the previous year 
Source: European Commission, State of the Digital Decade report 2025 

for  access 

to  public  services 

Progress  is  more  limited  as  regards  digital 
public  services  available  for  businesses 
(Table  A7.2).  Portugal  performs  below  the  EU 
average 
for 
companies  from  other  EU  countries  (Portugal:  69; 
EU:  74)(172).  Furthermore,  the  number  of  digital 
public  services  available  for  businesses  remains 
below  the  EU  average  (Portugal:  84;  EU:  86),  yet 
74% of Portuguese businesses use them regularly 
(EU:  68%).  In  2026,  Portugal  became  the  first  EU 
country to launch the digital wallet for companies, 
facilitating  essential  business  documentation(173). 
Registering  a  Portuguese  business  can  be  done 
entirely  online  through 
‘Empresa  Online  2.0’, 
consolidating services for companies into a single 
point  of  access.  A  company  can  now  be  set  up 
electronically in less than 10 minutes(174), but  the 
entire  registration  process  is  usually  completed 
within  one  to  two  days(175).  This  time  varies 
depending  on  the  type  of  business  and  channel 
used (See Annex 5). 

Portugal  has  enabled 
the  cross-border 
exchange  of  data  and  documents  between 
authorities 
the  EU  once-only 
technical  system(176).  As  once-only  makes 
services(177) accessible, people and businesses will 

through 

(172) European Commission, DESI dashboard for the Digital 

Decade. 

(173) The gov.pt app provides the Digital Business Wallet with new 

features and documents. 

(174) Empresa Online | Serviços do registo comercial - gov.pt - 

gov.pt. 

(175) European Commission, 2026, Simplification of key life 

events. 

(176) European Commission, Once-Only Technical System 

Acceleratormeter, Ec.europa.eu. 

(177) Procedure types under Annex II of the SDGR (2018/1724/EU) 
and directives 2005/36/EC, 2006/123/EC, 2014/24/EU and 
2014/25/EU.  

76 

no longer have to search for their data, download 
and  upload  documents  manually  across  e-
government  portals  in  different  Member  States. 
Portugal  has  authority  registries  in  the  education 
domain connected. The country still has to identify 
the  types  of  documents  and  data  to  exchange 
through the system and explore ways to shift from 
submitting  documents  to  exchanging  structured 
data. 

Civil service 

Portugal  has  one  of  the  oldest  public 
administration  workforces,  which  poses  a 
risk  for  mid-term  capacity  and  quality  of 
public  administration.  The  proportion  of  civil 
servants  older  than  55  has  steadily  increased 
since  2020,  indicating  the  importance  of  further 
strategic workforce planning(178). Recent measures 
to 
improve  the  attractiveness  of  the  public 
administration  have  led  to  an  increase  in  the 
number of civil servants, and improving continuous 
learning  opportunities  and  career  progression 
paths  within  the  public  administration  could 
further improve its attractiveness and adaptability 
to future challenges(179). 

Portugal  is  taking  measures  to  consolidate 
civil  servants’  skills.  Under  the  Recovery  and 
Resilience Facility,  Portugal  is investing in training 
courses for public servants(180). Furthermore, it has 

(178) European Commission, Eurostat, 2026, European Union 

Labour Force Survey, Employed persons by economic activity 
(NACE Rev. 2) (2008-2026). 

(179) DGAEP - Direção-Geral da Administração e do Emprego 

Público. 

(180) Component 19 (Digital Public Administration) of Portugal’s 

recovery and resilience plan. 

EU-272023202420252025788284828282848663868883Digital public services for citizens (0 to 100)Digital public services for businesses (0 to 100)Access to electronic health records (0 to 100)Portugal 
 
 
 
     
 
expanded  its  civil  service  competency  framework 
(ReCAP)  and  improved  provision  of  training  to 
acquire the skills and competencies needed for the 
green(181)  and  digital 
transitions(182).  Such 
measures  are  critical,  given  that  Portugal  has  a 
low  proportion  of  civil  servants  with  higher 
education,  although  this  figure  has  increased 
slightly(183).  The  proportion  of  civil  servants  in 
adult  learning  has  increased  sharply,  reaching  a 
level  above  the  EU  average(184).  Portugal  ranks 
second  in  the  EU  in  terms  of  gender  parity  with 
50% of women in senior civil servant positions(185). 

Integrity 

Although  the  perception  of  corruption  when 
doing business in Portugal remains very high, 
the  reported  level  of  experienced  corruption 
is low. 75% of companies believe that corruption 
is  widespread  (EU:  63%)  and  50%  see  it  as  a 
problem  when  doing  business  (EU:  35%)(186).  Yet 
only  44%  agree  that  overly  close  links  between 
business and politics lead to corruption (EU: 76%), 
suggesting  concerns  extend  beyond  political 
connections. Urban planning and local government 
are  among  the  sectors  particularly  vulnerable  to 
corruption  in  Portugal(187)  (see  also  Annex  5). 
Despite  relatively  low  reported  pressure  to  offer 
gifts  or  extra  payments  for  permits,  services  or 
(Portugal:  6%  vs  EU:  10%), 
procurement 
confidence  in  accountability  is  lower,  with  only 

(181) Training Centre for the Energy Transition (CTE), ECO.AP 

Program, trainings developed by the Public Employment 
Service (IEFP) on green transition and skills. 

(182) Digital Skills Pact aiming to strengthen and generalise digital 
skills among citizens, businesses, and Public Administration 
by 2030. The initiative focuses on education, reskilling and 
upskilling. 

(183) European Commission, Eurostat, 2026, European Union 

Labour Force Survey, Employees by educational attainment 
level and NACE Rev. 2 activity (2008-2026). 

(184) European Commission, Eurostat, 2026, European Union 
Labour Force Survey, Participation rate of employees in 
education and training (last 4 weeks) by NACE Rev. 2 activity 
(2008-2026). 

(185) European Institute for Gender Equality, 2025, Gender 

Statistics Database. 

(186) European Commission, 2025, Flash Eurobarometer survey 
557 on businesses’ attitudes towards corruption in the EU 
and selected enlargement countries. 

(187) European Commission, 2025 Rule of Law Report. 

23%  of  companies  believing  those  caught  bribing 
senior  officials  are  appropriately  punished  (EU: 
33%)(188),  pointing  to  challenges  regarding  the 
effectiveness of enforcement at higher levels. 

resources 

repression, 

cases  have 

for  handling 
On 
corruption 
improved,  but 
challenges  persist  in  effectively  pursuing 
high-level  cases.  Stakeholders  recognise  the 
positive impact of recent measures, but some note 
that  shortages  of  prosecutors  and  clerks,  limited 
access  to  specialised  advisers,  and  outdated  IT 
equipment  continue  to  hamper  the  prosecution’s 
handling  of  corruption  cases.  As  a  result,  the 
authorities  struggle 
to  deal  with  high-level 
corruption  cases  in  a  timely  manner,  risking  that 
they might become time barred. Significant delays 
were  noted 
to  some  high-level 
corruption  cases,  with  a  few  pending  for  over  a 
decade and remaining at pre-trial stage(189). 

relation 

in 

Justice 

in  particular 

justice  system, 

Challenges  remain  regarding  the  efficiency 
of  the 
in 
administrative  and  tax  courts.  The  time  taken 
to  reach  a  decision  in  civil  and  commercial  cases 
at  first  instance  courts  decreased  slightly  (263 
days in 2024, compared to 267 days in 2023). In 
first  instance  administrative  and  tax  courts,  the 
estimated 
cases 
(disposition time) rose dramatically to 858 days in 
2024  (compared  to  594  days  in  2023)(190),  and 
remains 
the 
comparatively  high  (0.8  cases  pending  in  first 
instance  per  100.00 
inhabitants,  the  second 
highest  in  the  EU)(191).  Despite  new  recruitments 
about 
serious 
and 

resolve  pending 

progress(192), 

concerns 

pending 

number 

cases 

time 

of 

to 

(188) European Commission, 2025, Flash Eurobarometer survey 
557 on businesses’ attitudes towards corruption in the EU 
and selected enlargement countries. 

(189) European Commission, 2025 Rule of Law Report, Chapter on 

Portugal. 

(190) These data are in part linked to the very high number of 
urgent cases to compel the administration to decide in 
asylum and migration cases that were lodged with the 
Lisbon Administrative Court during 2024. 

(191) European Commission, 2026 Rule of Law Report, Chapter on 

Portugal (forthcoming). 

(192) Under the Recovery and Resilience Facility Component 18 
(Economic Justice and Business Environment) of Portugal’s 

77 

 
 
 
 
In 

the 

contrast, 

resources  remain,  in  particular  regarding  judicial 
clerks, impacting the  efficiency  and quality  of  the 
justice  system. 
level  of 
digitalisation is advanced, with widespread use of 
digital technologies by the courts and prosecution. 
However, digital tools are underutilised in criminal 
proceedings.  Furthermore,  Portugal  lacks  digital 
solutions  to  initiate  and  follow  proceedings  in 
civil/commercial  and  administrative  cases,  as  well 
in  the  general  public’s  online  access  to 
as 
published judgments, in particular for first instance 
decisions.  Portugal  also  lags  behind  in  producing 
machine-readable judicial decisions. 

recovery and resilience plan, judicial clerks’ statutes have 
been revised to introduce changes to career structure and 
pay. 

78 

 
 
 
SUSTAINABILITY 
ANNEX 8: INDUSTRY DECARBONISATION, CIRCULARITY AND CLIMATE MITIGATION 

country-specific 

recommendations 

Portugal  is  making  progress  on  industry 
decarbonisation,  reducing  emissions  from 
road  transport,  circular  economy,  and  waste 
management,  but  challenges  remain.  The 
2025 
for 
Portugal  highlighted  challenges  concerning  the 
reliance  on  fossil  fuels  in  the  transport  sector. 
Portugal’s industrial decarbonisation faces hurdles:  
Though  pilot  hydrogen  projects  and 
fiscal 
incentives are advancing, delays in permitting and 
underdeveloped  CO₂  infrastructure  limit  progress 
toward  climate  neutrality.  While  measures  have 
been  adopted  and  partially  implemented  to  boost 
public transport, railway infrastructure and electric 
vehicle charging infrastructure, their impact is still 
limited,  and  fossil  fuel  subsidies  could discourage 
customers 
emission-free 
alternatives.  The  2025  recommendations  also 
highlighted the need to improve the conditions for 
towards  a  circular  economy, 
the 
transition 
increasing  waste  prevention, 
particularly  by 
recycling  and 
landfill  and 
to 
incinerator  waste.  Portugal  has  made  some 
progress by adopting a set of plans that now has 
to be properly implemented. 

choosing 

reduce 

reuse 

from 

Industry decarbonisation 

Greenhouse gas emissions from industry 

Overall,  Portugal  is  not  generally  ranked 
among the highest emitters in the EU, except 
in  specific 
industries  such  as  pulp  and 
paper (193).  In  that  sector,  the  emission  intensity 
in  Portugal  was  measured  at  1.1 kg CO2eq  per 
euro,  significantly  surpassing  the  EU  average  of 
0.6 kg  CO2eq  per  euro  in  2023.  The  emission 

intensity  of  Portugal’s  manufacturing  sector 
decreased by 28% between 2018 and 2023 (194).  

Policies to promote industry decarbonisation 

challenges 

faces  many 

Portugal 
in 
decarbonising  industry,  despite  favourable 
conditions  for  renewable  energy.  Notable 
obstacles  include  high  initial  investment  costs, 
restricted  access  to  financing  for  low-carbon 
technologies,  skill  shortages,  complex  regulatory 
frameworks,  permitting  constraints  and  high 
electricity prices for large consumers. 

Portugal  is  yet  to  present  a  finalised  green 
industrial  strategy,  that  is  expected  to  be 
finalised  by  mid-2026.  The  strategy  would 
complement a number of other relevant strategies 
and action plans, notably the national energy and 
climate  plan,  the  national  hydrogen  strategy,  the 
national strategy for critical raw materials and the 
action plan for biomethane. 

industry 

Clean 
is  expected  to  make  a 
significant  contribution  to  Portugal’s  path 
towards  climate  neutrality.  On  the  basis  of 
in  the  energy  and  climate  plan, 
projections 
Portugal expects to decrease total greenhouse gas 
(GHG)  emissions  (excluding  land  use,  land-use 
change and forestry and international aviation) by 
37% in 2030 and by 63% in 2040, compared with 
1990 levels (195). This includes a 57% decrease in 
emissions under the EU  emissions trading system 
(ETS) by 2030, compared with 2005, and is based 
on 
‘with  additional  measures’  scenarios  that 
assume the successful deployment of some large-
scale  low-carbon  industrial  projects  currently  in 
the pipeline. This would increase Portugal’s overall 
energy  consumption  but  would  largely  rely  on 
renewable  energy  sources (196).  In  its  hydrogen 

(193) This Annex discusses the transition of Portugal's 

manufacturing industry, specifically its energy-intensive 
industries, to low-carbon and net-zero modes of production, 
which is key to preserving competitiveness on the path 
towards climate neutrality as mandated by the European 
Climate Law. A broader perspective on the current 
competitiveness challenges facing Portugal's manufacturing 
industry is provided in Annex 5. For a more detailed 
description of greenhouse gas emissions from industry, see 
European Commission (2025), 2025 Country Report - 
Portugal, Commission staff working document, SWD (2025) 
205 final, Brussels, 4.6.2025, Annex A7. Clean industry and 
climate mitigation. 

(194) Data on the manufacturing sector exclude the NACE division 
C19 – manufacture of coke and refined petroleum products, 
for better match of the sectoral data from Eurostat (gross 
value added) with those from the UNFCCC under the 
Common Reporting Format. Also see further indicators on 
industry decarbonisation, as well as the annotation for 
further information, in table A8.1 at the end of this Annex.  

(195) Calculated on the basis of the 1990 figure reported by the 
European Environment Agency (EEA) and the projections 
provided by Portugal in the final updated national energy 
and climate plan. 

(196) See Portugal’s national energy and climate plan. 

79 

 
 
 
 
 
 
 
strategy, Portugal has set the following targets for 
2030: a 10-15% hydrogen share for the injection 
of gas into its grid; the installation of 2 to 2.5 GW 
of  electrolyser  capacity;  and  ensuring  that  5%  of 
industrial energy consumption is covered by green 
hydrogen by 2030 (197). 

is 

initiatives 

Portugal 
to 
implementing 
promote  the  decarbonisation  of  existing 
industries  and  attract  strategic  low-carbon 
sectors,  such  as  the  battery  and  renewable 
hydrogen  sectors.  The  country  has  introduced  a 
robust  investment  package,  with  calls  for  tenders 
to  promote  energy  efficiency  by  replacing  fossil 
fuels  with  cleaner  alternatives 
in  existing 
industries  and  facilitating  the  production  of 
renewable  hydrogen.  These  tenders  are  bolstered 
by  funds  from  the  recovery  and  resilience  plan, 
supporting capital expenditure for decarbonisation 
projects.  From  the  recovery  and  resilience  plan 
alone,  EUR 737 million  have  been  committed  to 
industry  decarbonisation  and  EUR 185 million  to 
producing renewable gases such as hydrogen and 
biomethane, thereby  attracting  new  green  sectors 
into  the  country.  That  does  not  include  the 
additional  EUR 100 million 
in  the  RePowerEU 
component.  On  renewable  hydrogen,  the  calls  for 
tenders within the framework of the Recovery and 
Resilience Facility were complemented by a special 
auction  for  centralised  purchases  of  renewable 
hydrogen  and  biomethane  to  be  injected  into  the 
gas  grid,  thereby  addressing  the  gap  between 
supply and demand in the sector. 

for 

costs 

Portugal  has  taken  measures  to  alleviate 
sustainable 
operational 
manufacturing.  Key  measures 
include  fiscal 
incentives  such  as  corporate  tax  reductions  and 
simplified  VAT  schemes.  For  highly  electrified 
industries, partial reductions of electricity costs are 
introduced.  These  particularly  benefit 
being 
long-term  power  purchase 
companies  with 
agreements 
set-ups. 
or 
self-consumption 
to  decarbonise  electricity 
Portugal’s  efforts 
generation  are  expected  to  have  a  broad  impact 
on  industry,  by  helping  to  lower  energy  expenses. 
This  is  crucial  as  Portugal  continues  to  grapple 
with  offering  competitive  electricity  rates  to 
industrial 
favourable 
conditions for renewable energy, Portugal provides 
lower  indirect  cost  compensation  than  other  EU 

consumers. 

Despite 

the 

affects 

Member  States,  which 
cost 
competitiveness  of  large  consumers  through their 
electricity  bill.  Currently,  most  of  Portugal’s 
revenues  from  the  EU  ETS  are  spent  on  the 
amortisation  of  electricity  tariff  debt,  further 
reducing the scope for indirect cost compensation 
to industry. 

Current  developments  in  hydrogen  supply 
remain  at  an  early  stage.  Several  pilot 
initiatives  are  in  progress,  primarily  focused  on 
production  and  distribution  for  certain  end  users, 
while  efforts  are  also  being  made  to  restructure 
existing  networks.  Notably,  on  a  larger  scale,  the 
Portuguese electricity producer, EDP, concluded the 
Flexnconfu  project  in  September  2025.  This  pilot 
involves  21  partners,  with  an  investment  of 
EUR 12.6 million,  70%  of  which  is  co-financed  by 
EU  funds.  Its  objective  is  to  produce  up  to 
400 kilograms  of  hydrogen.  In  parallel,  Galp,  a 
Portuguese  energy  corporation,  is  advancing  the 
construction  of  an 
industrial  facility  for  the 
production  and  storage  of  green  hydrogen,  which 
is  a  critical  component  in  the  decarbonisation  of 
its  energy  portfolio 
the  Sines  refinery  and 
products.  Several  projects  are  currently  in  the 
design  and  initial  implementation  phases.  These 
local  self-
initiatives  aim  to  operate  under 
the 
consumption 
decarbonisation 
industrial 
sectors. 

models, 
of 

hard-to-abate 

supporting 

Lengthy 

processes 

interest  across  multiple 
Despite  strong 
industries,  the  permitting  of  infrastructure 
for  the  clean  transition  remains  a  key 
the 
challenge. 
involvement  of  multiple  authorities  do  not  align 
with  the  economic  reality  of  projects.  The  lack  of 
CO2 transport infrastructure is a challenge for the 
development  of  carbon  capture  and  storage 
projects,  hampering  the  decarbonisation  of  hard-
to-abate  sectors  with  a  strong  presence 
in 
Portugal, such as cement. 

and 

Reduction of effort sharing emissions 

Compliance  with  effort  sharing  limits  with 
domestic measures 

(197) See Portugal’s national hydrogen strategy of 14 August 

2020. 

80 

 
 
is  projected 

For  2030,  Portugal 
to 
overachieve  its  effort  sharing  target (198).  In 
2024,  GHG  emissions  from  Portugal’s  effort 
sharing sectors are expected  to have been 19.5% 
below  those  of  2005.  By  2030,  with  current  and 
planned  policies  and  measures,  these  emissions 
are expected to decrease by 40.1%, resulting in a 
surplus  of  11.4  percentage  points  relative  to  the 
2030 target of −28.7 %. Portugal is projected not 
to exceed its effort sharing emissions limits in any 
year in the 2021-2030 period. 

Graph A8.1: Greenhouse gas emissions in the 
effort sharing sectors, 2005, 2023, and 2024 

Source: European Environment Agency. 

Sustainable transport 

In Portugal, transport is a significant emitter 
of  greenhouse  gases (199);  modal  shift  and 
decarbonisation  yet  has  to  gain  ground  in 
both  passenger  and 
transport. 
Emissions from transport account for 27% of total 
emissions  (including  19%  from  the  transport 
sector  and  8%  from  the  transport  activities  of 
households) (200).  Passenger 
is  still 

transport 

freight 

(198) The  national  GHG  emission  reduction  target  is  set  out  in 
Regulation (EU) 2018/842 (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). The emissions from effort sharing 
sectors for 2024 are based on approximated inventory data. 
The  final  data  will  be  established 
in  2027  after  a 
comprehensive  review.  Projections  about  the  impact  of 
current  policies 
(‘with  existing  measures’,  WEM)  and 
additional  policies (‘with  additional  measures’,  WAM)  as  per 
Portugal’s 2025 reporting under Article 17 of Regulation (EU) 
2018/1999 (the Governance Regulation). Also see European 
Commission  (2025),  Climate  Action  Progress  Report  2025 – 
Technical  Information,  Commission  staff  working  document, 
Brussels,  Chapter  9  (pp. 111ff.),  and  in  particular  Tables  25 
and 26. 

(199) See Graph A8.1, and Table A8.1 at the end of this Annex. 

(200) Air emissions accounts by NACE Rev. 2 activity, based on 

Eurostat database: env_ac_ainah_r2. 

heavily reliant on cars (88% of total transport; EU 
average: 83%) (201). For freight transport, Portugal 
is  far  more  road-dependent  than  the  EU  average: 
in  2023,  85.9%  of  inland  freight  in  Portugal 
moved by  road and only  14.1% by rail,  compared 
with the EU  average of roughly  77% by road and 
17% by rail (202). This shows that Portugal’s freight 
system  is  substantially  less  rail-oriented  than  the 
EU  overall.  In  2024,  45%  of  Portugal’s  effort 
sharing  emissions  came  from  road  transport, 
although they have decreased by 10% from 2005 
levels.  For  Portugal,  the  2025  country-specific 
challenges 
recommendations 
concerning  the  reliance  on  fossil  fuels  in  the 
transport  sector,  in  particular  highlighting  fossil 
fuel  subsidies,  the  need  to  invest  in  sustainable 
regional 
transport 
disparities. 

(particularly 

highlighted 

rail),  and 

in 

a 

new 

legal 

framework 

Portugal  has  measures  to  promote  more 
sustainable  modes  of  transport,  notably  by 
supporting  electromobility  and  investing  in 
public transport infrastructure.  It has recently 
adopted 
for 
electromobility, which simplified the administrative 
procedures  for  the  permitting  and  operation  of 
charging  points  and 
introduced  measures  to 
further liberalise the market, opening it up to new 
operators.  So  far,  charging  infrastructure  has 
followed  the  market,  with  the  expansion  largely 
led  by  private  operators  and  municipalities. 
Portugal has also allocated over EUR 30 million to 
incentivise the purchase of low- and zero-emission 
vehicles, reflecting a consistent policy focus in this 
area over the past decade. Nevertheless, in 2024, 
only  32%  of  newly  purchased  light-duty  vehicles 
were  electric.  The  decarbonisation  of 
road 
transport  still  faces  systemic  challenges.  Zero-
emission  vehicles  have  not  been  exempted  from 
concession  tolls,  nor  are  they  subject  to  the 
assessment  referred  to 
in  Article  7ca(4)  of 
Directive  1999/62/EC.  The  transition  to  more 
sustainable transport is still hindered by fossil fuel 
subsidies. 

Portugal is taking action to address the 2025 
country-specific 
to 
transport 
‘promote 

recommendation 
public 

efficient 

(201) Modal split of inland passenger transport, based on Eurostat 

database: tran_hv_psmod. 

(202) Portuguese Environment Agency (APA), Relatório do Estado 
do Ambiente – Transporte de mercadorias, 2025, Relatório 
do Estado do Ambiente – Transporte de mercadorias. 

81 

05101520253035404550200520232024MtCO2eDomestic transport (excl. aviation)Buildings (under ESR)AgricultureSmall industryWaste 
   
 
 
connections to reduce the pressure on house 
prices  in  urban  centres  and  improve  the 
attractiveness  of  other 
territories’.  To 
promote the use of public transport and the modal 
shift  away  from  private  cars,  Portugal  has 
committed EUR 3.2 billion through its recovery and 
resilience  plan 
railway 
infrastructure 
(modernise  signalling  systems); 
(ii) expand  metro  and  other  urban  transport 
systems;  (iii) acquire  413  zero-emission  electric 
buses  in  the  Lisbon  and  Porto  metropolitan  areas 
and  the  rest  of  the  country;  and  (iv) provide 
reduced  fares  and  free  public  transport  to  young 
people.  

(i) enhance 

to: 

its 

Portugal’s 

Key  infrastructure  projects  are  poised  to 
transportation 
transform 
landscape, but close monitoring is needed to 
ensure  timely  delivery. High-speed  rail  projects 
demonstrate  Portugal’s  commitment  to  cleaner 
transport  alternatives  to  efficiently  connect  urban 
centres  and  reduce  the  carbon  footprint.  The 
Lisbon-Madrid  cross-border  high-speed  line,  in 
particular, is crucial for linking Portugal to the rest 
of Europe, as is the shift to the European standard 
nominal 
track  gauge  of  1 435 mm.  Timely 
progress  on  this  project  could  significantly  boost 
Portugal’s competitiveness and resilience. 

Portugal is taking action to address the 2025 
country-specific recommendation on reducing 
reliance  on  fossil  fuels  ‘by  investing  in 
sustainable  transport,  particularly  in  rail, 
taking 
into  account  regional  disparities’. 
Upgrading  and  expanding  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  for  2030  mean 
that  these  plans  should  be  monitored  closely  to 
rail 
delivery. 
ensure 
infrastructure, 
and 
decarbonising 
personal  mobility  are  paramount,  particularly  in 
Portugal’s  metropolitan  areas,  which 
face 
significant  challenges  as  regards  air  quality  and 
traffic congestion. 

Improving 
transport, 

timely 

Sustainable industry 

Circular economy industry 

waste 

management 

Improving 
and 
developing  the  potential  of  the  circular 
economy  is  one  of  the  main  environmental 
challenges facing Portugal. 

On waste management, new legislation and a 
set  of  plans  have  been  adopted  in  the  last 
few years. However, overall progress in this field 
has  so  far  been  limited,  although  the  situation 
varies  by  region.  Thus,  a  new  General  Waste 
Management  Regime  –  a  reform  included  in 
Portugal’s  recovery  and  resilience  plan  –  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 (203).  The  new  regional 
waste management plans for Madeira and Azores 
were  adopted  in  2021  and  2023,  respectively. 
Moreover,  municipal  action  plans  for  municipal 
waste (PAPERSU) were adopted in 2024 and 2025 
(following 
the  Portuguese 
Environment  Agency  (APA)),  setting  out  strategies 
in  around  300  municipalities  to  comply  with 
national  targets.  Lastly,  to  supplement  PERSU 
2030,  the  Portuguese  government  adopted  the 
TERRA  Action  Plan  in  2025  to  promote  shared 
infrastructures for waste treatment and determine 
immediate  action  to  be  taken  to  ensure  landfill 
is  fully 
capacity  until 
implemented. 

the  PERSU  strategy 

the  validation  by 

In January 2026, the Portuguese government 
adopted  a  new  National  Circular  Economy 
Action Plan (CEAP 2030) (204), replacing the first 
national  circular  economy  action  plan,  adopted  in 
2017.  CEAP  2030  includes  73  actions:  41 macro-
actions,  targeted  at  seven  cross-cutting  areas 
(policy  instruments,  funding,  technology,  research 
and innovation, circularity in companies, symbiosis 
and 
life  cycle,  and  education,  training  and 
awareness  raising);  25  meso-actions,  aimed  at 
seven  priority  sectors  (agri-food,  construction, 

(203) Portuguese Environment Agency (APA), Waste Management 

Plans. Link. 

(204) Portuguese Environment Agency (APA), Circular Economy 

Action Plan. Link  

82 

 
 
 
 
distribution  and  retail,  electric  and  electronic, 
plastics,  tourism,  and  textile  and  clothing);  and 
seven  micro-actions,  designed  to  be  implemented 
at local level. 

Portugal  is  far  below  the  EU  average  on 
circular  economy  and  waste  management 
indicators.  However,  implementing  the  above-
mentioned plans and increasing investment efforts 
could  enable  Portugal  to  improve  circularity  and 
waste  management  outcomes.  Portugal’s  circular 
material use rate was 3% in 2024, well below the 
EU average of 12.2% (205). Resource productivity is 
also  below  the  EU  average,  at  EUR 1.7  per  kg  of 
material  consumed 
(EU  average:  EUR 3  per 
kg) (206).  In  2024,  Portugal  generated  519 kg  per 
capita of municipal waste, increasing from 505 kg 
per capita in 2023 and just above the EU average 
of 517 kg per capita (207). With a recycling rate of 
32.8% in 2024 (EU average: 48.1% (208)), Portugal 
missed  the  EU  target  of  recycling  50%  of 
municipal  waste  by  2020  and  is  at  high  risk  of 
missing the  new  EU  target  of  55%  for  2025 (209). 
Portugal  is  also  at  risk  of  not  meeting  the  2035 
target  of  landfilling  a  maximum  of  10%  of 
municipal  waste.  The  landfill  rate  was  57%  in 
2023,  a  limited  and  slow  decrease  from  62%  in 
2010 (210),  although  decreasing  to  52%  in  2024 
according  to  the  last  available  data.  On  the 
positive  side,  the  recycling  rate  for  packaging 
waste in 2023 was 61.8%, which was closer to the 
EU  target  of  65%  for  2025 (211).  Moreover, 
Portugal’s  plastic  recycling  rate  reached  39.5%  in 
2023,  only  slightly  below  the  EU  average  of 
42.1% (212). 

Portugal  is  also  below  the  EU  average  for 
reuse  and  recycling  of  construction  and 
demolition  waste.  Construction  and  demolition 
waste  accounts  for  almost  40%  of  all  waste 

(205) Eurostat, Circular material use rate, Link. 

(206) Eurostat, Resource productivity, Link. 

(207) Eurostat, Generation of municipal waste per capita, Link. 

(208) Eurostat, Recycling rate of municipal waste, Link. 

(209) European Commission, 2023 Waste early warning report, 

Link. 

(210) European Environment Agency (EEA), Municipal waste landfill 

rates in Europe by country (2010 and 2023), Link. 

an 

from 

environmental 

generated  in  the  EU.  A  recent  study (213)  showed 
perspective, 
that, 
preparation  for  reuse  and  recycling  is  preferred 
over  incineration  and  landfilling  for  most  of  the 
individual fractions of construction and demolition 
waste. In 2022, 42.6% of mineral construction and 
demolition  waste  was  prepared  for  reuse  and 
recycling  in  Portugal,  compared  with  the  EU 
average of 79.7%. 

Portugal 
is  below  the  EU  average  for 
innovation  but  above  the  EU  average  for 
employment  in  the  circular  economy.  On 
innovation,  Portugal  has  filed  few  patents  related 
to  recycling  and  secondary  raw  materials  and  is 
below the EU average (214). The number of workers 
employed  in  the  circular  economy  sector  has 
increased by 14% in comparison to 2014. Workers 
employed in the circular economy sector represent 
around  2.3%  of  overall  employment.  This  figure 
has remained stable over the last 10 years and is 
above the EU average (215). 

New  economic 
instruments  are  being 
introduced  to  encourage  the  transition  to  a 
circular  economy.  The  introduction  of  systems 
like  ‘pay  as  you  throw’  (PAYT)  and  deposit-refund 
schemes  for  beverage  packaging  (plastics  and 
metals  up  to  3 litres)  –  a  reform  under  the 
recovery  and  resilience  plan  –  can  be  highlighted 
as key measures to boost selective collection and 
reduce residual waste. The deposit-refund scheme 
is  being  implemented  and  became  operational  in 
April 2026. PAYT systems are expected to be rolled 
out  or  piloted  in more  municipalities.  In  any  case, 
PAYT  systems  are  mandatory  as  of  2025  for  the 
retail,  services  and  catering  sectors,  and  will  be 
mandatory for the domestic sector in 2030. 

investment  to  become  a  more 
Current 
circular economy has been insufficient. During 
2021-2027,  Portugal 
to  need 
investment  of  EUR 2.5 billion  per  year  for  the 
transition  to  a  circular  economy,  including  waste 
management.  The  investment  gap  amounts  to 
EUR 472 million 
comprising 
EUR 356 million  per  year  for  circular  economy 

is  estimated 

year, 

per 

(213) European Commission: Joint Research Centre, Techno-

economic and environmental assessment of construction and 
demolition waste management in the EU, 2024, Link. 

(214) Eurostat, Patents related to recycling and secondary raw 

(211) Eurostat, Recycling rates for packaging waste, Link. 

materials, Link. 

(212) Eurostat, Plastic packaging recycling rate, Link. 

(215) Eurostat, Persons employed in circular economy sectors, Link. 

83 

 
 
 
investments and an additional EUR 116 million for 
waste  management (216).  It  should  be  noted  that, 
on  the  basis  of  the  TERRA  Action  Plan,  Portugal 
estimates  there  to  be  an  investment  gap  of 
EUR 230 million  per  year  for  waste  management 
until 2030. 

Bioeconomy industry 

In  Portugal,  bioeconomy  value  added  has 
grown  at  a  high  average  growth  rate  (5.4%), 
driven  in  particular  by  the  wood  products  and 
food  and 
furniture,  biobased  plastics,  and 
beverages 
the  bioeconomy 
subsectors, wood products and furniture registered 
the  highest  growth  in  value  added  (6.8%  on 
average between 2018 and 2023) (217). 

subsectors.  Of 

bioeconomy 

employment 

Overall 
has 
decreased. However, the bio-based chemicals and 
furniture 
plastics  and  wood  products  and 
subsectors  bucked  that  trend,  recording  positive 
growth  in  total  employment  between  2018  and 
2023 (1.2% on average each) (218). 

Labour  productivity  in  the  bioeconomy  – 
measured  as value  added  per person  employed  – 
stood  at  64.7%  of  the  national  average  and  has 
grown from 53.6% in 2018 (219). 

R&D business expenditure from bioeconomy-
relevant subsectors has grown less than the 
overall R&D business expenditure in Portugal 
(7.5%  compared  with  an  average  of  12.2% 
between 2018 and 2023) (220). The country has 
a  well-established  network  of  technology  parks 
and incubators, the main ones being located in or 
close to universities, e.g., in Coimbra, Porto, Lisbon, 
Braga, Aveiro and Faro (221). 

Zero-pollution industry 

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 (222). (see Annex 18). 

releases 

industry  still 

Portugal’s 
large 
quantities  of  water  pollutants.  Some  800 
industrial  installations  are  required  to  have  a 
permit under the Industrial  Emissions Directive. In 
2022,  Portugal  ranked  seventh  for  emission 
intensity, with 1.37 kg/EUR 1 billion of gross value 
added,  weighted  by  human  toxicity  factors,  which 
is  above  the  EU  average  of  0.86.  The  main 
contributors to emissions to water in Portugal are 
the  pulp,  paper  and  wood  industry  for  heavy 
metals,  nitrogen,  total  organic  carbon  and  total 
phosphorus and the waste management sector for 
heavy  metals (223).  Water  pollution  from  industry 
imposes direct and indirect costs of EUR 24 million 
annually, not yet sufficiently borne by the polluters 
(224). 

The  impact  of  air  pollution  on  human  health 
remains significant.  The  latest  available  annual 
estimates for Portugal (for 2023) by the European 
Environment  Agency  (EEA)  attribute  2 221  deaths 
a  year  (or  22 894  years  of  life  lost  (YLL))  to  fine 
particulate  matter  (PM2.5);  692  deaths  a  year  (or 
7 133 YLL)  to  nitrogen  dioxide  (NO2)  and  1 320 
deaths a year (or 13 682 YLL) to ozone (225). 

Portugal’s  investment  needs  for  pollution 
prevention  and  control  are  estimated  to 
amount  to  EUR 1.2 billion  per  year  in  2021-

(216) European Commission, 2025 Environmental Implementation 
Review, Country Report – Portugal. Estimates expressed in 
2022 prices, Link. 

(217)Bioeconomy  subsectors:  food  and  beverages;  bio-based 
textiles;  wood  products  and  furniture;  bio-based  chemicals  and 
plastics. 

(218) Jobs and Wealth in the European Union Bioeconomy, Link. 

(219) Jobs and Wealth in the European Union Bioeconomy, Link. 

(220) Business expenditure in Research and Development (R&D) in 

the EU bioeconomy Link, JRC analysis 

(221) BIC-Country Report Portugal, 2021, Link. 

(222) Portugal was condemned by the Court of Justice of the EU 
by its Judgment of 29 June 2023 in Case C-220/22, in 
relation to the metropolitan areas of Lisbon, Porto and Braga. 

(223) European Commission, 2025 Environmental Implementation 

Review, Country Report – Portugal, Link. 

(224) European Commission, Directorate-General for Environment, 
IEEP, Green taxation and other economic instruments – 
Internalising environmental costs to make the polluter pay, 
2021, p.35, table 5, Link 

(225) EEA 2025, Harm to human health from air pollution in 

Europe: burden of disease status, 2025, Link. 

84 

 
 
 
 
2027 (226). Proper implementation of the national 
climate  and  energy  plan  (NECP),  including  the 
investments  in  sustainable  energy  and  transport, 
would largely deliver the necessary investment for 
clean air and noise. 

(226) European Commission, 2025 Environmental Implementation 
Review, Country Report – Portugal. Estimates expressed in 
2022 prices, Link. 

85 

 
 
 
Table A8.1:  Key clean industry and climate mitigation indicators: Portugal 

Sources and notes: Industry decarbonisation: All data are from Eurostat; data following the UNFCCC Common Reporting 
Format (CRF) are from the European Environment Agency (EEA), republished by Eurostat. (1) Sectors covered: all divisions of 
section C - Manufacturing - of the NACE Rev. 2 statistical classification of economic activities, except C19 (manufacture of coke 
and refined petroleum products). (2) GHG emissions as per UNFCCC Common Reporting Framework (CRF) categories 1.A.2 - fuel 
combustion in manufacturing in industries and construction (that broadly correspond to the broadly correspond to the NACE 
sections C - Manufacturing and E - Construction, excluding C-19),  and CRF2 - industrial processes and product use. The figures 
shows the emissions in the 1.A.2 category as a share of the sum of CRF1.A.2. and CRF2 emissions. (3) Sectors covered: CRF 1.A.2 
as described above. Gross value added (GVA) data in the denominator aligned in sectoral coverage, in 2020 prices. (4) Sectors 
covered: NACE section C excluding C19. (5) Nominator: NACE divisions C17, 20, 23, 24; denominator: NACE section C excluding 
C19 (see above). (6) GVA (denominator) in 2020 prices. Reduction of effort sharing emissions: Data source: European 
Environment Agency, greenhouse gas data viewer; European Commission, Climate Action Progress Report, 2025. For details, see 
the footnote in the "Reduction of effort sharing emissions" section. Sustainable road transport: (7) Source: Eurostat; (8) Source: 
European Alternative Fuels Observatory; (9) Source: Eurostat. For all climate mitigation indicators, the trend arrows compare the 
latest available data (year t) with the data four years earlier (t-4). Sustainable industry: Bioeconomy value added, employment 
and productivity: JRC, Developments of Economic Growth and Employment in Bioeconomy Sectors across the EU. Bioeconomy 
R&D business expenditure: JRC, Business expenditure in Research and Development (R&D) in the EU bioeconomy. Damage cost for 
industrial pollution: EEA, The costs to health and the environment from industrial air pollution in Europe, 2024. Water industrial 
pollutants releases: EEA, Industrial releases of pollutants to water and economic activity in the EU-27, 2024. Water chemical 
status: WISE, Surface water bodies: Chemical status, 2024 and WISE Groundwater bodies: chemical status, 2024. Other indicators: 
Eurostat. For circular economy indicators, the trend arrows compare the latest available data (year t) with the data two years 
earlier (t-2). 

86 

Climate mitigationTrendIndustry decarbonisation201820192020202120222023202420182023GHG emissions intensity of manufacturing production, g/€ (1)453464478453409326-330-Share of energy-related emissions in industrial GHG emissions (2)56.255.855.956.554.153.3-55.557.9Energy-related GHG emissions intensity of manufacturing and construction, g/€ (3)297.5304.9313.4298.9257.3226.4-203.9163.0Share of electricity and renewables in final energy consumption in manufacturing, % (4)53.253.954.353.656.057.159.342.843.9Energy intensity of manufacturing, GWh/€ (4)1.941.962.021.961.871.801.861.271.05Share of energy-intensive industries in manufacturing production, % in GVA (5)16.1816.1716.4018.3819.0116.66---GHG emissions intensity of production in sector [...], g/€ (6)- paper and paper products (NACE C17) 1,598        1,772       1,660              1,436         1,190                1,103         -722             619            - chemicals and chemical products (NACE C20) 1,350        1,686       1,430              1,523         1,272                625           ---- other non-metallic mineral products (NACE C23) 3,235        3,124       3,277              2,885         2,823                2,003         -2,495           2,352          - basic metals (NACE C24) 499          573          565                 467            462                  469           -2,842           3,099          Reduction of effort sharing emissions201820192020202120222023202420182023GHG emission reductions relative to base year, % -18.6-18.8-18.0-19.5- domestic road transport-14.4-11.9-25.5-20.4-15.0-9.3-10.0-1.4-5.6- buildings-36.6-36.5-36.5-38.5-41.0-42.7-43.2-20.3-33.520052021202220232024TargetWEMWAMEffort sharing: GHG emissions, Mt; target, gap, %48.639.639.539.939.1-28.7%-29.5%-40.1%Sustainable road transport2018201920202021202220232024202520182021New zero-emission vehicles, electricity motor, % (7)1.953.085.449.2411.6418.2119.901.038.96Number of publicly accessible AC/DC charging points (8)--23533686653373051211915647446956n/aShare of electrified railways, % of total (9)64.3867.1267.1270.8870.8870.8870.8655.4756.49Sustainable industryTrendEU-27Circular economy transition20182019202020212022202320242018latest dataMaterial footprint, tonnes per person16.616.614.617.215.615.415.414.813.7Circular material use rate, %2.2            2.4           2.6                  2.8             3.4                    3.0             3.011.612.2Resource productivity, €/kg1.2            1.3           1.4                  1.2             1.5                    1.7             1.72.13.0Employees in circular economy2.5            2.62.6                  2.8             2.3                    2.3             -2.12.0Patents in circular economy1.083.9           5.0                  -            12.312.0Recycling rate            29.1           28.9                  26.8             30.4                   30.2            30.6 32.8            46.4048.1Plastic recyling 34%36%34%38%37%40%-41%42%Construction and demolition waste (CDW) recovery 93-958889Bioeconomy industry 2018201920202021202220232024CAGR 2018-202320182023Value added, million EUR11,84311,91411,91713,33214,58916,223-5.4%642,438863,436Employment, total number of people employed616,991587,870567,769560,970556,530557,776--1.7%17,649,04017,085,642ProductivityValued added per worker, thousand EUR19.220.321.023.826.229.1-7.2%36.450.5Valued added per worker, % of national average53.654.558.562.863.864.7--62.270.7R&D business expenditureTotal bioeconomy (biomass producing and converting sectors)2192212362853133377.5%15,67223,335Total R&D business expenditure1,4251,5711,8442,1542,5662,844-12.2%196,587259,525Zero pollution industry201820192020202120222023202420182021Damage cost for industrial pollution6.45.45.04.7---414.9352.7Water industrial pollutants releases 2021change (2010)2021change (2010)2021change (2010)2021change (2010)3,853        -81%13,561,500      32%11,731,000       -24%1,343,670    17% Water chemical statusGood1,374              Good (%)0.7                    Poor156.0Poor (%)8%EUTOCPhosporusPortugalPortugalCd, Hg, Ni, Pbnitrogen 
 
   
 
 
ANNEX 9: AFFORDABLE ENERGY TRANSITION 

This  annex  outlines  the  progress  made  and 
the  ongoing  challenges  faced  in  increasing 
energy  affordability,  while  advancing  the 
transition 
the 
implementation  of  past  energy-related  country-
specific recommendations (CSRs). 

to  net  zero. 

reflects 

It 

in 

the 

For  Portugal,  the  2025  CSR  highlighted 
of 
regarding 
challenges 
roll-out 
renewables,  stability 
the  electricity 
market and energy efficiency. It recommended: 
phasing  out  fossil  fuel  subsidies;  providing  a 
regulatory  framework,  with  clear 
predictable 
digital  procedures  for  permitting;  implementing 
long-term 
flexibility 
solutions;  strengthening  the  capacity  of  the 
electricity  transmission  and  distribution  grid;  and 
incentivising investments in the national network. 

contracts; 

investing 

in 

Energy prices and costs 

and 

household 

(227), 
Despite  overall  price  affordability 
household  electricity  prices  in  Portugal  have 
decreased  since  2024  but  increased  for 
industrial consumers, whereas gas prices for 
both 
non-household 
consumers  have  remained  stable.  In  the  first 
half  of  2025,  household  electricity  prices  in 
Portugal  decreased  and  remained  below  the  EU 
average, at EUR 0.2390/kWh, while household gas 
prices increased slightly  and stayed above the EU 
average, at EUR 0.1265/kWh. Conversely, industrial 
electricity prices have increased significantly since 
2024  but  have  remained  below  the  EU  level, 
whereas non-household gas prices have stabilised 
yet  also 
the  EU  average. 
Nevertheless,  final  electricity  and  gas  prices  in 
Portugal  in  the  first  half  of  2025  remained 
unbalanced.  For  large  businesses,  electricity  was 
2.6 times more expensive than gas in the first half 
of 2025, with disproportionately skewed taxes and 
levies  (excluding  VAT)  accounting  for  13%  of 
electricity bills and 3% of gas bills. Excluding taxes 
and  levies,  the  electricity-to-gas  price  ratio  would 
have  decreased  to  2.3,  signalling  a  negative 
balancing effect of Portugal’s fiscal measures. For 
household  consumers,  the  impact  of  taxes  and 
levies on the electricity-to-gas price ratio was non-

remained  below 

(227) Electricity price statistics, Eurostat. 

87 

existent (228). In December 2025, Portugal repealed 
the  clawback  mechanism  introduced  in  2013, 
consisting  of  a  financial  compensation  charge 
levied  on  electricity  producers,  a  decision  which 
aims to improve investment conditions. 

Graph A9.1: Electricity and gas prices for 
household and non-household consumers, first 
half of 2025 

(i) For household consumers, the consumption band is DC for 
electricity and D2 for gas. 
(ii) For non-household consumers, the consumption band is ID 
for electricity and I4 for gas. VAT and recoverable charges are 
not displayed for non-household consumers as these are 
typically recovered by businesses. This also applies to the ‘% 
of taxes and levies’, which is shown excluding VAT and 
recoverable charges for non-household consumers. 
(iii) ‘Without taxes and levies’ indicates the retail price 
excluding all taxes and levies. It always includes the 
energy/supply and network cost components, which are not 
disaggregated in Eurostat’s six-monthly price dataset. 
Source: Eurostat 

Owing  to  a  significant  share  (83%)  of 
its  electricity  mix, 
in 
renewable  energy 
Portugal had the EU’s fifth-lowest wholesale 
electricity  prices,  averaging  EUR 67/MWh  in 
2025 (229),  below 
the  EU  average  of 
EUR 85/MWh.  Average  day-ahead  electricity 
prices in Portugal and the broader region increased 
by 8% in 2025 amid rising natural gas costs (230). 
Although  daytime  prices  have  fallen  in  recent 
years  owing  to  the  growing  penetration  of  cheap 
solar  power,  Portugal  remains  vulnerable  to  price 
spikes during peak-demand hours. This is because 
falling  solar  output  in  the  evening  and  early 
limited  non-fossil 
morning, 

combined  with 

(228) Analysis based on Eurostat data from the first half of 2025. 

(229)Ember. 

(230)Fossil  fuels  still  accounted  for  over  17%  of  electricity 
generation  in  Portugal  throughout  the  year,  maintaining  a 
certain role as marginal price-setting technologies. 

 
 
 
 
 
 
 
 
 
 
flexibility,  leads  to  costly  ramp-ups  of  thermal 
plants  to  cover  supply–demand  gaps.  As  a  result, 
price 
averaged 
in 
EUR 90/MWh  in  2025,  a  29%  increase  compared 
to 2024. 

spreads (231) 

Portugal 

Graph A9.2: Low-carbon electricity generation vs. 
electricity wholesale prices, 2025 

Unavailable data for Cyprus and Malta. Wholesale price is 
given as average of day-ahead electricity prices over 2025. 
EU-27 average is calculated as consumption-weighted. EU 
low-carbon share is calculated out of total EU electricity 
generation. Low-carbon share by country is calculated out of 
total public electricity generation. Low-carbon includes 
renewables and nuclear. 
Source: Eurostat 

Flexibility and electricity grids 

in 

in 

line  with 

its  final  updated  NECP 

the 
its  2025  CSR 

Portugal’s  operational  electricity  storage 
capacity is almost 3 GW, while the projection 
reported 
is 
expected  to  be  around  3.9 GW  for  pumped 
hydro  storage  and  2.0 GW  for  battery 
remaining 
storage  by  2030.  Despite 
challenges, 
for 
investment  in  energy  storage  capacities,  Portugal 
is currently building several storage projects, such 
as  the  conversion  of  a  generating  group  at  Alto 
Lindoso to a reversible unit. Portugal is expected to 
adopt  its  2026-2050  national  energy  storage 
strategy  during  the  first  half  of  2026.  Following 
the  April  2025  blackout,  Portugal  announced  a 
package  of  measures  to  increase  the  security  of 
the  national  electricity  system, 
including  the 
reinforcement of a battery storage-based scheme 
(being  supported  by  the  Recovery  and  Resilience 
Facility), and committed to introduce a competitive 

(231)‘Spread’  refers  to  the  difference  between  the  highest  and 
lowest hourly day-ahead electricity prices in a single day. 

88 

auction mechanism for the contracting of at least 
750 MW of battery storage. The auction is planned 
for the second half of 2026. 

Despite  the  2025  CSR  regarding  investment 
in  demand-side  response  tools,  Portugal’s 
regulatory  framework  presents  barriers  to 
the  development  of  flexible  resources.  It 
allows  for  demand-side  response  (DSR),  including 
by  independent  aggregators,  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 to 
industrial  and  commercial  consumers  through  a 
pilot  project  from  2022  to  2025).  Independent 
aggregators are defined in national rules. Portugal 
has  fully  defined  roles  and  responsibilities  for 
aggregators, including independent aggregators, in 
accordance  with  Articles  13  and  17  of  the 
Electricity  Directive (232).  However,  small  or  new 
aggregators  may  find  it  difficult  to  participate  in 
balancing  markets  due  to  minimum  bid  size  and 
qualification  requirements.  Portugal  has  made 
marked  progress  in  rolling  out  smart  meters  to 
households (233),  enabling  consumers  to  make 
informed  decisions  about  energy  use  and 
participate in DSR efforts. 

Being part of the south-west Europe capacity 
calculation  region  (CCR) (234),  Portugal  has 
increased its capacity for cross-border trade 
with  Spain,  in  line  with  the  2025  CSR 
regarding 
electricity 
cross-border 
interconnections.  Member  States  are  to  ensure 
that  at 
least  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.  The  Portuguese 
electricity  system  continues  to  be  relatively  well 
interconnected with Spain. At 13.33% in 2026 (235), 
the  level  of  interconnectivity  is  expected  to  meet 
the 2030 target of 15%. The continued expansion 

(232) ACER: Unlocking flexibility: No-regret actions to remove 

barriers to demand response. 

(233) ACER: Unlocking flexibility: No-regret actions to remove 

barriers to demand response. 

(234)The south-west Europe CCR covers Spain, France and 

Portugal. A CCR is a group of countries which calculate cross-
border electricity flows together. 

(235) ENTSO-E Winter Outlook 2024-2025. 

 
 
 
 
Portugal’s 

of 
interconnection 
cross-border 
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.  The 
Portugal-Spain  interconnection  between  Beariz, 
Fontefría  and  Ponte  de  Lima,  which  was  included 
in the second project of common interest / project 
of  mutual  interest  (PCI/PMI)  list,  has been  slightly 
delayed  and  is  expected  to  be  commissioned  by 
mid-2026. The internal line between Pedralva and 
Sobrado,  which  was  part  of  the  fifth  PCI  list, 
remains  hard  to  implement  on  the  ground  but  is 
scheduled  for  completion  by  2029.  It  will  support 
the  network  expansion  necessary  for  better 
integration  of  renewables  and  distribution  of 
electricity  from  solar  more  effectively  across  the 
territory (236). 

In 

grid 

systems 

reforms 

grid-related 

to  final  consumption. 

Regarding 
that 
facilitate  RES  integration,  Portugal  shows 
that  a  medium  rate  (10-25%)  of  users  are 
exposed  to  time-of-use  tariffs  despite  the 
high rates of smart meter roll-out. In terms of 
tariff  structure,  pumped  storage  has  no  injection 
charge and intermediate consumption is exempted 
to  avoid  double  payments,  with  withdrawal  cost 
its 
being  applied 
treatment  of  flexibility-related  costs,  such  as 
smart 
demand-response 
mechanisms,  Portugal  includes  incentives  relating 
to  the quality of smart grid services.  Moreover, in 
order  to  facilitate  the  integration  of  RES  into  grid 
connection,  Portuguese  entities  reply  to  general 
applications  in  five  days,  with  capacity  reserves 
being issued within 10 days if a positive opinion is 
given.  The  system 
is  marked  by  advanced 
digitalised processes that are accessible and user-
friendly.  Although  Portugal  has  not  yet  published 
continuous  public  queue 
any 
updates, in 2026 it plans to launch a tool that will 
regularly  provide  expected  grid  connection  dates 
and other project-specific details. 

consolidated, 

or 

to 

efforts 

develop 

The 
hydrogen 
infrastructure will help create a national and 
European  hydrogen  market  and  allow 
Portugal to contribute, as an exporter, to the 
renewable  hydrogen  corridor 
the 
Iberian  Peninsula  to  Germany.  This  flagship 
corridor, designed to export approximately 2 Mt of 

from 

list  and  expected 
in  2029  and  2030: 

hydrogen  from  Spain  and  Portugal  to  other 
Member  States,  in  particular  Germany,  is  enabled 
by two Portuguese projects included in the second 
to  be 
Union  PCI/PMI 
commissioned 
the  H2 
interconnection  between  Spain  and  Portugal,  with 
a  capacity  of  0.75 megatonnes  (Mt)  per  year (the 
H2med/CelZa  project);  and  the  internal  hydrogen 
infrastructure 
‘hydrogen 
backbone’  project).  Portugal’s  intention  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 
underground  storage  facility,  detailed  in  its  final 
updated  NECP,  is  expected  to  contribute  to  the 
development  of  the  hydrogen  value  chain  in 
Portugal and the rest of the EU. 

Portuguese 

(the 

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  is  still  on  the  long  side,  so  there  is 
room for acceleration. Stakeholders have identified 
the  lack  of  sufficient  staff  in  the  permitting 
authorities  and  opposition  by  local  communities 
and  municipalities  in  cases  where  local  benefits 
are  less  evident  as  the  key  causes  of  delays. 
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  a  lack  of  transparency  on  the 
available  distribution  grid  capacity  also  making  it 
difficult  for  developers  to  plan  new  projects. 
Nevertheless,  Portugal  has  in  place  a  tool  that 
provides information on grid capacity; the tool has 
no visual mapping representation but provides full 
coverage of all voltage levels (237). 

Portugal’s  large-scale  smart  meter  roll-out 
(99%  in  2024 (238))  is  one  of  the  conditions 
that empowers consumers to take action. The 
intensity  of  supplier  switching,  in  terms  of  the 
number  of  customers,  was  23%  for  electricity, 
representing  an  increase  of  6  pps  compared  to 
2023,  and  17%  for  natural  gas.  However,  in  the 

(236) ENTSO-E Winter Outlook 2024-2025. 

(238) ACER retail monitoring 2025 dataset. 

(237) https://e-redes.opendatasoft.com/pages/homepage/.  

89 

 
 
 
case  of  natural  gas,  this  rate  of  change  was  a 
decrease of around 2 pps, compared to 2023 (239). 
The household retail market is regulated and also 
involves market-based offers. 18% of Portuguese 
households  had  regulated  contracts  in  2024. 
requirements,  household 
Despite 
consumers in Portugal still did not have access to 
dynamic-price contracts as of 2024, which has an 
impact  on  the  provision  of  flexibility.  Final 
household  electricity  prices  increased  by  16% 
between 2023 and 2024 (240). 

regulatory 

The  number  of  self-consumption  generation 
units  (UPAC)  has  tripled  in  the  past  three 
years, rising from 78 841 in 2021 to 236 888 
in  2024,  and  installed  capacity  has  almost 
quadrupled,  from  478 MW  to  1 846 MW.  The 
development  of  collective  self-consumption  (CSC) 
has  seen  significant  progress  since  the  end  of 
2023 (241).  At  the  end  of  November  2025  there 
were  755  CSC  installations  in  operation,  326  in 
construction  and  347 
new 
installations  under  assessment.  However,  the 
majority of CSC installations have no active citizen 
governance. 

requests 

for 

Renewable energy communities (RECs), which 
enable  collective  and  citizen-driven  energy 
actions,  can  be  a  key  contributor  to 
Portugal’s  energy  transition.  However,  citizen-
led  RECs  in  Portugal  have  been  slow  to  emerge, 
with  only  three  communities  operating  as  of 
September 2025, also due to low levels of energy 
literacy  among 
the  public.  Moreover,  public 
authorities face regulatory constraints due to rigid 
procurement  rules  and  overlapping  regulatory 
local 
requirements  under  both  energy  and 
in 
authority 
municipal 
create 
including 
administrative  burdens 
connection  to  the  grid,  uncertainty  and  delays  for 
project  developers.  Portugal  also  has  a  relatively 
low level of prosumers, which has fallen to below 
lack  of  public 
5%.  Overall,  there 
empowerment  in  energy  communities,  since  they 
are  often  controlled  and  managed  by  private 
companies. 

including  differences 
criteria,  which 

legislation, 
approval 

is  still  a 

licensing, 

in 

In  2024,  electricity  accounted  for  26.4%  of 
Portugal’s  final  energy  consumption,  above 
the EU average of 23.4%, and this share has 
increased  slightly  in  the  past  decade (242). 
Electricity  accounts  for  43.2%  of  the  final  energy 
consumption  of  households,  while  in  industry  it 
represents  32.7%  (see  also  Annex  8).  For  the 
transport  sector,  this  share  remains  negligible,  at 
1.3%.  The  limited  level  of  electrification  across 
sectors 
cost-effective 
decarbonisation  of  the  economy  and  the  pass-
through  of  affordable  renewable  generation  to 
consumers. 

constrains 

the 

Renewables and long-term contracts 

It 

Portugal  has  made  some  progress 
in 
promoting  renewable  energy  and  increasing 
the  share  of  such  energy  in  final  energy 
consumption.  Several  RES  projects  are  in  the 
pipeline  for  deployment,  but  their  implementation 
appears to have been delayed. Moreover, Portugal 
is  facing  public  acceptance  challenges. 
is 
considering  reviewing  existing  social  acceptance 
measures to minimise project impact and promote 
social  acceptance,  including  the  mechanism  for 
allocating  compensation  to  municipalities  and 
existing  obligations  for  engagement  with  local 
communities (Order  No 6119/2025). In 2025, RES 
accounted  for  82.9%  of  the  electricity  mix, 
showing  a  slight  decrease  compared  to  the  share 
in  2024(243)(244).  Wind  power 
it 
installed  capacity  has  plateaued  in  recent  years, 
with only 5 MW of new installations in 2025, for a 
total  of  5  605  MW  of  installed  capacity.  In  sharp 
contrast,  solar  capacity  reached  6.2  GW,  with 
in  2025  only.  RES 
almost  2  GW 
acceleration  areas  are  expected  to  be  set  up  by 
July 2026. 

represented 

installed 

(239) Annual report on the electricity and natural gas markets in 

2024 – Portugal, ERSE, page 4. 

(240) ACER-CEER ‘Rewarding Flexibility’ report, p. 21. 

(241) Annual report on the electricity and natural gas markets in 

(242)CAGR (compound annual growth rate) of 0.46% between 
2015 and 2024 and minimum/maximum share of 25.2% and 
26.4% respectively (source: Eurostat). 

(243) Yearly electricity data, Ember. 

2024 – Portugal, ERSE, pages 26-27. 

(244) 2025 renewable capacity statistics, IRENA. 

90 

 
 
 
 
Graph A9.3: Portugal’s installed renewable 
capacity vs electricity generation mix 

Electricity mix is given as net electricity generation (gross 
electricity production minus consumption of power stations’ 
auxiliary services). Electricity produced in pumped hydro 
plants is excluded from total net electricity production, as it 
was previously counted as electricity produced from another 
source. 
“Other” includes renewable municipal waste, solid biofuels, 
liquid biofuels, and biogas. 
Source: IRENA, Eurostat 

Portugal  took  steps  towards  developing  a 
regulatory  framework  for  renewable  energy 
and shortening its procedures, with a special 
focus on the environmental aspects (Simplex 
Ambiental), but challenges remain. The current 
legal  framework  is  rather  complex,  lacking  clear, 
standardised  assessment  criteria  for  projects, 
leading to different interpretations of the different 
national  bodies  with 
this 
area (245). On the digitalisation front, the country is 
working to have all steps of the permitting process 
carried out online, e.g. by creating the digital one-
stop shop (Balcão Único), but it is facing delays. In 
2025,  Portugal  launched  a  reform  of  the  public 
administration  in  the  energy  sector  by  setting  up 
the national Agency for Geology and Energy (AGE), 
which  merges  existing  entities  and  aims  to 
consolidate  responsibilities,  including  on  planning 
and  licensing.  The  reform  will  be  phased  in 
gradually, by June 2027. 

responsibilities 

in 

In  its  efforts  to  address  the  2025  CSR  to 
enhance  stability  in  the  electricity  market 
through  long-term  contracts,  Portugal 
is 
currently  developing  a  state  guarantee 

the 

mechanism  for  power  purchase  agreements 
(PPAs)  to  further  de-risk  renewable  energy 
purchasing and strengthen bankability. At the 
same time, it has established the legal framework 
registration  of  bilateral  electricity 
for 
contracting.  The  registration  of  eligible  PPAs  on 
this  platform  is  mandatory  for  physical  bilateral 
contracts  with  a  duration  of  more  than  one  year. 
Regarding  contracts  for  difference  (CfD),  Portugal 
currently has no plans to launch any new schemes. 

Energy efficiency 

In  2024,  Portugal  still  lagged  behind  in 
reaching  energy  efficiency  targets.  In  2024 
final  energy  consumption  (FEC)  grew  by  1.3%, 
compared  to  2023,  to  17.4 Mtoe,  continuing  the 
slight increase since 2019. Portugal’s FEC in 2024 
is  thus  not  in  line  with  the  trajectory  to  its 
expected  NECP  contribution  in  2030.  While  in 
industry  and  services  FEC  has  decreased  slightly 
since  2019  (− 3.2%  and  -2.5%  respectively); 
transport  and  the  residential  sector  showed  an 
increase 
in  energy  consumption  (+ 5.2%  and 
+ 1.9% respectively). The technical energy savings 
the 
were  offset  by  behavioural  effects 
household sector and by an increase in activity in 
all other sectors. 

in 

the 

strategy 

Portugal’s  final  energy  consumption  in  the 
residential sector increased by 1.9% between 
2019  and  2024,  while 
long-term 
foresaw  an  11% 
renovation 
reduction  by  2030.  The  observed  increase  has 
been  driven  by  changes  in  heating  behaviour  and 
an addition in the number of dwellings (246). Given 
that 26.3% of the energy consumed in Portugal is 
used  in  buildings,  highlighting  the  importance  of 
the sector in increasing energy security, Portugal is 
encouraged  to  submit  its  draft  national  building 
renovation  plan  pursuant  to  the  recast  EPBD  in 
order  to  ensure  a  clear  and  predictable  pathway 
towards  an  energy-efficient  and  decarbonised 
building stock. 

(245) Portugal and the competent entities have been clarifying 

interpretation, responsibilities and practical applications, but 
with a rather limited scope (e.g. clarification of the 
interaction between grid capacity reservation titles and the 
procedures under the EIA framework – Joint Ordinance 
No 1/2025, and technical guidance on renewable projects in 
areas with steep slopes). 

As per its 2025 CSR to accelerate investment 
in energy efficiency, Portugal is taking steps 
to  accelerate  energy  efficiency  investments 
in  buildings.  It  is  doing  so,  in  particular,  by: 

(246) https://www.indicators.odyssee-mure.eu/decomposition.html.  

91 

 
 
 
 
focusing  on  the  ‘E-Lar’  programme  for  replacing 
fossil  fuel  appliances  with  efficient  electric 
alternatives  for  heating  and  cooking  systems, 
prioritising  vulnerable  consumers;  current  (2021-
2027) financing instruments under cohesion policy 
targeting  support  for  energy  efficiency  in  public 
and  residential  buildings,  as  well  as  enterprises 
and  other  related  services;  new  (2026-2032) 
financing  instruments  under  the  Social  Climate 
to  support  vulnerable  households  and 
Fund 
promote  the  adoption  of  heat  pumps;  and 
developing hybrid financing mechanisms, enabling 
deep renovation of buildings owned by households 
with  different  income  levels,  including  energy-
vulnerable households. However, funding calls lack 
predictability,  in  terms  of  both  availability  and 
timing.  They  are  subject  to  frequent  rule  changes 
and  fail  to  adequately  adapt  to  different  building 
types, target groups and regional needs. Given the 
needs of the existing building stock, tax incentives 
and  green  mortgage  schemes  are  barely  used  to 
attract  private  investment  in  deep  renovation. 
Moreover,  Portugal  has  committed  over  EUR 2.4 
billion from the Recovery and Resilience Facility to 
large-scale 
energy 
EUR 420  million 
to 
increase  the  energy  efficiency  of  residential 
buildings. 

investment  programme 

including  a 

renovations, 

Energy  poverty  remains  significantly  above 
the  EU  average  and  constitutes  a  persistent 
In  December  2025, 
structural  challenge. 
Portugal  adopted  its  2025-2030  action  plan  to 
tackle energy poverty (PACPE), focusing on housing 
sustainability 
vulnerable 
consumers,  though  financial  allocations  remain 
unclear.  Additionally,  the  Portuguese  government 
created  the  National  Energy  Poverty  Observatory 
(ONPE-PT)  as  an  RRP  measure,  the  main  goal  of 
which  is  to  monitor  the  development  of  energy 
poverty in Portugal (see Annex 12). 

support 

and 

for 

final 

residential 

Heating  and  cooling  account  for  50%  of  the 
energy 
country’s 
consumption, with renewables supplying 47% 
of  the  total  energy  used  for  heating  and 
cooling  in  all  sectors.  Approximately  50 000 
heat pumps were sold in 2024, an increase of 2% 
compared  to  the  previous  year,  taking  the  total 
stock of installed heat pumps to around 370 000. 

Security of supply and diversification 

increase 

Portugal has increased the security of its gas 
the  share  of 
increasing 
supply,  while 
renewables 
In  2024, 
its  energy  mix. 
in 
Portugal’s  energy mix  remained  dominated  by  oil, 
at  47.3%,  followed  by  a  slight 
in 
renewables/biofuels  compared  to  2023,  from 
33.5%  to  36.6%,  while  natural  gas  consumption 
decreased  from  1  8%  in  2023  to  15.1%  in 
2024 (247). 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  a  very 
limited  extent.  In  the  gas  sector  in  particular, 
Portugal  has  achieved  a  substantial  reduction  in 
imports compared to the period before the start of 
Russia’s 
Specifically, 
Portugal’s imports of Russian liquefied natural gas 
decreased from 0.740 bcm in 2021 to 0.18 bcm in 
2025. This decline is a result of Portugal stepping 
up its efforts to diversify its energy supply, with a 
focus on prioritising LNG imports from alternative 
sources, such as Nigeria and the United States. 

of  Ukraine. 

invasion 

On  28 April  2025,  Spain  and  Portugal  faced 
an  unprecedented  power  outage,  which  also 
affected parts of France. In accordance with EU 
law, ENTSO-E led an independent investigation into 
the causes of the blackout and published a factual 
report on 3 October 2025 describing the sequence 
of  events  that  occurred  before  and  after  the 
blackout.  A  final  report  by  the  ENTSO-E  expert 
panel  explaining  the  root  causes  of  the  blackout 
was  published  in  March  2026.  Both  Spain  and 
their  ex-post 
Portugal  have  also  submitted 
evaluation 
the 
to 
Commission and the Electricity Coordination Group. 

report  on 

incident 

the 

In  response  to  the  regional  crisis  in  the 
Middle  East,  Portugal  has 
introduced 
temporary  fuel  subsidies,  including  a  10 
cents/litre  rebate  for  transport  operators 
and  farmers,  and  increased  LPG  support  to 
EUR  25/cylinder  for  vulnerable  households. 
Renewable 
Structural  measures 
Acceleration  Areas,  a  EUR  600  million  "Portugal 

include 

(247) Source: Eurostat. Electricity and heat are excluded from gross 
inland consumption to avoid double counting. The focus is on 
primary energy sources. 

92 

 
 
Energy  Resilience"  programme 
intensive firms, and self-consumption incentives. 

for  energy-

Fossil fuel subsidies 

additional 

introduced 

Portugal  has  taken  some  steps  to  address 
the  2025  CSR  on  phasing  out  fossil  fuel 
subsidies,  mainly  in  the  transport  sector; 
however, due to the ongoing energy crisis, it 
temporary 
has 
measures.  In  2024,  environmentally  harmful 
(143)  fossil  fuel  subsidies  without  a  planned 
phaseout before 2030 decreased, and represented 
0.31%  (144)  of  Portugal’s  GDP  (145), in  line  with 
the  EU  weighted  average  of  0.32%.  Portugal 
decided in 2026 for the gradual  phase out of the 
fuel tax reductions on unleaded gasoline and road 
(measures  part  of  the  support  relief 
diesel 
package 
tax 
exemptions  for  natural  gas  used 
in  certain 
industrial processes and diesel fuel used by freight 
companies  and  for  agriculture  machinery  remain 
in  place  as  fossil  fuel  subsidies.  While  these 
exemptions  do  not  specifically  address,  in  a 
targeted  way,  energy  poverty  or  genuine  energy 
security  concerns.  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.  

Primeiro).  However, 

Famílias 

93 

 
 
 
ANNEX 10: CLIMATE ADAPTATION, PREPAREDNESS AND ENVIRONMENT 

While 

solutions. 

climate  adaptation 
to 

Over the past year, Portugal has developed a 
strategy  and 
new 
strengthened  efforts 
tackle  water 
management issues. The 2025 CSRs highlighted 
challenges in water management and governance, 
particularly in the resilience of the water sector to 
climate  change  and  called  for  the  promotion  of 
water efficiency measures and the prioritisation of 
climate 
nature-based 
vulnerabilities are now more clearly identified and 
better  understood, 
implementation  of 
the 
adaptation  measures  remains  fragmented  across 
sectors,  making  it  difficult  to  assess  overall 
investment  levels  and  track  progress  towards  a 
more  resilient  ecosystem.  The  country  remains 
deeply  vulnerable,  with  frequent  heatwaves, 
droughts,  floods,  wildfires  and  coastal  erosion. 
Investments required for climate adaptation could 
reach  EUR 1.7  billion  annually  up  to  2050, 
equating  to  0.502%  of  the  country’s  GDP,  a 
proportion  that  exceeds  the  EU  average  of 
0.459%.    Portugal  has  adopted  a  national  water 
strategy, although sustainable water management 
remains  a  major  environmental  challenge.  The 
state  of  nature  and  ecosystems  continues  to 
degrade,  presenting  significant  economic  and 
competitiveness  risks.  There  are  also  significant 
investment gaps in these fields. 

Climate resilience and preparedness 

is  particularly  vulnerable 

Portugal 
to 
heatwaves,  droughts,  floods  and  wildfires, 
which  are  set  to  intensify  due  to  climate 
change.  The year  of  2025  was  the  second  worst 
year  of  the  decade  in  terms  of  wildfires,  with 
around 270 thousand ha burnt, surpassed only by 
the tragic year of 2017. Compared to the average 
of  the  previous  10  years,  2025  had  32%  fewer 
occurrences but a 119% larger burnt area (248). 

In  2023,  around  90%  of  the  national 
territory  experienced 
some  degree  of 
drought.  The  Lower  Alentejo  and  Algarve  regions 
were  under  meteorological  drought  throughout 
every  month  of  the  year  and,  between  April  and 
August,  fell  into  the  severe  to  extreme  drought 
categories. In the same year, some crops lost more 

(248) Jornal Expresso, 2025 was the second worst year of the 

decade for burnt area in Portugal, 8.1.2026, Link. 

for 

Portugal. 

challenges 

than  30%  of yield  due  to water  scarcity  (249).  The 
other extreme of weather conditions also presents 
The 
significant 
hydrological  year  2025/26  was,  already 
in 
January,  one  of  the  rainiest  in  the  past  25  years 
and ranks as the second highest since 2000, with 
rainfall  levels  about  1.5  to  2  times  the  usual 
amount  in  most  river  basins  (250).  In  January  and 
February, a series of storms bringing strong winds 
and  heavy  rain  caused  deaths,  as  well  as  severe 
damage 
to  homes,  agriculture  and  critical 
infrastructure such as power lines and motorways. 
Repairs  might  take  a  year  to  complete.  The  total 
economic cost of these events is still unknown, but 
early  estimates  point  to  costs  of  around  2%  of 
GDP (251). 

Portugal’s strategy for adaptation to climate 
change is currently under revision and public 
consultation.  The  previous  strategy 
(ENAAC 
2020)  set  objectives  for  advancing  knowledge  on 
climate  adaptation,  and  the  national  roadmap  for 
adaptation (RNA2100) provides detailed results on 
the  main  climate  adaptation  risks  and  costs  of 
inaction in Portugal. Despite these findings, ENAAC 
2030  sets  the  overall  direction,  priorities  and 
strategic 
concrete 
operationalisation  depends  on  the  subsequent 
approval  of  action  plans,  legal  instruments  and 
dedicated funding, which are not yet fully defined 
in  the  consultation  document.  The  effective 
implementation  of  this  strategy  will  require 
additional  instruments,  namely  detailed  sectoral 
plans, 
timelines,  and 
frameworks, 
legislation 
that  embeds  binding  adaptation 
requirements. 

guidance, 

financing 

but 

its 

A  recent  study  (252)  shows  that  Portugal  will 
need  to  invest  almost  EUR 1.7  billion  per 
year up to 2050 to build resilience across all 
identified climate risks: first and foremost in 

(249) Jornal Expresso, Scarce water, high impact and strategy that 

unites, 1.4.2025, Link. 

(250) IPMA, Summary of monthly report January 2026. Link. 

(251) Sapo, Kristin: Storm economical losses could amount to 6 

billion euros. Link. 

(252) European Commission (2026), Assessment of EU and 

Member States adaptation investment needs, Table 25, Link. 
The study provides detailed estimates of adaptation 
investment needs at the level of the EU and individual 
Member States per type of measure. It relies on a common 
methodology that makes estimates comparable across the 
EU. Four accompanying methodological reports provide a 
detailed description of how the results were estimated to 
ensure full transparency. 

94 

 
 
 
 
 
infrastructure retrofitting and reinforcement 
(around  33%  of  the  total),  followed  by 
ecosystems restorations (around 30% of the 
total)  and  resilience  of  agriculture  (around 
26%  of  the  total).  These  investment  needs 
represent  0.5%  of  Portugal’s  GDP,  similar  to  the 
EU average of 0.5%. 

The  Portuguese  Climate  Law  emphasises 
engagement  with  municipalities,  which  must 
develop action plans to support the national 
targets  and  strategies.  The  share  of  Portugal’s 
population covered by the EU Covenant of Mayors 
signatories has been steadily increasing and stood 
at  46%  (vs  EU27:  34%)  in  2024.  Furthermore, 
70%  of  signatories  have  submitted  a  sustainable 
energy and action plan (SECAP) on time, within two 
years  of  their  initial  commitment  to  the  EU 
Covenant, and 60% of signatories have submitted 
at 
the 
recommended  timeframe  (i.e.  at  least  two  years 
after  submission  of  their  SECAP)  (253).  This  shows 
that  majority  of  municipalities  have  a  growing 
commitment  to  increase  climate  resilience  and 
that the implementation of policies is progressing 
at the local level as well. 

least  one  monitoring 

report  within 

Climate  risks  have  a  direct  and  significant 
effect  on  Portugal’s  economy,  yet  insurance 
coverage  remains  low.  Between  1980  and 
2024,  Portugal  recorded  EUR 17.7  billion 
in 
economic  losses,  and  only  3%  of  those  losses 
were  insured  (vs  EU27  average:  19%),  showing 
that  there  is  a  protection  gap  against  climate-
related  events  in  the  country  (254).  Latest  studies 
show  that  combined  losses  from  drought  in 
affected  regions  in  Portugal  are  expected  to 
exceed  1%  of  national  2024  GVA  in  2029  (255). 
There  is  currently  no  national  insurance  scheme 
for  natural  catastrophe  risks,  and  Portugal  is  part 
of  the  countries  with  the  lowest  share  of  insured 
economic  losses  related  to  natural  catastrophes 
across  EEA  countries  (256).  As  a  response  to  these 
challenges  and  the  train  of  storms  that  affected 

(253) European Commission, Link. 

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

related extremes in Europe, Link. 

(255) Usman, Parker & Vallat (2025), Dry-roasted NUTS: early 

estimates of the regional impact of 2025 extreme weather, 
Link. 

several  regions  in  Portugal  in  the  beginning  of 
2026, the government is expecting to announce a 
national  scheme  called  the  Natural  Catastrophes 
Fund by summer 2026 (257) 

The most vulnerable sectors identified in the 
RNA2100  are  water/agroforestry,  fires  and 
coastal areas. Portugal’s strategy does, however, 
also  raise  awareness  to  the  fact  that  the  energy 
sector  will  have  to  deal  with  increased  energy 
demand  for  cooling  in  the  summer,  reduced 
efficiency  of  conventional  energy  systems,  and 
heightened  risks  to  infrastructure  due  to  extreme 
weather  events.  Hydroelectric  power  generation 
may  face  reductions  because  of  lower  water 
availability  and  increased  competition  for  water 
from other sectors. The transport sector could also 
be  affected.  A  recent  study  (258)  estimates  that 
Portugal  will  need  EUR 2.3  billion  of  investments 
(considered  moderate  in  comparison  with  other 
Member States) to adapt its TEN-T network in the 
future.  Additionally,  if  current  levels  of  coastal 
protection  are  not 
raised,  direct  economic 
damages and social impacts from coastal flooding 
in  Portugal  are  projected  to  rise  sharply  this 
century,  with  especially  severe  consequences  for 
low-lying  coastal  communities  in  the  country’s 
outermost regions (259). 

RNA2100  (260)  estimates  that  a  lack  of 
awareness and coercive measures could cost 
a total of EUR 213 million between 2011 and 
2030  and  an  additional  EUR 301  million 
between  2030  and  2040  from  forest  fires. 
These figures are based on broad assumptions, as 
there  is  currently  no  extended  information  on  the 
real value lost due to wildfires. 

Several  implementation  measures  to  tackle 
the  risk  of  wildfires  was  integrated  in 
Portugal’s  RRP  and  the  national  plan  for 

(257) SAPO, Insurance companies want to participate in the public 

Catastrophes Fund. Link. 

(258)Support study on the climate adaptation and cross-border 
investment needs to realise the TEN-T network. Publications 
Office of the European Union, 2024. Link. 

(259) Vousdoukas et al., 2026, Nature, Coastal flood impacts and 
lost ecosystem services along Europe’s outermost regions 
and overseas countries and territories. 
https://doi.org/10.1038/s41467-025-66391-7. 

(256) ECB & EIOPA (2024), Towards a European system for natural 

(260) National Roadmap for Adaptation 2100, WP5 Adaptation 

catastrophe risk management, Link. 

needs, link. 

95 

 
 
 
integrated rural fire management (261) 2020-
2030,  which  has  seen  a  positive  shift  of 
priority  from  reaction  and  combat  to 
prevention  and  landscape  transformation. 
Key operational measures include the expansion of 
village  condominiums  to  create  safety  buffers  at 
the  rural-urban 
interface  and  the  rapid  and 
continued implementation of integrated landscape 
management  areas  to  introduce  discontinuity  in 
forest cover. Because the Portuguese landscape is 
highly  fragmented,  with  forests  owned  by  small 
private  owners,  policy  is  pivoting  towards  more 
incentive-based  programmes  rather  than  a  top-
down  centralised  approach.  The  Portuguese 
government  has  also  adopted  a  strict  ‘build  back 
better’  framework  for  the  areas  affected  by  the 
2025  fires,  to  prevent  them  from  becoming  as 
vulnerable to fires as they were before. Long-term 
recovery  strategies  now  legally  mandate  species 
diversification in reforestation projects, prohibiting 
the  reinstatement  of  continuous  monocultures. 
However,  critical  delays  persist 
in  structural 
landscape  transformation  and  engagement  with 
private  owners  is  still  limited.  The  first  response 
structures  are  also  being  strengthened  to  ensure 
that more incidents are resolved within the first 90 
minutes,  by  professionalising 
response, 
increasing  the  number  of  permanent  response 
teams from volunteer fire brigades and increasing 
the  staff  of  the  national  reserve  force.  The 
national action plan is already showing results; the 
number of ignitions is going down, and investment 
in  prevention  is  finally  overtaking  suppression 
costs.  However,  the 
intensity  of  such  fires 
continues  to  bring  considerable  damage  to  the 
population.  This  is  a  consequence  of  the  more 
extreme  weather 
lengthy 
heatwaves that the country is a victim of. 

conditions 

first 

and 

for 

While  Portugal  has  progressed  in  designing 
and  implementing  sectoral  action  plans  that 
include  measures 
change 
adaptation,  allocation  of  funds  for  each 
identified  area  remains  a  challenge.  Water 
management  issues  linked  to  climate  adaptation 
needs  will  be  further  discussed  in  the  section 
below. 

climate 

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 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 
also  take  advantage  of  the  potential  of  water 
reuse.  For  this  reason,  under  the  2024  and  2025 
European  Semester,  Portugal  received  a  CSR  on 
water  management  and  adaptation  to  climate 
change including these elements. 

Water  productivity  in  Portugal (262)  stood  at 
EUR 34  per  m³  of  abstracted  water  in  2022, 
below the EU-27 average of EUR 151 per m3. 
Agriculture is the largest consumer of water, with 
water  abstraction 
the  agricultural  sector 
accounting  for  62%  of  total  consumption  in 
2023 (263),  putting  a  significant  strain  on  the 
country’s  water  resources,  particularly  in  regions 
that suffer from serious water scarcity (see Annex 
18). 

in 

the  Commission’s  ability 

Portugal’s delay in submitting its river basin 
and  flood  risk  management  plans  has 
to 
hindered 
evaluate  and  report on  them.  Portugal  did  not 
submit  the  third  river  basin  management  plans 
(RBMPs) and second flood risk management plans 
(FRMPs)  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 was not able 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. 
This assessment is currently ongoing. 

(262) Water productivity is a metric that is calculated by dividing 
GDP (in chain-linked volume) by total water abstraction. It 
indicates the average economic value (GDP) a Member State 
creates for each unit of water it takes from nature. 

(261) 20-30 National Plan for Integrated Rural Fire Management, 

(263) European Environment Agency, Water abstraction by 

Link. 

economic sector, 2000-2023. Link. 

96 

 
 
 
Problems  on  wastewater  collection  and 
In  Portugal,  the  overall 
treatment  remain. 
compliance  rate  with  the  Urban  Wastewater 
in  2020  (264). 
Treatment  Directive  was  82% 
Although  above  the  EU  average  of  76%,  this 
situation continues as a reason of concern. As part 
of a horizontal  infringement procedure  covering a 
certain  number  of  non-compliant  agglomerations, 
the  Commission  decided  in  December  2025  to 
refer the case to the Court of Justice of the EU. 

Portugal is taking measures to address 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.  In  March 
2025,  the  Portuguese  government  presented  a 
far-reaching  national  water  strategy  (‘Water  that 
Unites’)  that  aims  to  establish  a  resilient  and 
integrated  approach  to  water  management  in 
Portugal, ensuring sustainability and security in the 
face  of  climate  change  and  increasing  water 
scarcity.  It  prioritises  increased  water  efficiency, 
reduction  of  water  losses  in  public  and  private 
systems,  promotion  of  treated  wastewater  reuse, 
and  optimisation/creation  of  water  infrastructure. 
The  strategy  is  structured  around  three  main 
pillars:  efficiency,  resilience  and  intelligence,  in 
nine programmes that identify 294 measures, with 
a total investment of approximately EUR 5.5 billion 
by  2030.  The  overall  strategy  encompasses  also 
other  measures  underway  to  help  increase  water 
resilience  on  the  supply  side,  such  as  the  Algarve 
regional  water  efficiency  plan,  partially  funded 
under the recovery and  resilience plan and 2021-
2027 cohesion policy. 

health, 

As  part  of  the  new  national  water  strategy, 
the  government  also  presented  the  action 
plan for the rehabilitation and restoration of 
rivers  and  streams  (‘PRO-RIOS  2030’)  in 
January  2026.  It  is  focused  on  improving  the 
ecological 
climate 
rivers  and  streams 
adaptation  capacity  of 
throughout  Portugal.  Among  others,  the  plan 
includes  measures  to  manage  and  reduce  flood 
risk,  especially  in  areas  prone  to  flooding,  and 
strengthen  climate  change  adaptation  by  building 
more 
riparian 
ecosystems.  Some  of  the  actions  include  nature-
based  engineering  solutions  (e.g.  vegetation  and 

river  systems  and 

resilience 

resilient 

and 

floodplain  reconnection)  to  enhance  ecosystem 
function  and  reduce  hydrological  risks.  EUR 187 
million have been planned for this action plan, and 
priority  funding  is  earmarked  for  regions  like 
Algarve  and  Alentejo.  Portugal  intends  to  use  the 
Cohesion  Policy  and  the  RRF  to  support  these 
measures. 

financing  needs 

The  investment  needs  for  water  protection 
and  management,  highlight  a  significant 
financing gap of EUR 371 million per year by 
2027  (265).  Most  of  the  gap  can  be  attributed  to 
in  wastewater 
unaddressed 
infrastructure.  Increasing  investment  in  this  area 
will  be  even  more  important  since  the  Urban 
Wastewater  Treatment  Directive  was  revised  and 
in  2024 (266).  EU 
for 
strengthened 
example from the European Regional Development 
Fund and the Cohesion 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. 

funding, 

the  national 

The  Portuguese  government  has  proposed  a 
new water tariff regulation.  This covers  public 
water  supply  and  wastewater  management,  and 
would  grant 
regulator  ERSAR 
enhanced powers to oversee, approve and enforce 
tariff  structures,  thereby  ensuring  they  are  cost-
reflective,  transparent,  and  socially  equitable. 
While  the  public  consultation  concluded  in  early 
March  2026,  it  remains  too  early  to  predict  the 
outcome  and  its  full  impact  on  pricing,  as  the 
process  of  stakeholder  feedback  and  regulatory 
review is still ongoing. 

Nature restoration 

There  is  clear  room  for  improvement  on 
biodiversity  and  nature  protection  and 
restoration.  Portugal  boasts  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 

(265) European Commission, Environmental Implementation 
Review (EIR) 2025, country report Portugal. Estimates 
expressed in 2022 prices. Link. 

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

(264) WISE System – UWWTD country report Portugal. Link. 

for transposition is 31 July 2027. 

97 

 
 
 
in  the  marine  environment,  are  not  sufficiently 
protected.  For  marine  sites,  progress  has  recently 
been  made  in  the  Azores.  Furthermore,  Portugal 
could  benefit  from  adopting  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 22.6% 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 
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. 

improved 

it 

Nature  degradation  creates  significant  risks 
to  Portugal’s  economy  and  competitiveness, 
is  a  Member  State  with  a  high 
as 
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 
2024 (267).  (This  is  set  out  in  more  detail  in  the 
2025 country report). 

Nature  degradation  is  further  amplified  by 
invasive  alien  species  (IAS).  Portugal  recorded 
39 IAS in 2024 (268). It has suffered an estimated 
damage  of  EUR  6.56  billion  from  this  issue 
between 1960-2020) (269). 

Sustainable agriculture and land use 

Portugal’s  carbon  removals  are  in  line  with 
the  level  of  ambition  needed  to  meet  its 

(267) Commission / JRC, 2025: The EU economy’s dependency on 

nature, Link. 

(268) European Commission, Environmental Implementation 
Review (EIR) 2025, country report Portugal, Link. 

(269) NeoBiota, 2021, Economic Cost of invasive alien species 
across Europe, Link. European Commission: EMRC, Logika 
Group and RPA Europe, 2025, Update of the costs of not 
implementing EU environmental law, Link. 

(CO2eq)(270).  The 

2030  target  for  land  use,  land-use  change 
In  2023  Portugal’s 
and  forestry  (LULUCF). 
forests were responsible for a major share of net 
carbon  removals  and  seem  to  have  partially 
recovered from the decreased natural carbon sink 
in particular in 2017 caused by severe forest fires, 
among  other  phenomena.  To  meet  its  2030 
LULUCF  target,  Portugal  would  need  to  ensure 
additional  carbon  removals  of  1.0  Mt  of  CO2 
equivalent 
latest  available 
projections  show  a  surplus  over  the  target  of 
almost  5  Mt  of  CO2eq  for  2030  (271).  Therefore, 
Portugal  is  on  track  to  meet  its  2030  target. 
However,  severe  wildfire  risks  remain  challenging 
for  Portugal.  To  combat  this,  the  country  has 
developed  a  national  plan  on  integrated  rural  fire 
management 2020-2030. In addition to increasing 
LULUCF  net  removals,  further  investments  in 
healthy  forests  and  soils  are  key  to  building 
resilient  bio-based  product  value  chains  and 
enabling a growing, competitive EU bioeconomy. In 
particular, 
the 
monitoring system of net removal data and will be 
crucial in supporting timely and effective action in 
the sector. 

improvements 

continued 

in 

the 

Portugal  is  transitioning  to  a  sustainable 
food  system  by  implementing  policies  to 
of 
impact 
environmental 
reduce 
agriculture.  To  mitigate 
the  environmental 
impact  of  agriculture,  the  Portuguese  authorities 
have  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  in  the  share  of  organic  farming, 
integrated  production  and  the  use  of  soil  covers 
and  organic  fertilisers.  It  also  promotes  crop 
rotation  and  diversification,  helps  to  reduce 
nutrient  losses,  and  promotes  other  sustainable 
agriculture practices. Organic farming practices are 
highly  beneficial  to  biodiversity.  According  to  the 
latest  available  data,  it  is  estimated  that  21.23% 
of  Portugal’s  land  area  is  under  organic  farming. 
This  is  the  second  highest  share  in  the  EU  (272). 
These  measures  are  crucial  to  the  long-term 
competitiveness  of  Portugal’s  agri-food  system 

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

Regulation (EU) 2023/839 Link. 

(271) Climate action progress report 2025. Link. 

(272) Eurostat, Area under organic farming. Link. 

98 

 
 
 
and  its  bioeconomy,  which  play  a  significant 
economic role. 

99 

 
Table A10.1:Key Adaptation Indicators 

(1)  EFFIS (European Forest Fire Information System). Link. 
(2) The climate protection gap refers to the share of non-insured economic losses caused by climate-related disasters, based on 
modelling of the risk from floods, wildfires, windstorms, and the insurance penetration rate. Scale: 0 (no protection gap) – 4 (very 
high gap). EIOPA, 2025, Dashboard on insurance protection gap for natural catastrophes. 
(3) 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. 
(4) 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). 
(5) Indicator refers to concentrations of nitrate (NO3) in groundwater, measured as milligrams per litre (mg NO3/L). Nitrate 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 is limited to 50 mg NO3/L to avoid threats to human health. 
(6) Net removals are expressed in negative figures, net emissions in positive figures. Reported data are from the 2025 
greenhouse gas inventory submission. 2030 value of net greenhouse gas removals as in Regulation (EU) 2023/839 – Annex IIa. 
Source: Eurostat, EEA, JRC 

100 

Climate adaptation and preparedness:EU-27201920202021202220232024latest dataDrought impact on ecosystems3.160.010.0143.196.8-2.76[area impacted by drought as % of total]Forest fires burned area (1)33,451     62,557     25,855     104,379   36,855     143,684   354,510     [burned area in ha. per year]Economic losses from extreme events637          106          3              1,242       43            122          40,452        [EUR million at constant 2022 prices]Insurance protection gap (2)---2              2              2               -[composite score between 0 and 4]Sub-national climate adaptation action34            39            47            47            51            50            34               [% of population covered by the EU Covenant of Mayors for Climate & Energy]Water resilience:EU-27201920202021202220232024latest dataWater Exploitation Index Plus, WEI+ (3)8.74         7.96         7.97         10.09       7.27         -4.53            [total water consumption as % of renewable freshwater resources]Water productivity---34            --151[EUR per m3]Water abstractionWater abstraction by source (% from surface water)------Water abstraction by sectorAgricultureElectricity coolingManufactu-ringPublic water supplyMining and QuarryingConstru- ction 61.75%14.79%9.57%13.90%0.00%0.00%Status of water bodies (4)[% of water bodies in a good status]Surface water bodies (ecological)-----47%38%Groundwater bodies  (quantitative)-----89%93%Nature restoration:EU-27201920202021202220232024latest dataEcosystem dependency---55%--44%[% of direct dependency]Protected area22.422.422.422.422.626.4[% of terrestrial protected areas]Invasive alien species (IAS)-----3929.2[number of Union concern]Damage cost of IAS----6.561.69[EUR billion]Eutrophication 174174295[AAE of area at risk of euthrophication]Sustainable agriculture and land use:EU-272012-20182018-2021latest dataYearly net land taken by Member State364          738          670            [ppm of total urban surface per Member State]Land conversion in functional urban area [% of total land taken from 2018-2021]Arable land28%Complex and mixed cultivation0%Forests26%Herbaceous vegetation associations18%Open spaces with little or no vegetation0%Pastures24%Permanent crops3%Water0%Wetlands0%201920202021202220232024latest dataNitrates in groundwater (5)15.015.115.315.515.7[mgNO₃/l]Livestock density0.630.570.75(number of livestock units per hectare of utilised agricultural area)Ammonia emissions 91%91%91%91%92%-94%[% of total utilised agricultural area]Pesticide contamination on rivers and lakes water bodiesrivers27%27%[% of monitoring sites with pesticides exceeding thresholds, 2018-2023]lakes24%18%Pesticide contamination in soil 39%57%[% of samples with a concentration over 0.5 mg/Kg⁻¹]Net greenhouse gas removals from LULUCF (6)-3280.9-3519.4-2634.0-425.2-2032.7--198,421 [ktCO₂-eq] 
 
        
 
FAIRNESS 
ANNEX 11: LABOUR MARKET 

country-specific 

recommendations 

Portugal’s  labour  market  has  demonstrated 
resilience, but structural challenges continue 
to  limit  the  country’s  competitiveness.  The 
for 
2025 
Portugal  highlighted  the  need  to  address  skills 
mismatches  by  improving  the  skills  level  of  the 
population  and  by  making  education  and  adult 
learning more relevant to the needs of the labour 
market.  With  79.6% 
in  2025,  Portugal  has 
practically  achieved  its  2030  employment  rate 
target. However, the benefits have not been evenly 
shared,  particularly  among  young  people.  The 
above-average  youth  unemployment  and 
job 
precariousness,  job  quality  issues,  demographic 
decline,  coupled  with  labour  and  skills  shortages 
pose structural challenges for the inclusiveness of 
the labour market.  

Graph A11.1: Key labour market indicators 

Source: Eurostat, LFS [lfsi_emp_a, une_rt_a, une_ltu_a, 
lfsi_neet_a] 

overall 

situation 

is 
employment 
The 
favourable,  but  regional  disparities  persist, 
and 
long-term  unemployment  remains  a 
concern.  The  employment  rate  reached  79.6% in 
2025, steadily above the EU average (76.1%), and 
is  now  only  0.4  pps  below 
the  national 
employment  rate  target  (80%  by  2030).  Regional 
outcomes  in  2025,  however,  vary  markedly:  the 
is  the  best  performer 
Grande  Lisboa  region 
(81.9%), while the outermost region of the Azores 
(76.7%)  lags far behind  all  the other regions. The 
activity rate followed a similar trend, increasing by 

to  84.6% 

0.9  pps  year-on-year 
in  2025, 
significantly  above  the  EU  average  (80.8%).  The 
unemployment  rate  decreased  by  0.5  pps  and 
stood at 6% in 2025, in line with the EU average. 
Long-term  unemployment  was  slightly  above  the 
EU average (2.2% vs 1.9%), accounting for around 
one  third  of  total  unemployment  and  highlighting 
the  need  for  targeted  efforts  to  reintegrate  this 
group 
labour  market.  The  gender 
employment  gap  remained  well  below  the  EU 
average in 2025 (5.4 pps vs 9.6 pps). The disability 
employment  gap  is  only  slightly  above  the  EU 
average  and  rose  by  1.3  pps  in  2025.  Both 
employment  growth  and 
in 
unemployment are expected to moderate in 2026 
and 2027 according to forecasts (273). 

the  decrease 

into 

the 

and 

Structural 
job 
unemployment 
precariousness  persist  among  young  people. 
In  2025,  the  employment  rate  for  young  people 
(aged  15-24)  was  lower  than  the  EU  average 
(27.9% vs 34.5%), while the youth unemployment 
rate remained one of the highest in the EU (19.5% 
vs 15.2%), even though it had gone down 2.1 pps. 
from  2024.  Regional  youth  unemployment  rates 
for  2025  vary  from  18.4%  (Norte)  to  23.2% 
(Península de Setúbal) (274). Educational attainment 
remains a key determinant of outcomes: in  2025, 
unemployment among young people with ISCED 0-
2 levels stood at 32.2% (EU: 21.2%), down by 2.9 
pps  from  2024,  while  for  those  with  ISCED  3-4 
levels, it stood at 17.0% (EU: 13.2%), down by 2.7 
pp  from  2024.  This  reflects  a  lack  of  efficient 
targeting  of  ALMPs  regarding  young  people 
qualification  levels.  Moreover,  although  the  share 
of  young  people 
in 
employment nor in education and training (NEETs) 
has  been  steadily  decreasing  in  recent  years  and 
stood at 8% in 2025 (vs EU: 11.0%), the NEET rate 
among  unemployed  aged  15-29  remained  above 
the EU average in 2024 (5.2% vs 4.2%). Moreover, 
the  outermost  region  of  the  Azores  (12.4%)  and 
Algarve (10.8%) record NEET rates well above the 
national  average.  In  2025,  labour  market  slack 
among  young  people (275)  stood  at  21.5%  (vs  EU: 

(aged  15-29)  neither 

(273) European Commission, European Economic Forecast. Autumn 

2025 - Portugal. 

(274) No Eurostat data available for the outermost regions of the 

Azores and Madeira. 

(275) As a share of the extended labour force: total number of 
people employed, unemployed, seeking work but not 
immediately available and those available for work but not 

101 

70727476788082848605101520253035404520092010201120122013201420152016201720182019202020212022202320242025%%PTActivity rate 20-64 (rhs)Unemployment rate 15-74 (lhs)Long-term unemployment rate 15-74 (lhs)Youth unemployment rate 15-24 (lhs)NEET rate 15-29 (lhs) 
 
 
     
 
 
 
 
21.8%).  Although  the  situation  has  recently 
improved, the  country  still  has  one  of the  highest 
shares  of  young  people 
(aged  15-29)  on 
temporary  contracts  in  the  EU  (36.7%  vs  EU: 
33.2%  in  2025).  The  share  of  young  involuntary 
in  2025, 
temporary  employees  was  24.9% 
significantly  above  the  EU  average  of  12.0%.  The 
share  of  young  people  in  involuntary  part-time 
employment  (as  a  percentage  of  total  part-time 
employment) stood at 35.1% in 2025, significantly 
above the EU average of 18.2%.  

Portugal  is  taking  measures  to  tackle  youth 
employment  challenges,  but  further  efforts 
are  needed.  The  national  PESSOAS  2030 
programme,  benefiting  from  financing  under  the 
European  Social  Fund  Plus  (ESF+),  supports  youth 
employment.  By  the  end  of  December  2025, 
around  82%  of  participants  (people  aged  18-29) 
in  professional  traineeships  or  receiving  hiring 
support  were  employed  six  months  after 
completion of the programme (276). Results from a 
new  set  of  ALMPs  show  that  up  to  mid-January 
2026  around  20 000  people  participated 
in 
traineeship  measures  and  around  18 000 
benefited  from  hiring  support  measures.  While 
high-qualified people participate in traineeships in 
greater  numbers  than  low-qualified  people,  the 
take-up  of  hiring  support  brought  much  more 
benefits  to  the  less  qualified  individuals,  which 
shows 
the 
effectiveness  of  ALMPs  and  targeting.  Since 
October  2025,  the  government  has  launched  the 
‘Exceptional  Measure  to  Encourage  Unemployed 
Young  People  to  Return  to  Work’  (IRT  Jovem)  –  a 
scheme that allows young unemployed people who 
take up work to combine their salary with 25% to 
35% of their unemployment benefit (depending on 
the type  of contract), but it is too  early to assess 
its  impact.  This  measure  is  complementary  to 
other existing hiring support schemes and aims to 
promote rapid reintegration into the labour market, 
reduce  the  average  duration  of  unemployment, 
to 
improve  placement 
rationalising public expenditure on social benefits. 

rates  and  contribute 

importance  of 

improving 

the 

in 2023 and 7.5% in 2024, nominal wage growth 
reached 4.8% in 2025 and is expected to stand at 
4.4%  in  2026 (277)(278).  In  turn,  real  wage  growth 
rebounded  slightly  from  4%  in  2023  to  4.3%  in 
2024,  before  easing  at  2.3%  in  2025.  It  is 
projected  to  reach  1.3%  in  2026.  By  2025,  real 
wages  were  approximately  20%  higher  than  in 
2019.  In  turn,  the  statutory  minimum  wage 
increased  by  30.4%  between  January  2022  and 
January 2026, a rise of 11.8% in real terms. While 
there  may  be  some  scope  for  further  wage 
increases  without  jeopardising  competitiveness  in 
the short term, structurally low labour productivity 
may  constrain  sustainable  wage  growth  over  the 
medium term.  

for 

skills 

Involuntary 

High  in-work  poverty,  involuntary  temporary 
employment,  long  working  hours  and  limited 
opportunities 
development 
undermine  job  quality.  In  2025,  the  in-work 
poverty  rate  remained  high  at  8.6%  (EU:  8.3%). 
The  country  also  performed  worse  than  the  EU 
average  in  terms  of  in-work  poverty  among 
households  with  dependent  children  (10.9%  vs 
temporary  employment(279) 
9.8%). 
(11.2%)  was  nearly  twice  the  EU  average  (6.4%). 
In  2025,  the  share  of  temporary  employees 
remained above the EU average (14.8% vs 11.5%), 
although  it  had  been  steadily  declining  due  to 
labour code reforms (in 2019 and 2023) targeting 
labour  market  segmentation.  Moreover,  in  2025, 
long  working  hours  affected  8.9%  of  workers, 
significantly  above  the  EU  average  of  6.2%. 
Furthermore,  skills’  levels  and  development  are 
hindered  by  low  adult  participation  in  education 
and  training.  The  structural  qualifications  deficit 
among  the  adult  population  remains  a  bottleneck 
for  quality  employment  (for  both  challenges,  see 
Annex 13), 
labour  market’s 
increasing demand for highly qualified workers (in 
2025, the share of population aged 25-64 with at 
least upper secondary education was far below the 
EU  average:  64.3%  vs  81.2%).  This  poses  a 
worrying  medium-term  challenge:  according  to 

light  of 

the 

in 

Wage  developments  have  been  broadly  in 
line with EU trends. Following increases of 9.4% 

seeking it. It corresponds to roughly 210 000 young people 
who could potentially find employment (it is more than twice 
the share of people in this situation aged 20-64). 

(276) PESSOAS 2030 Transmission of data (TOD), December 

2025. 

(277) European Commission, AMECO database. 

(278) Based on the European Commission Spring 2026 economic 

forecast. 

(279) the indicator considers two main reasons for this: “no 
permanent job found” and “job only available with a 
temporary contract”. Source: 
https://ec.europa.eu/eurostat/databrowser/view/lfsa_etgar__c
ustom_21256137/default/table  

102 

 
 
 
Cedefop’s skills forecast for Portugal (280), by 2035 
more  than  half  (53%)  of  total  job  openings  will 
require  high-level  qualifications,  while 
the 
remaining  47%  will 
require  medium-level 
qualifications.  This  means  that  job  openings  for 
low-qualified  are  forecasted  to  play  no 
the 
significant role in Portugal. The ICT sector shows a 
steady progress, with ICT specialists accounting for 
5.2% of total employment in 2024 (compared with 
5% in the EU). Portugal also stands above the EU 
average in terms of the percentage of female ICT 
specialists  with  a  22.7%  share  of  women  in  this 
sector. In 2025, the share of individuals aged 16-
74  with  at  least  basic  digital  skills  was  59%  (EU: 
60%),  leaving  scope  for  boosting  the  digital  skills 
of  the  population  and  reaching  the  EU  target  of 
80% by 2030. 

Empowering  social  dialogue  can  further 
support  labour  market  and  quality  jobs  in 
Portugal. Collective bargaining coverage stood at 
83.3%  in  2023.  Trade  union  density  was  among 
the lowest (13.9% in 2020) in the EU, as opposed 
to  employer  organisation  density,  which  stood  at 
changes 
42.6% 
introduced in 2023 extended collective bargaining 
coverage 
self-
employed  workers.  The  labour  package  proposed 
by the government and currently under discussion 
with the social partners presents an opportunity to 
strengthen  social  dialogue  while  improving  labour 
market dynamics and ensuring quality jobs for all.  

to  economically  dependent 

2022 (281). 

Legislative 

in 

While  low  in  general,  labour  shortages  are 
affecting  specific  sectors.  The  overall 
job 
vacancy rate remains stable  at 1.4% in  Q4-2025, 
significantly  below  the  EU  average  of  2.0%. 
Business  survey (282)  evidence  suggests  that  a 
relatively  low  share  of  employers  expects  labour 
shortages to constrain production. An exception to 
this  is  the  construction  sector,  where  28%  of 
companies report challenges, slightly above the EU 
average  (27%)  and  higher  than  Portugal’s  pre-
pandemic  level  (22%  in  Q4-2019).  Companies 
from  the  sector  estimated  a  shortfall  of  80 000 
workers (283).  Shortages  are  also  evident 
in 

(280) CEDEPOF, 2025, Skills Forecast: Portugal.  

(281) OECD/AIAS ICTWSS v. 2.0. 

(282) Business and consumer surveys - Economy and Finance - 

European Commission. 

(283) Association of Civil Construction and Public Works 

Industrialists. 

(see 

labour  shortages 

selected service occupations, notably personal care 
workers,  hospitality  workers,  education  and  care 
workers  (see  Annex 13  and  Annex 15).  Looking 
ahead,  an  ageing  population  and  a  forecasted 
decrease  in  the  working-age  population  (a  5.2% 
drop  by  2030  and  21%  by  2050)  are  likely  to 
exacerbate 
the  2025 
country  report  and  Annex 18).  These  problems, 
coupled  with  higher  unemployment  rates  among 
young people (despite their availability for work  – 
see the 2025 country report), make it necessary to 
improve the balance between labour demand and 
improve  the 
supply.  Portugal 
effectiveness  of  the  public  employment  service, 
and  the  2025  Activity  Plan  of  the  Institute  for 
Employment  and  Vocational  Training  (Instituto  do 
Emprego  e  Formação  Profissional,  IEFP)  aims  to 
promote  employment  and  improve  the  quality  of 
jobs  through  stronger  cooperation  with  employers 
and  more  effective 
IEFP 
launched  an  Action  Plan  for  Employer  Relations 
and  will  also  benefit 
the  European 
Commission's support through a mutual assistance 
project concerning IEFP services to employers. 

intermediation.  The 

is  working  to 

from 

Immigration,  which  has  played  a  key  role  in 
mitigating  labour  shortages,  is  expected  to 
decrease.  The  government  is  easing  immigration 
rules for key  sectors to address labour shortages. 
In  2025,  a  protocol  was  agreed  with  employer 
organisations  to  streamline  the  hiring  of  foreign-
born  workers  –  the  Via  Verde  para  a  Imigração. 
Firms  can  request  working  visas  (which  can  be 
approved  in  20  days)  if  they  offer  a  valid  work 
contract, Portuguese language courses and if they 
guarantee  accommodation  for  their  employees. 
However,  according  to  projections  from  the  Bank 
of  Portugal,  the  expected  net  migration  inflows  – 
which  have  been  a  key  driver  of  recent  record 
employment growth – is expected to fall by nearly 
50%  between  2025  and  2027 (284).  Strengthened 
public employment service could help improve job 
matching  for  migrant  workers  and  better  align 
employment  outcomes  with  their  qualifications. 
The 
share  of  migrant  workers  who  are 
overqualified is almost three times higher than the 
national average (see Annex 13). 

Portugal’s  labour  market  contributes  to  the 
green  transition.  The  emission  intensity  of  all 
employment  declined  significantly  between  2018 
(recording  a  25%  drop),  and 
and  2024 

(284) Boletim Económico – Outubro 2025, Banco de Portugal. 

103 

 
 
 
employment  in  the  environmental  goods  and 
services sector was above the EU average in 2022 
(3.9%  vs  3.1%).  In  contrast  to  most  Member 
States,  employment  in  energy-intensive  industries 
increased  by  almost  10%  between  2019  and 
2024.  However,  its  share  in  total  employment  in 
2024  was  slightly  lower  than  the  EU  average 
(3.3% vs 3.5%). 

104 

 
 
 
ANNEX 12: SOCIAL POLICIES 

Portugal  still  faces  significant  social  policy 
challenges.  Insufficient  progress  towards  the 
2030  poverty  reduction  target  and  the  limited 
capacity  of  social  benefits  to  reduce  poverty  and 
inequality  highlight  the  need  to  further  improve 
access  to  social  protection  and  make  it  more 
adequate  and  efficient.  In  2025,  the  country-
specific recommendations for Portugal highlighted 
the  need  to  ensure  equal  access  to  quality 
healthcare  and 
(LTC),  while 
preserving the sustainability of the national health 
service  and  supporting  households  experiencing 
energy  poverty.  Access  to  LTC  services  remains 
insufficient amid rising demand and relatively low 
public  spending.  Addressing  these  challenges 
should  boost  Portugal’s  competitiveness,  drive 
sustainable  and  inclusive  growth,  and  support 
social cohesion. 

long-term  care 

only 

risks 

Poverty 

178 000. 

in  poverty 

Despite  the  decrease 
levels, 
accelerated progress is required to reach the 
2030  national  poverty  reduction  target.  The 
percentage  of  people  at  risk  of  poverty  or  social 
exclusion  (AROPE)  decreased  to  18.6%  in  2025. 
However,  progress  towards  the  national  2030 
target of reducing the number of people at risk of 
poverty  or  social  exclusion  by  765 000  compared 
to 2019 remains limited: by 2025, it had declined 
by 
are 
disproportionately  high  among  certain  groups, 
including persons with disabilities, Roma and non-
-EU nationals. In 2024, 93% of Roma were at risk 
of poverty (EU: 70%) (285). Overall, in 2025, 8.6%% 
of the employed population in Portugal was at risk 
of  poverty.  This  is  lower  than  in  previous  years, 
though a gap with the EU average (8.3%) remains. 
Among older people (65+), 20.8% were at a risk of 
poverty or social exclusion (EU: 18.8%). Poverty or 
social  exclusion  risks  were  above  the  national 
average  in  the  outermost  regions  -  the  Azores 
(2.6%)  and  Madeira  20.5%  -  and  in  several 
mainland  regions,  including  Oeste  e  Vale  do  Tejo 
(20.4%) 
highlighting 
persistent  territorial  disparities.  Overall,  in  2025, 
the  relative  median  at-risk-of-poverty  gap (286) 
stands  at  22.6%, indicating  a  significant  depth  of 

and  Centro 

(19.9%), 

poverty  among  those  at  risk.  Full  implementation 
of  the  2021-2030  national  strategy  to  combat 
poverty,  updated  as  necessary  based  on  its 
planned evaluation (287), will be essential to reduce 
poverty and social exclusion,  

Child poverty is declining in Portugal. In 2025, 
the  AROPE  rate  for  children  decreased  to  19.2% 
(EU:  24.3%).  Over  the  last  two  years,  around  57 
000  children  were  lifted  out  of  poverty  or  social 
exclusion, representing more than one third of the 
reduction required to meet the 2030 target (-161 
000 from 2019 levels), following a period of near-
stagnation in the preceding years. Sustained effort 
will  be  required  to  achieve  the  2030  target.  The 
2024  national  report  on  the  European  Child 
Guarantee  notes improvements in  early  childhood 
education and care, yet major gaps persist. Health, 
for instance, remains an issue, with less than half 
(48.5%)  of  children  at  risk  of  poverty  or  social 
exclusion  reporting very  good  health  in  2024  (EU: 
57.4%),  pointing  to  poor  living  conditions,  health 
behaviours  and  access  to  healthcare  services. 
Portugal  adopted  a  2025–2030  action  plan  to 
guarantee  free  school  activities,  meals  and 
comprehensive  health-related  services  for  all 
children.  

The  effectiveness  of  social  benefits  is  still 
limited.  In  2025,  social  transfers  (excluding 
pensions) 
reduced  poverty  by  25.9%,  still 
significantly  below  the  EU  average  of  33.2%. 
Portugal allocates 55.3% of its total social-benefit 
spending  to  old-age  and  survivors’  benefits  (well 
above  the  EU  average  of  47%),  while  directing  a 
to 
comparatively 
unemployment  and  social-exclusion  benefits  (288). 
Income  inequality  has  been  reduced  but  remains 
high,  as  evidenced  by  the  income  quintile  share 
ratio (S80/S20), which stood at 4.7 in 2025 (vs 4.6 
in the EU). The fragmentation of Portugal’s benefit 
system  –  with  27  separate  benefits  –  contributes 
to  low  uptake  and  limited  impact.  Many  social 
benefits  have  ‘all-or-nothing’  income  threshold 
criteria, meaning that eligibility is lost entirely once 

proportion 

smaller 

(285) FRA report on the rights of Roma and Travellers in 13 

European countries 
https://fra.europa.eu/en/publication/2025/roma-survey-2024.  

(286) The difference between the median equivalised disposable 

income of people below the at-risk-of-poverty threshold and 
the at-risk-of-poverty threshold, expressed as a percentage 
of the at-risk-of-poverty threshold (cut-off point: 60% of 
national median equivalised disposable income). 

(287) The national strategy sets out a comprehensive plan of 
policies and measures to address poverty; to maintain 
momentum in poverty reduction, it is important that the 
second action plan (2026–2030) be adopted and 
implemented promptly based on the evaluation of the first 
plan. 

(288) Based on 2024 data collected by ESSPROS, the European 

system of integrated social protection statistics 

105 

 
 
 
 
 
the 

recovery  and 

household  income  exceeds  a  specified  limit (289), 
which  can  disincentivise  adults  from  working  full-
time (290). The single social benefit reform included 
in 
(RRP), 
scheduled  for  2026,  aims  to  improve  coverage, 
simplify  access  and  increase  effectiveness.  The 
2025  OECD  report  underpinning  this  benefit 
reform 
identified  potential  efficiency  gains, 
particularly if accompanied by improved adequacy 
of benefits.  

resilience  plan 

Adequacy  and  coverage  of  the  minimum 
income  scheme  is  insufficient  to  effectively 
protect people at risk of poverty. In 2025, only 
64.2%  of  people  aged  18-64  at  risk  of  poverty 
(AROP)  and  living  in  quasi-jobless  households 
received benefits, compared with 82.2% in the EU 
on average. Despite regular updates to account for 
inflation, the adequacy of the rendimento social de 
inserção (RSI, Portugal’s minimum income benefit) 
remains  relatively  low,  at  29.1%  of  the  national 
at-risk-of-poverty  threshold (291)  in  2025,  down 
from  42%  in  2014 (292).  In  the  same  period,  the 
RSI  amounted  to  just  23.0%  of  the  minimum 
wage. 

Access to social protection is still limited for 
some  categories  of  workers,  with  coverage 
gaps  affecting  several  forms  of  non-
standard  employment.  Workers  on  very  short 
fixed-term  contracts  may  be  unable  to  access 
sickness  and  maternity/paternity  benefits,  due  to 
the  required  6  months  qualifying  contribution 
period.  Among  the  self-employed,  insurance  for 
occupational  diseases 
is  voluntary,  and  only 
economically  dependent  workers  (those  deriving 
most  of  their  income  from  a  single  client)  are 
eligible  for  the  unemployment-type  benefit  for 
cessation  of  activity.  Gaps  may  also  affect 
low  pensions, 
farmers,  who  often 
hampering  generational  handover 
(see  2025 
country  report).  People  with  temporary  contracts 
and  part-time  workers,  as  well  as  the  self-

receive 

(289) This is the case for the minimum income benefit, the social 
unemployment benefit and social benefits related to 
newborn children, while the income rules for the child benefit 
and the disability benefit create work incentive traps. 

(290) 2025 OECD report on the creation of a single social benefit 

for Portugal.  

(291) This threshold represents 60% of the median equivalised 

disposable income (after taxes and social transfers such as 
benefits). In 2025 it was EUR 831 per month in Portugal. 

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

employed,  have  significantly 
lower  effective 
coverage  rates  than  the  EU  average.  There 
remains  scope  for  further  efforts  to  ensure 
comprehensive  social  protection  coverage  for 
workers  on  non-standard  contracts,  as  temporary 
employment  remains  more  prevalent than  the  EU 
average (15.2% of employees vs 12.6% in the EU; 
see  Annex  10).  These  groups  also  face  higher 
poverty  risks:  the  AROP  rate  among  the  self-
employed  is  23.2%  (compared  with  20.1%  in  the 
EU), while temporary employees are more likely to 
be at risk of poverty than workers with permanent 
contracts  (10.6%  vs  6.0%).  Social  transfers  also 
reduce  poverty  among  those  groups  less  than  in 
the EU (16.9% in Portugal vs 22.3% in the EU). In 
this  context,  the  introduction  in  2025  of  a  new 
personal  income  tax  scheme  (Novo  IRS  Jovem) 
extended  eligibility  to  self-employed  and  non-
standard  workers  and  reduced  their  tax  burden 
during  the  early  years  of  their  working  lives. 
Coverage  of  unemployment  benefits  remains 
comparatively 
low.  Only  around  31.6%  of 
unemployed people at risk of poverty before social 
transfers  receive  some  form  of  cash  benefits, 
compared  with  54.8%  in  the  EU,  and  only  about 
32.4%  of  unemployed  people  (those  unemployed 
for 
receiving 
unemployment  benefits  compared  with  37.7%  in 
the  EU.  At  the  same  time,  42.0%  of  unemployed 
people are at risk of poverty (49.3% in the EU). 

than  12  months) 

report 

less 

Graph A12.1: Impact of social benefits (excluding 
pensions) on poverty reduction 

Percentage reduction of population at risk of poverty 
Source: Eurostat (ilc_li02, ilc_li10) 

Availability  of  long-term  care  (LTC)  services 
remains  insufficient,  particularly  for  home 
and community-based care. With 24.3% of the 
population aged 65 and over in 2025 (EU: 22.0%), 
demographic  developments  are  driving  increased 
demand for LTC services in Portugal. Despite rapid 
population 
remain 
limiting 
underfunded, 
their  availability  and 
In  2023,  public  LTC  spending 
affordability. 

services 

ageing, 

LTC 

106 

1520253035402019202020212022202320242025EU 27PT 
 
     
accounted for only 0.5% of GDP, well below the EU 
average  of  1.8%.  The  largest  share  of  public  LTC 
spending  went  to  residential  care  (57.5%),  while 
funding for home care remains insufficient. Due to 
the  limited  availability  of  services,  particularly  in 
low-density  areas (293),  the  share  of  people  aged 
65 and over who receive public home care is one 
of the lowest in the EU. The 2023 LTC action plan, 
intended to drive structural reforms, has yet to be 
implemented,  meaning  that  neither  adequate 
funding nor a clear framework for the coordination 
of  services  are  in  place.  This  hinders  equitable 
access  and  the  integration  of  various  care  types. 
Overall, substantial gaps remain in expanding and 
funding  home  and  community-based  care.  A  pilot 
project (294)  was  introduced  in  October  2025.  This 
year-long  initiative  aims  to  test  a  comprehensive 
model  of  publicly  supported  home-care  services. 
The MAVI programme, which supports independent 
living for persons with disabilities through personal 
funding  and 
to 
assistance,  continues 
coverage  gaps  at  national  level.  Demand  exceeds 
available resources, resulting in delays in access to 
support, while regional disparities persist. 

face 

The LTC workforce faces low wages and poor 
working  conditions.  In  2024,  Portugal  had  3.4 
care workers per 100 people aged 65 and over (EU 
average: 3.3), despite low wages in the sector (295). 
The  reliance  on  foreign-born  workers  is  high (296). 
The  labour  force  is  mostly  composed  of  female 
workers  in  precarious  jobs,  with  high  workloads, 
training  possibilities. 
high 
Additionally, for the 12% of the population acting 
as  informal  carers,  recent  measures  to  improve 
their status – including easier recognition (297) and 
increased  support  –  are  being  held  back  by 
implementation  delays,  particularly 
regarding 
respite care and the provision of income aid. 

turnover  and  few 

(293) First report on the implementation of the Council 

recommendation on access to affordable high-quality long-
term care (Portugal). 

(294) SAD-Saúde pilot-project was established by Ordinance 
324/2025/1. It will provide individualised social support 
services and care to people with serious disabilities and 
incapacities, 7 days a week, in 5 regions. 

(295) 67.3% of wages of workers in other sectors in Portugal, 

compared with an EU average of 89.2%, in 2022 (source: 
SES). 

(296) From 2014 to 2024 the rate of foreign-born workers in LTC 
more than doubled (“Health at a Glance” 2025 – OECD 
indicators) 

(297) European Social Policy Analysis Network (ESPAN) Country 

Profile – Portugal 2024-2025. 

Participation  in  early  childhood  education 
and  care  (ECEC)  continues  to  increase,  but 
capacity  constraints  limit  universal  access. 
Participation  in  formal  childcare  for  children  aged 
0-3  reached  57.9%  in  2025,  down  1.5 pps  from 
2024  but  still  well  above  the  EU  average  of 
40.5%.  However,  coverage  remains  limited  for 
children  at  risk  of  poverty  and  social  exclusion 
(29.5%  in  2025),  and  in  the  districts  of  Lisbon, 
Setúbal  and  Porto.  The  expansion  of  free  nursery 
provision  under  the  Creche  Feliz  programme, 
alongside 
the  guaranteed 
entitlement to pre-primary education from four to 
three years of age, have been major steps toward 
greater  ECEC  participation.  However,  despite 
significant  investments  under  Portugal’s  RRP  and 
cohesion  policy  programmes,  supply  continues  to 
lag behind demand, namely driven by shortages of 
facilities and qualified staff in high-demand urban 
areas. Addressing gaps in access and capacity is a 
central  priority  under  Portugal’s  national  action 
plan  for  the  European  Child  Guarantee,  which 
frames ECEC as a key lever to reduce inequalities 
from the earliest age. 

the  extension  of 

poverty 

Portugal 

Energy 
remains 
in 
significantly  above  the  EU  average.  In  2025, 
15.6% of the population was unable to keep their 
homes  adequately  warm  (6.8 pps  above  the  EU 
average), with low-income households particularly 
affected  (30.6%  vs.  19.6%  in  the  EU).  In  2023, 
29%  of  the  population  lived  in  homes  with 
problems such as leaks, damp or rot, nearly double 
the EU average of 15.6%. Portugal also has one of 
the highest winter excess mortality rates in the EU. 
This  vulnerability  persists  throughout  the  year,  as 
38.2% of households report  difficulty maintaining 
comfortable indoor temperatures in summer, rising 
to  49%  among  low-income  households,  one  of 
highest  percentages  in  the  EU (298).  Moreover,  the 
upcoming  extension  of  the  EU  emissions  trading 
system to buildings (ETS2) is expected to result in 
smaller  price  increases  than  the  EU  average,  as 
most  households  rely  on  electricity  or  renewables 
and biofuels for heating, which are not covered by 
ETS2 (299).  The  national  energy  and  climate  plan 
long-term  strategy  that  aims  to 
includes  a 

(298) EU_SILC_2023_modules_assessment.pdf. 

(299) Final energy consumption of Portuguese households 

consisted of 40% electricity and 41% renewables and 
biofuels in 2023. Source: Eurostat nrg_d_hhq. 

107 

 
 
 
ETS2,  transport  fuel  prices 
in  Portugal  are 
expected  to  rise  more  than  the  EU  average. 
Strengthening  the  affordability,  accessibility  and 
availability of public transport offers a viable way 
to support affected households.  

support 

to  energy, 

the  national 

increased  energy 

in  energy  poverty 

eradicate  energy  poverty  by  2050  and  led  to  the 
energy  poverty 
creation  of 
observatory,  ONPE-PT,  whose  main  goal  is  to 
monitor  developments 
in 
Portugal (300).  In  2025,  the  plan  was  further 
developed  to  include  measures  such  as  the 
creation  of  renewable  energy  communities  and 
one-stop  shops,  alongside  specific  measurable 
targets.  In  December  2025,  Portugal  adopted  an 
action plan to tackle energy poverty (PACPE 2025-
2030),  which  focuses  on  housing  sustainability, 
for  vulnerable 
access 
literacy. 
consumers,  and 
However, the funding available for these measures 
is still unclear. To address energy poverty, Portugal 
provides  the  social  energy  tariff(301),  alongside 
RRP-supported  programmes  promoting  home 
energy  efficiency  through  vouchers,  one-stop 
shops and residential energy  updates. From 2026 
onwards,  additional  EU  support  is  expected  to 
complement  these  national  measures  through 
Portugal’s  plan  under the  EU  Social  Climate  Fund. 
The  Fund  supports  the  most  vulnerable  through 
energy  efficiency  investments  targeting  energy-
poor  households.  In  addition,  upcoming  national 
the  Energy 
building 
renovation  plans  under 
Performance  of  Buildings  Directive,  with 
its 
measures  and 
targets  on  energy  poverty 
alleviation, could also contribute to this objective.  

As regards transport poverty, the proportion 
of  households  unable  to  afford  a  car  was 
below  the  EU  average  in  Portugal  in  2024 
(4.7%  vs  5.6%  in  the  EU)  and  has  remained 
stable  in  recent  years.  However,  Portugal’s 
reliance  on  cars  for  land  transport  is  one  of  the 
highest in the EU (87.2% for passenger-km vs the 
EU average of 82% (302)), with a low propensity for 
taking the train (4.2 % for passenger-km vs the EU 
average  of  8.4%).  This  is  linked  to  the  lack  of 
public  transport  infrastructure,  the  lack  of  service 
outside metropolitan areas and the low take-up of 
railway  transport (303)  (see  also  Annex  19).  Under 

(300) National long-term strategy to combat energy poverty 

(ELPPE). The ONPE-PT is one of the measures included in the 
Portuguese recovery and resilience plan. https://onpe.pt/wp-
content/uploads/PACPE_2025_2030_ONPE_vf-2.pdf 

(301) https://www.dgeg.gov.pt/pt/areas-transversais/politicas-de-

protecao-ao-consumidor-de-energia/tarifa-social-de-energia/ 

(302) Eurostat 2023. 

(303) The data on public transport accessibility in Portugal on the 
Commission’s Transport Poverty Hub are not provided here 
because the data on Portugal’s national access point (set up 

108 

as part of Delegated Regulation (EU) 2017/1926 (the MMTIS 
Delegated Regulation)) do not cover the entire country. 

 
 
 
 
 
 
 
ANNEX 13: EDUCATION AND SKILLS 

ongoing 

Portugal’s 

leaving.  Despite 

Strengthening 
long-term 
competitiveness and social cohesion requires 
sustained  efforts  to 
improve  education 
outcomes, reduce skills gaps and better align 
learning pathways with labour market needs. 
Portugal  has  witnessed  significant  improvements 
in rates of tertiary education attainment and early 
school 
efforts, 
weaknesses  in  basic  skills,  socio-economic  and 
regional  disparities  and  a  reduced  ICT  talent  pool 
undermine  Portugal’s  human  capital  development 
and  ability  to  drive  innovation.  Teacher  shortages 
put  increasing  strain  on  the  education  system’s 
capacity.  Structural  skills  deficits  in  the  adult 
population continue to have a negative impact on 
competitiveness.  More  efforts  are  needed  to 
improve  participation  in  vocational  education  and 
training  (VET)  and  to  raise  employability  through 
enhanced  adult  learning  policies.  Portugal  has 
struggled 
in 
education  and  training  activities  and  is  far  away 
from its 2030 target. Persistent skills mismatches 
hinder  efficient  labour  use  and  reduce  business 
productivity. The need to address these challenges 
was  highlighted  in  the  2025  country-specific 
recommendation,  which  called  on  Portugal  to 
improve  the  skills  level  of  the  population  and 
make  education  and  adult  learning  more  relevant 
to the needs of the labour market.  

improve  adult  participation 

to 

Declining 
levels  of  basic  skills  among 
Portuguese  students,  paired  with  low  shares 
of  top  performers,  hinder  productivity  and 
innovation.  PISA  2022  results  show  that  29.7% 
of 15-year-olds still fail to reach basic proficiency 
in mathematics (EU: 29.5%), 6.4 percentage points 
more  than  in  2018  (304).  Underachievement  in 
reading  (23.1%)  and  science  (21.8%)  remains 
below  the  EU  average,  but  has  also  risen  since 
2018.   At  the  same  time,  the  share  of  top 
performers  in  mathematics  fell  sharply,  from 
11.6%  in  2018  to  6.7%  in  2022.  It  is  now  below 
the EU average (7.9%). This shrinks the talent pool 
for  highly  skilled  careers,  notably  in  science, 
technology,  engineering  and  mathematics  (STEM). 
Moreover, over a third (37%) of eighth-graders did 
not  reach  basic  proficiency  levels  in  the  2023 
International  Computer  and  Information  Literacy 
Study  (305),  which  is  better  than  the  EU  average 

(304) OECD, 2022 PISA. 

(305) Fraillon, Julian, 2025, ICILS 2023 International Report: An 

(43%), but still far from the EU target of <15% by 
2030.  Results  from  recent  national  assessments 
(306) – reformed in 2024 to improve comparability 
– 
in 
revealed  persistent  regional  disparities 
educational  outcomes,  with  students  from  the 
Autonomous Region of the Azores and the south of 
the  country  recording  consistently  lower  scores 
than those in the North and Centre regions.  

Graph A13.1: Low achievement and top 
performance in mathematics of Portuguese 15-
year-olds, 2015-2022 

Source: PISA 2022, OECD. 

in 

inequalities 

in  mathematics 

Structural 
educational 
outcomes  are  a  growing  concern.  Socio-
economic  background  has  a  strong  influence  on 
educational  outcomes,  with  46.9%  of  students 
from  the  bottom  quarter  of  the  socio-economic 
distribution  underachieving 
in 
2022,  compared  to  39.4%  in  2018.  In  addition, 
lower-income students are less likely to transition 
to higher education than their better-off peers(307). 
Despite  continued  progress  on  reducing  early 
school  leaving rates (6.1% in Portugal in 2025 vs 
9.1% in the EU), regional disparities persist. Rates 
of early leavers from education and training range 
from  21.1%  in  the  Azores  to  5.0%  in  the  Norte 
(see  Annex 18).  Moreover, 
region, 
successful 
secondary 
completion  of  upper 
education  is  strikingly  low  and  decreasing  for 
young  Roma  (8%  in  2024  among  20-24-year-
olds)  (308),  and  dropout  rates  are  three  times 
higher for students with foreign-born parents than 
for  Portuguese  natives  (309),  severely  impacting 
their  later  transition  to  the  labour  market.  These 

in  2024 

(306) 2025 ModA assessments (grades 4 and 6). 

(307) OECD, 2025, Higher Education in Portugal: Policies for Access 

and Success. 

(308) Fundamental Rights Agency, 2025, Roma Survey 2024. 

International Perspective on Digital Literacy. 

(309) EDULOG, 2025, Annual Report on Education 2025. 

109 

0.05.010.015.020.025.030.0201520182022201520182022Low performanceTop performancePortugalEU 
 
 
     
 
 
 
inequalities  gain  weight  considering  that  the 
number  of  foreign-born  students  in  primary  and 
secondary  education  almost  tripled  over  the  past 
six school years – from 53 000 in 2018/19 to 157 
000 in 2024/25 (around 14% of the total) (310)).  

continuous 

programme 

Several  measures  are  being  implemented  to 
strengthen  educational  outcomes.  In  response 
to  worrying  results  of  new  national  diagnostic 
tests for second grade pupils, the government has 
announced  new  measures  to  strengthen  reading 
skills  in  primary  schools,  namely  through  the 
reinforcement of the school library network and a 
new 
for 
training 
teachers (311). The national programme Aprender + 
Agora,  launched  in  2024,  reinforces  remedial 
measures  put  in  place  in  the  aftermath  of  the 
COVID-19  pandemic  and 
introduces  targeted 
support  for  migrant  students.  This  includes  the 
recruitment  of  linguistic  and  cultural  mediators 
and  expanded  language-acquisition  programmes 
for  students  and  parents.  While  recognising 
ongoing 
Education 
Council (312) has noted weaknesses in the practical 
implementation of additional support programmes 
– including the limited reach of language support, 
shortages  of  specialised  staff,  uneven  capacity 
across schools, and significant gaps in monitoring 
and evaluation  – which hinder their effectiveness. 
framework (313) 
Portugal’s 
offers  schools  flexibility  to  cater  for  students’ 
diverse  needs, 
including  top  performers  and 
students  with  special  educational  needs  (over  8% 
of  students  in  primary  and  lower  secondary). 
However,  a 
lack  of  practical  guidelines  or 
additional  resources  has  been  a  barrier  to  its 
implementation (314).  

inclusive  education 

the  National 

efforts, 

are 

shortages 

Teacher 
increasingly 
undermining  the  quality  of  education,  with 
worrying  projections  for  the  next  decade.  At 
the start of the 2025/2026 school year, nearly 8 in 
10  public  schools  reported  a  shortage  of  at  least 
one teacher (315). This comes amid a rapidly ageing 

(310) Data from the Ministry of Education and Science. 

(311) Government of Portugal, Communication of 3 December 

2025. 

(312) National Education Council, 2025, State of Education 2024. 

(313) Decree-Law No 54/2018. 

(314) IPPS, ISCTE (2026). Evaluation of Inclusive Education. 

(315) Ministry of Education and Science, 2025, Communication of 

In 

workforce:  in  2023,  60%  of  lower-secondary 
teachers were aged 50 or above, far above the EU 
average  of  39.9%.  A  recent  study (316)  estimates 
that 38 000 new teachers will be needed by 2034 
to  replace  retirees,  while  only  around  20  000 
graduates  are  expected  to  enter  the  profession, 
pointing to widening gaps. The OECD’s TALIS 2024 
survey  points  to  low  salary  satisfaction,  heavy 
administrative  workload,  job  instability  and  low 
perceived  societal  recognition  as  key  factors 
undermining  the  attractiveness  of  the  teaching 
profession (317). 
response,  a  package  of 
temporary’  measures  was 
‘exceptional  and 
introduced  in  August  2024  to  address  critical 
shortages, 
for 
teachers nearing retirement and the recruitment of 
non-teaching 
professionals  with 
degrees,  subject  to  the  completion  of  teacher 
certification  within  four  years.  Complementary 
measures  aim  to  attract  new  entrants,  notably 
for  students  pursuing 
through  scholarships 
degrees  in  education.  However,  teachers’  unions 
and the National Education Council stress the need 
for  structural  reforms  to  make  the  profession 
more attractive and prevent a decline in education 
quality (318). Central  among the pending initiatives 
is the revision of the ‘Teaching Career Statute’, the 
core legal framework for the profession, for which 
trade  unions  are 
negotiations  with  major 
underway. 

incentives 

advanced 

retention 

including 

Despite rising tertiary attainment, Portugal’s 
to  weigh  on 
continues 
skills  deficit 
productivity and competitiveness. The share of 
young people (25-34) holding a tertiary education 
qualification  (ISCED  level  5-8)  reached  42.5%  in 
2025,  slightly  below  2024  (43.2%)  and  the  EU 
average (44.8%), but still over 10 pps higher than 
in    2014  (31.6%).  In  parallel,  the share  of adults 
lower  secondary 
(25-64) with  no  more  than 
education  (ISCED  level  2)  is  decreasing  steadily, 
standing  at  35.7%  in  2025,  down  from  54.9%  in 
2015. It is nevertheless still significantly above the 
EU  average  of  18.8%.  The  large  share  of  low-
the  older 
(particularly 
qualified  people 

for 

(316) Directorate-General for Education and Science Statistics, 
2025, Diagnostic Study of Teaching Needs from 2025 to 
2034.  

(317) European Commission (forthcoming), Directorate-General for 
Education, Youth, Sport and Culture, The teaching profession 
in the EU: a comparative analysis building upon the TALIS 
2024 results 

22 September 2025.  

(318) Recommendation No 3/2024. 

110 

 
 
 
segments  of  the  population)  remains  a  barrier  to 
productivity  and  competitiveness.  It  also  hinders 
the  participation  and  access  of  less-qualified 
individuals  to  the  Portuguese  labour  market  – 
which increasingly demands highly skilled workers 
– ultimately limiting their career prospects (319).  

recent 

Despite substantial efforts, VET participation 
low.  The  main 
and  employability  remain 
European  Social  Fund  Plus  (ESF+)  programme  in 
Portugal (PESSOAS 2030) contributes significantly 
to  providing  VET  courses  (EUR  1.459  billion  over 
results  from 
2021-2027).  The  most 
December 2025 demonstrate that around 73% of 
participants  were  employed  or  continuing  their 
studies  six  months  after  the  end  of  the  course. 
Still, the employment rate of recent VET graduates 
(age  20-34)  was  below  the  EU  average  in  2025 
(75.2%  vs  80.2%).  In  2024  the  share  of  students 
enrolled  in  medium-level  vocational  education 
(ISCED  3-4)  was  also  below  the  EU  average 
(37.0%  vs  EU:  49.4%).  According  to  a  recent 
study (320),  although  those  who  have  completed 
VET  integrate  relatively  quickly  into  the  labour 
market  and  display  lower  inactivity  rates  than 
those  with 
education 
attainment, VET employment opportunities remain 
limited.  Only  11%  of  VET  graduates 
find 
employment  related  to  their  specific  training 
within two years of completion, rising to just 14% 
within  three  years.  This  suggests  a  mismatch 
between  VET  curricula  and  employer  needs, 
highlighting  the  need  for  more  frequent  and 
improved  updates  of  skills  anticipation  exercises 
(currently  carried  out  by 
the  Sistema  de 
Antecipação  de  Necessidades  de  Qualificações  – 
SANQ)  to  better  align  VET  programmes  with 
evolving skills demand. Portugal is also working to 
provide a new legal framework for VET. 

secondary 

general 

Engineering  enrolment  is  relatively  high,  yet 
ICT  skills  shortages  persist  within  STEM.  In 
2024, 29.2% of higher education students pursued 
STEM  studies,  a  slight  decline  compared  to  2015 
(30%) and below the EU-wide ambition of 32% by 
2030,  but  above 
(26.6%). 
Engineering remains the most popular STEM field, 
attracting 67.9% of STEM enrolments (EU: 53.5%), 

the  EU  average 

(319) EUROSTAT, online data code: lfsa_urgaed. 

(320) Fundação Francisco Manuel dos Santos, 2025, A expansão 
dos cursos profissionais em Portugal: que impacto na 
educação, no emprego e no empreendedorismo? (policy 
paper). 

However,  only  3.6%  of  higher  education  students 
were  enrolled  in  ICT,  one  of  the  lowest  shares  in 
the  EU  (average  of  5.7%).  Enrolment  in  STEM 
fields  among  medium-level  VET  students  was 
lower  than  the  EU  average  in  2023  (30.5%  vs 
36.2%).    Female  representation  in  STEM  VET 
(10.9%)  was  below  the  EU  average  (15.4%). 
Similarly,  women  represented  less  than  one  fifth 
of students in ICT VET (18.4% vs EU: 20.3%). This 
reduced  skills  pipeline  contrasts  with  persistent 
labour  market  demands,  as  the  ICT  sector  has 
recorded  consistently  higher  vacancy  rates  over 
the past decade, increasing from 1.5% in 2015 to 
4.0% 
in  2024.  These  trends  risk  weakening 
Portugal’s  capacity  to  progress  in  its  digital  and 
technological transformation. This underscores the 
importance  of  sustained  efforts  to  expand  and 
diversify  STEM  pathways, with more  focus  on  the 
VET  system,  through  initiatives  such  as  ‘Impulso 
Jovens  STEAM’  (co-financed  by  the  RRF)  and  the 
National  Digital  Strategy.  This  underscores  the 
importance  of  sustained  efforts  to  expand  and 
diversify  STEM  pathways, with more  focus  on  the 
VET  system  and  bridging  gender  gaps,  through 
initiatives  such  as  “Impulso  Jovens  STEAM”  (co-
financed  by  the  RRF)  and  the  National  Digital 
Strategy. 

for 

Efforts  to  promote  greater  labour  market 
relevance  of  VET  and  higher  education  are 
under  way.  With  a  view  to  restructuring  its  VET 
offer  to  better  align  with  the  needs  of  the 
economy, Portugal is currently revising its national 
catalogue  of  qualifications,  updating  the  SANQ 
system 
regional  skills  anticipation,  and 
completing technological specialised centres under 
the  recovery  and  resilience  plan.  To  diversify 
pathways  and  enhance  flexibility, 
legal 
framework for degrees and diplomas is planned to 
be  revised  in  2026,  integrating  micro-credentials 
and  establishing  a  national  graduate  tracking 
system.  With  support  from  the  Technical  Support 
Instrument,  a  set  of 
for 
designing  a  skills  forecasting  system  for  higher 
education was recently made available to Portugal 
to advance in this area. However, an action plan to 
embed  skills  intelligence in  policymaking is  yet  to 
be adopted and implemented.  

recommendations 

the 

Skills mismatches still present a challenge in 
Portugal.  The  macroeconomic  skills  mismatch 

111 

 
 
(321) has decreased slightly from 22.1% in 2024 to 
21.7% in 2025 and remains above the EU average 
of  19.2%.  While  labour  shortages  in  Portugal  are 
well  below  the  EU  average,  they  remain  high  in 
specific  sectors (See  Annex  11  Labour  Market).  In 
a  2025  survey,  61%  of  firms  identified  a  lack  of 
availability  of  skilled  staff  as  a  major  long-term 
barrier  to  investment (322).  Portugal  is  making 
investments  to  improve  skills  matching,  and  the 
includes  a 
ESF+  programme  PESSOAS  2030 
specific  typology  aimed  at  reinforcing  the  labour 
market 
includes 
strengthening  PES  and  its  territorial  presence 
through  a  new  generation  of  professional 
integration offices (GIP), as well as integrating the 
ESCO (European skills, competences, qualifications 
and  occupations)  classification  into  the  labour 
market information system. However, the absence 
of  a  skills  anticipation  mechanism  for  higher 
education  continues  to  undermine  overall  skills 
labour  market 
matching,  especially 
increasingly demanding highly qualified workers. 

adjustment 

system. 

in  a 

This 

Graph A13.2: Adult participation in learning 

for 

those 

holding 

in  skills  matching.  While  over-qualification 
among  Portuguese  citizens  was  below  the  EU 
average  in  2025  (14.1%  vs  20.0%),  it  is  much 
higher for foreign-born citizens (46.8% vs 37.0%). 
Moreover, 
workers 
third-country  migrant 
experience weaker labour market integration, with 
unemployment 
tertiary 
qualifications (323) at 11.5% in 2024, above the EU 
average  of  8.8%  (324).  This 
is  a  significant 
challenge  in  light  of  the  recent  increase  in 
migration  influxes.    According  to  national  data, 
foreign-born  workers  already  outnumber 
the 
national  workforce  in  sectors  such  as  agriculture 
(6.2%  vs  2.4%),  tourism  (18.3%  vs  8.7%)  and 
administrative  activities  (20.8%  vs  9.8%),  which 
typically  require  lower  skill  levels.  Portugal  can 
attract  qualified  foreign-born  workers  (30.7%  of 
foreign  citizens  had  tertiary  education  in  2025, 
above the EU average of 28.5%) but does not fully 
utilise their skills.  

Demand for green skills remains strong, with 
relatively  low  shortages  in  some  sectors 
relevant  to  the  green  transition.  As  of  2025, 
persistent  shortages  were  reported  in  certain 
occupations linked to the green transition, such as 
electrical  mechanics  and  fitters.  Recent  estimates 
show  that  more  than  0.6  jobs  per  thousand 
workers in the labour force will be created in wind 
and  solar  power  generation  in  Portugal  by  2030, 
which  is  slightly  higher  than  the  EU  average  (325). 
re-  and 
These  developments  suggest 
upskilling  investments  will  be  required  to  ensure 
employability and fair transitions.   

that 

low 

levels  of  adult  participation 

The  upskilling  of  the  population  is  hindered 
by 
in 
education  and  training.  In  2022,  33.4%  of 
adults  took  part  in  education  and  training  (EU: 
39.5%). Progress towards the 2030 target of 60% 
remains  modest  and  has  worsened  since  2016, 

Participation in learning in the last 12 months (excluding 
guided on-the-job training) 
Source: Eurostat – adult education survey (AES 2022) 

High  over-qualification  among  migrant 
workers in Portugal also points to challenges 

(321) The macroeconomic skills mismatch indicator measures the 
dispersion of employment rates across skill groups (proxied 
by qualification levels, with ISCED 0-2 low; 3-4 medium and 
5-7 high). Source: F2 own calculations. 

(322) EIB Investment Survey, 2025. 

(323) ISCED 5-8. 

(324) There is a relevant gender imbalance under this result: the 

figure for women is 15.4% (EU average 10.2%) while for 
men it is 6.5% (EU average 7.3%). 

(325) European Commission: Directorate-General for Employment, 

Social Affairs and Inclusion, Fulvimari, A., Garaffa, R., 
Kunertova, L., Van Der Vorst, C. et al., Estimating labour 
market transitions and skills investment needs of the green 
transition – A new approach, Publications Office of the 
European Union, 2025, 
https://data.europa.eu/doi/10.2767/4332366 

112 

0102030405060TotalMenWomenLow-skilledMedium-skilledHigh-skilled25-3435-4545-5555-64EmployedUnemployedOutside lab. forceGenderEducationAgeEmploymentStatusEUPT 
      
 
 
 
lifelong 

when  the  share  was  38%.  Participation  is  higher 
(41  pps  gap 
among  highly  qualified  adults 
between  most  and  least  qualified)  and  those  in 
employment (21.4 pps gap between employed and 
unemployed). This is particularly problematic given 
the  large  share  of  adults  with  low  levels  of 
qualification  despite  recent  data  based  on  the 
labour  force  survey  showing  slight improvements. 
According  to  the  OECD’s  Survey  of  Adult  Skills 
(PIAAC),  Portugal  performs  below  the  EU  average 
across  all  areas:  literacy,  numeracy  and  adaptive 
problem  solving.  The  QUALIFICA  programme  is  a 
national initiative aimed at adults with incomplete 
education and training backgrounds that promotes 
school, vocational and double certification of skills, 
initial  and 
learning,  namely  through 
recognition,  validation  and  certification  of  skills 
and  training,  improving  qualification  levels  and 
employability. QUALIFICA centres are supported by 
ESF+.  Moreover,  the  Accelerator  QUALIFICA  (RRP-
funded)  grants  financial  incentives  to  adults  who 
obtain  full  certification  through  Reconhecimento, 
Validação  e  Certificação  de  Competências  (RVCC) 
processes. The most recent findings show that by 
December 2025 more than 1.4 million adults had 
enrolled  in  QUALIFICA,  achieving  some  2 million 
certifications.  In  Portugal,  the  ESF+  offers  a  wide 
range of measures to support access to education 
and  training,  focusing  on  two  main  priorities: 
ensuring 
courses, 
learning  programmes  and  advanced  training)  and 
upskilling  or  reskilling  adults  (modular  training, 
technological specialisation courses, adult learning 
through  QUALIFICA  and  continuous  training  for 
teachers and trainers). Reaching the 2030 national 
target will require greater outreach, particularly to 
low-qualified  and  unemployed  people.  This  would 
also help boost their labour market integration and 
mobility. 

initial  qualifications 

(VET 

113 

 
 
ANNEX 14: SOCIAL SCOREBOARD 

Table A14.1:Social Scoreboard for Portugal 

Update of 4 May 2026. 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 2026 for details on the methodology 
(https://employment-social-affairs.ec.europa.eu/joint-employment-report-2026_en). 
Source: Eurostat 

114 

33.46.159.28.05.44.8679.66.02.2118.818.619.226.024.56.357.92.5Critical situationTo watchWeak but improvingGood but to monitorOn averageDynamic 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, 2025)Impact of social transfers (other than pensions) on poverty reduction(% reduction of AROP, 2025)Children aged less than 3 years in formal childcare (% of the under 3-years-old population, 2025)Self-reported unmet need for medical care (% of the population aged 16+, 2025)Disability employment gap (percentage points, population aged 20-64, 2025)Housing cost overburden (% of the total population, 2025)Adult 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 marketBest performersBetter than averageEarly leavers from education and training(% of  the population aged 18-24, 2025)Young people not in employment, education or training(% of the population aged 15-29, 2025)Gender employment gap(percentage points, population aged 20-64, 2025)Income quintile ratio (S80/S20, 2025)At risk of poverty or social exclusion (AROPE) rate (% of the total population, 2025)Employment rate(% of the population aged 20-64, 2025)Unemployment rate(% of the active population aged 15-74, 2025)Long term unemployment(% of the active population aged 15-74, 2025)Gross disposable household income (GDHI) per capita growth(index, 2008=100, 2024)At risk of poverty or social exclusion (AROPE) rate for children(% of the population aged 0-17, 2025) 
 
 
 
   
 
 
ANNEX 15: 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,  social 
fairness  and  productivity.  Consequently,  the  2025 
country-specific 
(CSR) 
highlighted  the  need  to  ensure  equal  access  to 
the 
preserving 
quality 
sustainability of the National Health Service. 

healthcare,  while 

recommendations 

than  men.  Diseases  of 

Life  expectancy  at  birth  in  Portugal  was 
higher  than  the  EU  average  in  2024,  and 
Portugal fares comparatively well in avoiding 
deaths  from  treatable  causes.  As  in  other  EU 
countries, women are expected to live longer than 
men (5.8 years longer), but with around 2.7 fewer 
healthy  years 
the 
circulatory  system  (‘cardiovascular  diseases’)  and 
cancer  are  the  leading  causes  of  death,  but  with 
mortality  rates 
lower  than  the  EU  average. 
Between  2014  and  2023,  the  rate  of  treatable 
mortality  fell  by  about  17%  (see  Graph  A15.1). 
Portugal’s  primary  healthcare  system  keeps  the 
rate of avoidable hospitalisations low - among the 
lowest  in  the  EU  -  and  helps  retain  treatable 
mortality rates below the EU average. 

Graph A15.1: Treatable mortality 

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

Preventable  mortality  in  Portugal  is  lower 
than  the  EU  average  despite  comparatively 
low  spending  on  disease  prevention.  In  2023, 
spending  on  prevention  in  Portugal  accounted  for 
2.3% of total spending on health, much lower than 
the  EU  average  of  3.7%.  Yet  the  rate  of 

preventable mortality in Portugal was around 17% 
lower  than  the  EU  average.  However,  as  the 
number  of  cancer  cases  is  projected  to  rise  by 
20% by 2040, and  taking into account population 
ageing  in  the  coming  decades  more  broadly  (see 
Annex  2),  there  is  a  need  to  expand  efforts  for 
prevention of cancer and other non-communicable 
diseases.  Portugal  participates  in  several  joint 
actions  funded  by  EU4Health  aimed  at  reducing 
the  burden  of  cancer,  cardiovascular  diseases, 
diabetes  and  respiratory  diseases.  Investments  in 
disease  prevention  support  the  sustainability  of 
the health system by reducing the need for costly 
treatments  in  the  future,  which  in  turn  can 
contribute to addressing the 2025 CSR. 

More than one fifth of deaths in Portugal are 
linked  to  behavioural  risk  factors.  Despite  a 
reduction  in  the  number  of  people  smoking, 
tobacco  control  has  stalled  as  cigarettes  have 
become  more  affordable.  The  level  of  alcohol 
consumption  was  among  the  highest  in  the  EU  in 
2022.  While  alcohol  control  policy  was  strong  in 
the 2010s, it has stagnated since. Health warning 
labels remain absent and wine is still exempt from 
the  tax  on  alcoholic  beverages.  Low  levels  of 
physical activity in the population, with impacts in 
terms  of  overweight  and  obesity,  are  a  public 
health  concern.  A  significant  share  of  Portuguese 
adults  (44.1%)  reported  never  exercising  outside 
working time in 2022 (compared to 31.6% of the 
population  across  the  EU).  In  relation  to  this 
challenge,  Portugal’s  recovery  and  resilience  plan 
(RRP)  includes  measures  to  promote  physical 
activity in the population, with investment directed 
towards (i) a national campaign and technological 
platform  to  raise  awareness  of  the  benefits  of 
physical  activity;  and  (ii)  the  purchase  of  bicycle 
kits. 

Health  spending  has  grown  but  the  share 
covered  by  public  funds  remains  low.  Health 
spending  per  inhabitant  (adjusted  for  differences 
in  purchasing  power)  increased  significantly  in 
Portugal between 2015 and 2023, yet it remained 
around  one  fifth  lower  than  the  EU  average.  The 
largest proportion of health spending (almost half 
-  a  share  above  the  EU  average)  went  towards 
outpatient 
Portugal’s 
organisational focus on primary healthcare. Public 
spending  as  a  proportion of  total  health  spending 
in  Portugal  was  among  the  lowest  in  the  EU  in 
2023.  This  translated  into  one  of  the  highest 
proportions 
out-of-pocket 
payments  for  healthcare  in  the  EU  (29.3%  in 

households’ 

reflecting 

care, 

of 

115 

89.279.179.174.574.574.294.889.291.793.389.786.8201420192020202120222023per 100 000 populationPortugalEU 
 
        
 
 
2023, almost twice the EU average). This rate has 
not effectively reduced since 2014. Almost half of 
the  out-of-pocket  spending  for  health  was  for 
outpatient care, driven partly by long waiting times 
that  prompt  many  individuals  to  pay  for  private 
healthcare  providers,  and  by  the  limited  public 
coverage of dental care services. 

Graph A15.2: Healthcare infrastructure investment 
by year 

Source: Country Health Profiles - Dashboard 

in 

an 

the 

and 

uneven 

investment 

Portugal’s 
healthcare 
infrastructure has trailed the EU average but 
EU  funds  are  now  supporting  significant 
investments. 
level  of 
In  2015-2023, 
investment in healthcare infrastructure in Portugal 
(expressed as EUR million per 100 000 population) 
was substantially below the EU average each year. 
This  is  reflected  in  a  relatively  low  density  of 
hospital  beds  per  population  (lower  than  the  EU 
average),  an  ageing  stock  of  medical  diagnostic 
geographical 
equipment 
distribution of healthcare facilities. Lisbon and the 
autonomous  regions  of  the  Azores  and  Madeira 
maintain higher densities of hospital beds than the 
other  regions.  Consequently,  people  in  Portugal’s 
inland  face  longer  travel  times  to  hospital  care 
(326). The occupancy rate of hospitals beds reached 
83%  in  2023,  one  of  the highest  rates in  the  EU. 
This, combined with comparatively lengthy hospital 
stays, can challenge the resilience of the country’s 
hospital  sector.  With  support  from  the  RRP,  the 
National Health Service (NHS) has been expanding 
the  number  of  patients  benefiting  from  home 
hospitalisation,  but  there  is  scope  for  further 
investments  in  this  direction  to  improve  patients’ 
experience  and  help  relieve  pressure  on  hospital 
beds. 
is  directing  a 
considerable amount of funding under its RRP and 
the  2021-2027  cohesion  policy  programmes 

In  addition,  Portugal 

(326) OECD/European Observatory on Health Systems and Policies 
(2025), Country Health Profile 2025: Portugal. State of 
Health in the EU. 

towards  new  medical  equipment,  new  and 
renovated  facilities  for  hospitals,  as  well  as  new 
and  renovated  primary  healthcare  centres.  These 
investments have the potential  to improve access 
to healthcare, and in turn contribute to addressing 
the  2025  CSR,  provided  that  the  new  and 
renovated facilities are staffed with the necessary 
medical staff. 

and 

geographical 

Challenges  in  accessing  healthcare  persist, 
with 
income-related 
disparities  in  unmet  needs  for  healthcare.  In 
2025,  4%  of  the  Portuguese  population  who 
reported  needing  medical  care  had  unmet  needs 
due to cost or waiting times. This share was above 
the  EU  average  (3.6%),  with  lower  income  groups 
disproportionally  affected:  7.5%  of  people  below 
the  poverty  threshold  reported  such  unmet  needs 
versus 3.3% of those above the poverty threshold. 
Comparatively  higher  unmet  needs  for  medical 
care are reported in rural areas. This may be linked 
to difficulties in hiring healthcare workers in some 
rural  areas  (see  Annex  18).  Unmet  needs  for 
dental care are much higher, identified by 16% of 
the  population  who  reported  needing  dental  care 
(well above the EU average of 6.3%), with people 
at risk of poverty being more than three times as 
likely  to  forgo  dental  care.  Access  to  publicly 
financed dental  care is restricted due to a lack of 
public  facilities  and  the  fact  that  most  dental 
services  are  excluded  from  the  NHS  benefits 
package.  Portugal’s  RRP  includes  investments  to 
enhance  access  to  dental  care  in  NHS  primary 
healthcare  centres,  although  delays 
in  hiring 
dentists  are 
leaving  state-equipped  facilities 
closed.  Gaps  in  public  coverage  of  healthcare 
services,  medicines  and  medical 
products 
undermine financial protection, while waiting times 
are  an  issue  in  primary  healthcare,  for  specialist 
visits and certain surgeries. According to Portugal’s 
Health  Regulatory  Authority,  at  the  end  of  2024, 
17%  of  people  waiting  for  oncology  surgery  and 
cardiovascular 
59%  of 
their  maximum 
interventions  had  exceeded 
guaranteed  response  times  (MGRTs).  Regarding 
initial specialist visits, the shares of people waiting 
beyond  their  MGRTs  were  even  higher:  79%  for 
oncology  and  86%  for  cardiovascular  healthcare 
(327).  Beyond  its  direct  impact  on  health  status, 
healthcare  coverage  is  also  a  powerful  tool 
against  poverty  and  inequality.  Analysis  shows 
that  in  Portugal’s  case,  income  inequality  as 

those  waiting 

for 

(327) Country Health Profile 2025: Portugal – see earlier footnote. 

116 

12.312.013.114.115.317.016.816.219.619.519.720.421.521.421.921.920152016201720182019202020212022EUR million per 100 000 populationPortugalEU 
        
 
 
Table A15.1: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 2023 data (or latest available). 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 Portugal (licensed to practice) and Slovakia (professionally active). Latest data 
update on nurses for Belgium and Sweden: 2022; for France: 2021; for Luxembourg: 2017. 
** latest available 10-year trend: ratio 2023/2014 or 2024/2013; a factor of 2.00 means that it has doubled in 10 years. 
***‘Available hospital beds’ covers somatic care, not psychiatric care. 
Source: Eurostat 

measured  via  the  Gini  coefficient,  would  increase 
by  26%  in  the  absence  of  public  coverage  for 
healthcare (328). 

and  allowing  patients  to  book  primary  healthcare 
appointments directly via the SNS24 portal (329). 

Persistent  shortages  of  health  workers  in 
Portugal  limit  the  provision  of  healthcare. 
The NHS continues to face significant shortages of 
healthcare  staff  (see  2025  Country  Report).  The 
shortages  have  an  impact  on  the  accessibility  of 
health  services,  prompting  closures  of  Emergency 
Departments and obstetric services in hospitals. A 
technical  working  group,  mandated  by 
the 
government,  has  proposed  a  hub-and-spoke  rota 
for smaller obstetric units and phone triage before 
pregnant 
Emergency 
Departments. One  third  of  NHS  specialists  are 55 
years  and  over,  raising  concerns  about  the  long-
term  accessibility  of  health  services.  To  ease 
workforce  shortages,  measures  for  administrative 
simplification  and  digitalisation  are  underway. 
These  include  extending  the  validity  of  chronic 
disease  prescriptions,  introducing  triage  based  on 
Artificial  Intelligence  (AI)  tools  to  clear  backlogs, 

women 

travel 

to 

(328) European Commission: Directorate-General for Health and 
Food Safety, Cruces et al. (2025), The role of healthcare in 
reducing inequalities and poverty in the EU. 

To note that as regards health coverage, in this analysis 
poverty and income refer to a different measure than the 
usually reported one, which is defined for instance in Annex 
12. The analysis also estimates the impact of benefits in 
kind, while the standard measure only accounts for cash 
transfers. 

to 

Difficulties  in  recruiting  and  retaining  NHS 
health  workers  persist.  Working  conditions  for 
health  professionals  are  a  significant  issue,  with 
low  pay,  high  workload  and 
limited  career 
prospects  acting  as  a  deterrent  to  working  in  the 
NHS. Overtime hours for NHS doctors rose by 51% 
between  2018  and  2022.  Health  professionals  in 
Portugal  report  some  of  the  highest  rates  of 
depression  and  anxiety  across  the  EU  (330).  In 
the  annual  number  of  nursing 
addition 
graduates per 100 000 population being below the 
EU  average,  a  significant  number  of  nurses  and 
nursing graduates choose to emigrate to countries 
that  offer  better  pay  and  working  conditions. 
Portugal  has  increased  the  number  of  medical 
education  places,  to  boost  the  supply  of  doctors. 
However, young doctors opt for better paid agency 
work  even  before  starting  their  specialty  training. 
Consequently,  attracting  newly  qualified  doctors, 
including  general  practitioners  (GPs)  for  family 
medicine, proves difficult. In 2025, around 60% of 
the  residency  positions  for  medical  doctors  were 
not filled. Furthermore, in June 2025 less than half 
of the GP vacancies in the NHS offered to doctors 
finishing their residency programme were filled. A 
insufficient 
shortfall  of  GPs  has  resulted 

in 

(329) Country Health Profile 2025: Portugal – see earlier footnote. 

(330) WHO Regional Office for Europe (2025), Mental Health of 
Nurses and Doctors survey in the European Union, Iceland 
and Norway. 

117 

2020202120222023202410-year change**EU average* (latest year) Cancer mortality per 100 000 population240.5226.1219.5218.2n.a.0.90233.1 (2023)Mortality due to circulatory diseases per 100 000 population 285.0 247.9 237.9 220.8n.a.0.72313.0 (2023)Current expenditure on health, purchasing power standards, per capita2 3122 6992 8843 0013 2111.673834.9 (2023)Public share of health expenditure, % of current health expenditure 64.3 62.5 62.4 61.5 62.21.0180.6 (2023)Spending on prevention, % of current health expenditure 1.93.33.32.3n.a.1.243.7 (2023)Available hospital beds per 100 000 population*** 284 285 281 278n.a.1.03440 (2023)Doctors per 1 000 population*5.45.65.75.8n.a.1.304.3 (2023)*Nurses per 1 000 population* 7.2 7.4 7.5 7.6n.a.1.237.6 (2023)*Mortality at working age (20-64 years), % of total mortality13.413.313.013.212.90.8814.3 (2023)Consumption of antibiotics in the community and hospital sectors,      defined daily doses per 1 000 inhabitants 15.2 15.3 18.8 19.7 20.81.1120.3 (2024) 
 
 
 
        
 
coverage  of  primary  healthcare.  In  early  2025, 
around  15%  of  the  country’s  population  was  not 
registered  with  a  GP.  The  largest  proportion  of 
people  without  a  GP  was  in  the  Lisbon-Tagus 
Valley  region  (31%).  Estimates  suggest  that  the 
NHS would need another 6 100 doctors and 3 900 
nurses  to  end  reliance  on  overtime  and  agency 
staff  (331),  and  around  3 000  additional  doctors 
and  14 000  additional  nurses  to  bridge  regional 
gaps in the density  of  health workforce resources 
(332).  Incentives  such  as  salary  top-ups  have  had 
limited  impact  in  filling  positions,  particularly  in 
rural  areas.  The  government  has  now  reached 
agreements  with  the  trade  unions  representing 
doctors and nurses for phased-in salary increases 
until 2027. Representatives of doctors and nurses 
still  point  to  the  lack  of  comprehensive  strategies 
for  improving  recruitment  and  retention  of  NHS 
health  workers  to  make  the  NHS  more  attractive 
versus  the  prospect  of  working  in  the  private 
sector or abroad. They also stress the need to map 
shortages  per  specialty  in  order  to  identify  the 
staffing  needs.  Portugal  participates  in  the  joint 
action  HEROES  (333)  under  EU4Health,  through 
countries  share  knowledge  and 
which  EU 
experience on health workforce planning.  

Portugal’s  health  system  is  among  the  most 
digitally  mature  in  the  EU,  with  plans  to 
scale up its digitalisation further. Portugal has 
been  investing  consistently  in  digital  technologies 
for  health.  Since  2020,  the  amount  invested 
annually,  expressed  in  EUR  million  per  100 000 
population, has been nearly twice the EU average. 
As  a  result,  the  shares  of  Portuguese  people 
accessing  their  personal  health  records  online  or 
using  online  health  services  (excluding  phone) 
instead  of  in-person  consultations  both  increased 
between 2020 and 2024, and stood above the EU 
average.  However,  there  are  significant  socio-
economic  disparities  in  the  use  of  digital  health 
tools.  The  percentage  of  Portuguese  people  with 
lower 
level  of  education  who  seek  health 
information,  book  a  medical  appointment  or 
access  electronic  health  records  online  is  much 
lower  than  that  of  people  with  a  high  level  of 
education. This education gap  is wider in Portugal 

(331) ‘Tempo de trabalho dos profissionais do SNS’ (Working time 
of health professionals in the NHS), PLANAPP – Centre for 
Planning and Evaluation of Public Policies, 2025. 

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

(333) JA HEROES | Health workforce planning project. 

than across the EU. To bridge these digital divides, 
services  to  support  people  in  attaining  digital 
access  have  expanded  to  nearly  400  sites  in 
municipalities,  primary  healthcare  centres  and 
community  pharmacies.  Portugal  is  utilising  EU 
funds,  under  the  RRP  and  the  cohesion  policy  in 
2021-2027, to scale up the digital transformation 
of the health system. These investments focus on 
(i)  digitalising  clinical  records;  (ii)  improving  the 
health  data  network;  (iii)  ensuring  interoperability 
between  different  information  systems;  and  (iv) 
expanding  the  availability  of  telemedicine.  In 
addition,  Portugal  participates  in  joint  actions  and 
benefits  from  direct  grants  under  EU4Health, 
which aim to improve the semantic interoperability 
of  health  data  and  facilitate  the  implementation 
of the European Health Data Space. The successful 
accomplishment of these measures could improve 
the  access  to  and  the  quality  of  healthcare 
services, and in turn could contribute to addressing 
the 2025 CSR. 

of 

The 

share 

The  economic  significance  of  Portugal’s 
pharmaceutical  sector,  albeit  modest, 
is 
in 
employment 
growing. 
pharmaceutical  manufacturing  has  more  than 
doubled  in  2018-2024  and  is  close  to  the  EU 
average.  Clinical  research  capacity  has  expanded 
in recent years and, in 2024, the number of clinical 
trials per million population in Portugal (17.5) was 
close to the EU average of 18.3 (334). Despite this, 
in  research  and  development  by 
investment 
Portugal’s pharmaceutical industry (in terms of the 
amount  spent  per  capita  annually)  has  been  well 
below the EU average over the years (335). This has 
resulted in a rather low number of patents granted 
for  pharmaceuticals  per  million  population 
annually  (0.9  in  2024  vs  an  EU  average  of  1.8) 
(336).  Regarding 
trade  and  commercialisation, 
Portugal’s  pharmaceutical  industry  accounts  for  a 
rather  modest  share  of  the  exports  to  non-EU 
countries,  7.5%  in  2025  vs  an  EU  average  of 
13.9%,  although 
increased 
considerably since 2018. 

this  share  has 

(334) US National Library of Medicine, https://clinicaltrials.gov.  

(335) The Pharmaceutical Industry in Figures, EFPIA (European 

Federation of Pharmaceutical Industries and Associations). 

(336) European Patent Office: Statistics & Trends Centre | epo.org. 

118 

 
 
 
ANNEX 16: HOUSING 

(iv) 

in 
the 

large  cities; 

Portugal  continues 
to  face  a  housing 
affordability  crisis.  The  main  challenges  for 
housing  policy  and  investment  concern:  (i)  the 
continuous rise in prices: (ii) the lack of supply; (iii) 
high  pressure 
regional 
issues  of  rental  market 
(v) 
disparities, 
affordability that affect not only vulnerable groups 
but  also  essential  workers,  students  and  young 
people;  and  (vi)  the  increase  in  housing  exclusion. 
In  2025,  Portugal  received  a  country-specific 
recommendation  requiring  it  to  take  additional 
policy action to: address housing affordability and 
availability  in  high  demand  areas  by  eliminating 
barriers  to  renting  vacant  houses  and  renovating 
derelict  buildings;  and  promote  efficient  public 
transport  connections  to  reduce  the  pressure  on 
house  prices  in  urban  centres  and  improve  the 
attractiveness of other territories.  

is  an 

Portugal’s 
lack  of  affordable  housing 
increasingly  affects  not  only  the  most 
vulnerable  groups,  but  also  other  segments 
of the population. Houses price growth has been 
stronger  than  income  growth,  further  pressuring 
increasing 
household  budgets.  There 
difficulty to meet the needs not only of vulnerable 
groups,  but  also  of 
low-  to  middle-income 
households, which are often not eligible for social 
housing  but  are  not  capable  of  affording  suitable 
housing at market prices either. Thus, a substantial 
part  of 
in 
the  Portuguese  population 
overcrowded  homes.  Similarly,  some  households 
are unable to keep their homes adequately warm. 
Young  adults  are  particularly  exposed  to  rising 
housing  costs.  Renting  a  standard  two-room 
apartment  would  absorb  more  than  80%  of  a 
young  adult’s  median  income  in  several  areas 
experiencing housing pressures. 

lives 

A  significant  proportion  of  the  housing 
supply in  Portugal  is  underutilised.  More  than 
30%  of  residential  dwellings  –  the  highest 
proportion  among  OECD  countries  –  are  not 
occupied  as  primary  residences,  but  are  instead 
either unoccupied (12% in 2021, corresponding to 
723 715  dwellings)  or  used  as  second  or  holiday 
homes  (19%).  Despite  the  increasing  housing 
needs  in  high-demand  areas,  most  of  the  vacant 
dwellings are located in Lisbon, Porto and the main 
urban  centres  along  the  coast.  According  to  a 

its 

rental  market  with 

study  (337),  rather  than  entering  the  long-term 
slowness, 
market 
uncertainty  and  bureaucracy,  it  can  be  a  more 
rational  risk-management  strategy  for  owners  to 
keep  a  dwelling  vacant  while  awaiting  a 
favourable  moment  to  sell  it,  to  convert  it  a  to 
short-term  rental  or  to  pass  it  on  to  family 
members. 

 Housing market developments 

Portugal’s  house  prices  have 
increased 
rapidly  over  the  past  years.  In  cumulative 
terms,  prices in  2024  had  risen  by  124%  relative 
to 2015, equivalent to a compound annual growth 
rate  of  9.5%,  or  roughly  twice  as  fast  as  the  EU 
average. In 2025, house prices accelerated further, 
rising  by  17.6%  year-on-year  showing  signs  of 
overvaluation  of  about  36% 
(based  on  the 
standard European Commission methodology). The 
strong growth is partly explained by a correction to 
previously  low  valuations,  as  Portugal’s  weak 
economic  performance  before  2015  kept  house 
price  increases  well  below  the  EU  average.  In 
addition,  strong  growth  in  tourism,  along  with  the 
rapid expansion of online platforms for short-term 
rentals,  have  further  pushed  up  prices. 
In 
cumulative  terms,  rental  prices in  2024  had  risen 
by  around  30%  relative  to  2015,  equivalent  to  a 
compound annual growth rate of 2.9%. Both house 
and  rental  prices  have  surged  much  faster  in 
popular  travel  destinations  and  urban  centres, 
particularly in the capital city of Lisbon. 

Housing  affordability  worsened  as  income 
growth  only  partly  offset  price  effects. 
Although  household  nominal 
income  grew 
substantially  in  past  years,  it  was  insufficient  to 
fully offset the house price increases. The price-to-
income  ratio  increased  by  44%  from  2015  to 
2024,  one  of  the  highest  in  the  EU,  and  is 
estimated  to  have  risen  further  in  2025.  About 
80% of households report that they are financially 
burdened  heavily  or  to  some  degree  by  housing 
(EU  average:  78%,  2023).  Housing 
costs 
affordability was also weakened by the increase in 
mortgage  interest  rates  in  2022-2023  but  the 
trend  reversed  as  of  2024.  The  high  ownership 

(337) Why Homes Stay Empty: Understanding Property Owner 
Withdrawal in Lisbon’s Housing Crisis available here: 
www.mdpi.com/2413-8851/10/1/30.  

119 

 
 
 
 
 
 
ratio in Portugal partly offset the impact of prices 
on affordability,  as the self-reported housing cost 
overburden  rate  in  Portugal  remained  below  the 
EU average, despite increasing somewhat in 2024. 
In  addition,  household  arrears  on  mortgage  or 
rental payments dropped to only 2% in 2024. The 
ratio  of  household  debt  to  GDP  fell  from  75%  in 
2015 to 52% in 2024 and the proportion of non-
performing loans also decreased. 

Graph A16.1: House prices, rents and price-to-
income evolution in PT and EU27 since 2005 

relatively  stable  and  ageing  population,  and  the 
large  housing  stock  (338).  It  is  estimated  that 
around 12% of the existing dwellings in Portugal – 
including many in Lisbon – remain vacant. A study 
by  IHRU,  I.P,  conducted  at  NUTSIII  level  presents 
regional  disparities  in  households’  capacity  to 
afford  housing  in  Portugal,  with  78  municipalities 
where  households  spend  over  50%  or  more  of 
their  disposable  income  to  purchase,  and  76 
municipalities where the same proportion is spent 
on rent. The highest housing cost overburden rate 
is  in  Lisbon  at  10%,  followed  by  Algarve  at  8.6% 
and  Setúbal  at  6.7%  (2025).  Both  Outermost 
Regions are under the national average of 6.3%. 

Graph A16.2: Housing supply indicators in PT since 
2005 

Source: Eurostat 

Construction  is  slowly  responding  to  rising 
demand.  Investment  in  dwellings  increased  by 
5.5%  in  real  terms  in  2024  and  is  estimated  to 
in  2025. 
have  followed  a  similar  trajectory 
Building  permits  had  been  rising  steadily  since 
2015  to  reach  655 m²  per  1 000  inhabitants  in 
2024  –  nearly  80%  above  the  EU  average. 
However,  investment  in  dwellings  as  a  proportion 
of  GDP  remained  below  the  EU  average  (4.3% vs 
5.3%).  Supply  is  also  constrained  by  low  land 
availability  in  areas  with  high  tourism  intensity. 
Surveys  of  construction  activity  identify  higher 
labour shortages than the average in other sectors 
(see  Annex  11),  material 
constraints  and 
difficulties  in  obtaining  building  permits  as  the 
main barriers to sectoral activity. 

Housing  needs  are  subject  to  significant 
regional  disparities.  The  steep  house  price  rise 
in  Portugal  has  been  concentrated  mostly  in  the 
large  cities  of  Lisbon  and  Porto,  as  well  as  in 
popular  tourism  areas  in  Algarve  and  Madeira.  In 
contrast, many rural regions face low demand and 
an oversupply of housing. This is explained by the 
indicate  a 
demographic  projections,  which 

Source: Eurostat 

 Structural policies 

Low  public  social  and  affordable  housing 
stock continues to be a constraint. Portugal is 
slowly  progressing  towards  building  up  its  public 
housing stock, increasing the current proportion of 
less than 2% (339) at national level to at least 5%. 
With the Recovery and Resilience Plans completion 
approaching, Portugal plans on completing 31 000 
social  and  affordable  housing  by  August  2026.  In 
the  meantime,  Portugal  has  also  committed  to 

(338) Balouktsi et al. (2026) Housing investment needs in the EU. 

JRC Technical Report 144419. 

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

120 

751001251501752002252502750507091113151719212325Index (2005 = 100)Nominal prices PTNominal prices EU27Rental prices PTRental prices EU27Price-to-income ratio PTPrice-to-income ratio EU27012345670204060801001201401601802000507091113151719212325% of GDPIndex (2005 = 100)Residential building permits in m2, indexResidential buildings producer prices, indexInvestment in dwellings (right-hand side axis) 
     
   
 
European Investment Bank loans and to reinforced 
European Regional Development Fund co-financing 
following  the  mid-term  review  of  cohesion  policy. 
Nevertheless,  the  stock  will  not  be  sufficient  to 
cover  the  housing  needs  of  the  over  143  000 
families  identified  by  municipalities  in  2025  as 
living  in  inadequate  conditions  nor  to  have  a 
significant  impact  in  the  supply  of  social  and 
affordable housing.  

and 

current 

fragmented 

Portugal  lacks  not  only  an  integrated  and 
sustainable  housing  policy,  but  also  regular 
evaluation of its housing policies’ impact and 
mapping of the needs. To partially address this, 
Portugal  will  receive  technical  support  from  the 
Commission’s  Technical  Support  Instrument  to 
help  set  up  a  national  model  for  housing  data 
governance  and  management,  as  well  as  to 
strengthen  housing  policies  through  pilot  projects. 
The 
ineffective 
coordination between central and local authorities 
means  that  Portugal  also  lacks  an  integrated 
approach  to  housing  policy. 
Investment  and 
financing  mechanisms  are  mainly  ad  hoc,  based 
on  significant  EU  support,  and  will  not  be 
sustainable in the future.  Furthermore, limited use 
is  made  of  long-term  planning  instruments  in 
which  municipalities  combine  housing  needs  with 
policy  and  planning  measures,  and  of  useful 
testing  schemes  that  would  allow  mixed-tenure 
developments.  Increasing  the  uptake  of  planning 
long-term 
a 
instruments, 
affordable  housing  delivery  and 
investment 
pipeline  is  important  to  ensure  the  continuous 
development  and  maintenance  of  quality  and 
inclusive public housing. 

developing 

and 

The 

2025 

houses. 

Portugal has limited measures to reduce the 
high number of vacant and derelict buildings 
country-specific 
and 
recommendation  indicates  the  need  to  eliminate 
barriers  to  renting  vacant  houses  and  renovating 
derelict  buildings.  Of  the  more  than  700 000 
vacant houses in Portugal, around 248 000 are in 
good  condition,  with 
little  no  or  need  for 
renovation,  but  are  not  available  on  the  rental 
market  (340),  according  to  an  IHRU,  I.P  study  (341). 

(340) There are several reasons that the dwellings are vacant, for 
example some might be under legal disputes involving 
inheritances or facing ownership issues, complicating their 
release to the market. 

(341) Territórios com falta ou desadequação da oferta 
habitacional em Portugal, IHRU, July 2025, 
www.portaldahabitacao.pt/documents/20126/58203/1_Estu

fiscal  measures 

leaving  houses  vacant 

Currently,  Portugal  is  aiming  to  launch  financing 
instruments  for  the  renovation  of  residential 
buildings  and 
is  exploring  the  possibility  of 
transferring state property to the municipalities. A 
recent  OECD  report  (342)  recommends  the  use  of 
to 
vacant  dwellings  and 
disincentivise 
in  high-
pressure areas. 30% of the municipalities register 
a  positive  house-to-household  ratio  of  between 
1.1  and  1.4,  indicating  an  excess  of  housing  for 
the resident population. This ratio, which takes into 
account  second  homes,  vacation  and  vacant 
dwellings,  is  lower  in  the  coastal  urban  areas 
(except for Algarve) than in the countryside where 
it  reaches  3.2.  The  availability  of  dwellings  is 
higher  in  low-density  territories,  and  lower  in  the 
most populated areas. Even so, the problem is not 
a lack of housing, but the large number of vacant 
dwellings,  most  of  which  are  in  good  condition, 
which  worsens  affordability  and  access  in  high-
pressure areas. 

The  Portuguese  government  continues  to 
apply  fiscal  measures  in  an  attempt  to 
improve  the  availability  and  affordability  of 
housing.  The  latest  announced  package  is  set  to 
include  several  measures  on  the  supply  and 
demand  side  to  incentivise  an  increase  in  the 
housing  stock,  and  to  alleviate  accessibility  and 
affordability  pressures 
(see  Annex  3).  These 
measures  include  a  VAT  reduction  from  23%  to 
6%  for  renovating  and  building  properties  with  a 
value  of  up  to  EUR 660 982.  The  package  also 
includes  a 7.5%  flat-rate property  transaction tax 
on  the  acquisition  of  residential  property  by  non-
residents,  which  aims  to  constrain  demand. 
However,  given  the  marginal  difference  between 
the 7.5% rate and current property transaction tax 
rates, its capacity to effectively constrain demand 
may  be  limited.  Furthermore,  in  view  of  the 
existing  supply  constraints,  at  least  part  of  the 
reduction  in  VAT  risks  being  absorbed  through 
increased land prices or margins, limiting effective 
price moderation and decreases.   

In  addition,  the  new  package  also  includes 
fiscal  measures  that  aim  to  put  existing 
housing  stock  on  the  rental  market.  These 
entail tax benefits for owners to let property at up 

do%20PNH-_VFinal_completo.pdf/49b45fff-df9f-0dce-
75eb-bef8df6745e1. 

(342) OECD Economic Surveys: Portugal 2026, OECD Publishing, 

Paris, https://doi.org/10.1787/025b3445-en. 

121 

 
 
 
 
to 

rents 

to  EUR 2 300  per  month  and  a  capital  gains 
exemption  for  selling  primary  and  secondary 
residences when owners buy another property that 
they  intend  to  let  at  a  price  up  to  the  same 
threshold.    The  rental  income  tax  incentive  is 
undifferentiated  between  new  and  existing 
contracts  and  applied 
that  are 
significantly  above  the  national  average  monthly 
income.  The  tax  expenditure  is  therefore  likely  to 
be  largely  absorbed  by  existing  contracts,  with  a 
rather  limited  impact  on  new  supply.,  In  addition, 
the 
gains 
exemptions  come  on  top  of  a  general  exemption 
for 50% of capital gains and a full exemption for 
owner-occupiers  who  reinvest  gains  in  another 
primary  residence.  The  additional  exemptions 
further  contribute  to  reduced  progressivity  and 
largely untaxed real estate capital gains, while it is 
unclear that they will have a significant impact on 
the  objectives  of  increasing  rental  supply  and 
decreasing rental prices.        

above-mentioned 

capital 

new 

Portugal  transferred  the  competences  for 
short-term rentals to municipalities with the 
aim  of  tailoring  solutions  to  local  needs. 
Despite  the  measures  taken,  the  rental  market 
continues  to  be  under  significant  pressure,  also 
outside of traditional high-pressure areas, with not 
only  young  people,  low-income  and  vulnerable 
groups, 
groups 
experiencing  difficulties  in  accessing  the  rental 
market. 

also  middle-income 

but 

talent 

constrains 
attraction 

labour 
Housing  affordability 
mobility, 
and 
competitiveness. A notable example is Algarve, a 
region  dependent  on  seasonal  work,  where 
companies  have  difficulties  in  hiring  workers, 
partially  due  to  the  high  cost  of  housing,  which 
further  deepens  the  labour  shortages.  Similarly, 
key  workers 
teachers,  emergency  and 
healthcare  professionals,  cleaning  workers,  care 
workers, etc.) face difficulties in finding affordable 
accommodation;  a  situation  that  affects  the 
provision of public and essential services (343).  

(e.g. 

(343) ‘Housing in the European Union: Market Developments, 

Underlying Drivers, and Policies’, G. Cousin et al., available 
https://economy-finance.ec.europa.eu/publications/housing-
european-union-market-developments-underlying-drivers-
and-policies_en.; ‘Portugal tem uma das maiores crises 
habitacionais da Europa’, G. Rodrigues et al., available, 
https://causapublica.org/estudos/portugal-tem-uma-das-
maiores-crises-habitacionais-da-europa/.  

Vulnerable groups 

Young  people  and  disadvantaged  groups  are 
more  exposed  to  increased  housing  costs.  In 
2025,  the  housing  cost  overburden  rate  (the 
proportion of people who spend over 40% of their 
household  income  on  housing)  slightly  decreased 
by  0.6  percentage  points  (pps)  compared  with 
2024,    reaching  6.3%,  after  years  of  increase, 
while  EU  average  continues  decreasing  EU 
average:  8.8%  in  2023;  8.2%  in  2024,  7.7%  in 
2025)  (344).  Tenants  renting  at  market  price  are 
particularly  affected,  with  27.2%  facing  housing 
cost overburden compared with the EU average of 
18.6%.  The  most-affected  cohorts  include:  (i) 
young  people  who  are  more  likely  to  leave  their 
home because they can no longer afford it, and to 
live  in  poorer  quality  dwellings  (345)  or  are  forced 
to  postpone  leaving  the  parental  home;  and  (ii) 
other  more  vulnerable  groups,  such  as  single-
parent  households,  people  with  disabilities  (346), 
migrants and lower-income cohorts. Rents account 
for  33.4%  of  disposable  household  income  for 
people  at  risk  of  poverty  or  social  exclusion  (EU 
average:  33.5%),  and  34.9%  for  single-parent 
households (EU average: 25.5%) in 2025. Portugal 
incentives  and  public 
has  developed 
guarantee  schemes  to  help  young  people  to  buy 
property.  Despite  the  significant  uptake,  the 
schemes  may  have  caused  purchase  prices  to 
increase, offsetting the potential savings benefits.  
Access  to  an  affordable  rental  market  is  a  key 
challenge  for  these  groups.  Programmes  like 
Porta65+, Apoio Extraordinário à Renda and Apoio 
ao  Arrendamento  can  help  alleviate  costs  and 
should  help  to  improve  long-term  rental  market 
accessibility for these groups. However, constraints 
and delays in implementation and reach, together 
with  shortcomings  in  targeting,  undermine  their 
capacity  to  adequately  address  the  needs  of  the 
most vulnerable households. 

fiscal 

(344)The overburden rate should be read together with the tenure 
structure (homeowner, tenants), that may differ across 
country and regions.   

(345) Eurofound (2025), Foundational challenges: The housing 
struggles of Europe’s youth, Publications Office of the 
European Union, Luxembourg. 

(346) European Commission: Directorate-General for Justice and 
Consumers, Pinto, P. and Acosta Jimenez, M. A., Accessible 
and sustainable housing for persons with disabilities – 
Portugal, Publications Office of the European Union, 
2026, https://data.europa.eu/doi/10.2838/0680398 

122 

 
 
 
The  lack  of  affordable  housing  can  be  a 
significant  obstacle  to  enrolment  in  higher 
education.  The average cost for a student room 
in  the  private  market  is  EUR 410,  rising  to 
EUR 500  in  Lisbon,  while  there  were  around 
17 000  beds  in  public  student  residences  (347). 
Low-  and  middle-income  families  face  added 
pressure  on  their  household  budget  to  tackle  the 
rent  costs  of  students  living  away  from  home, 
particularly  for  students  that  either  don’t  qualify 
for  social  support  or  don’t  find  a  bed  in  public 
student  housing.  The  Portuguese  government  has 
introduced  an  affordable  student  housing  plan 
(EUR 515  million)  to  construct  and  renovate 
buildings  that  will  provide  18 000  beds.  Also,  the 
revised  social  support  system  in  higher  education 
(348),  in  place  since  early  2026,  introduces  a 
means-tested  model  to  reflect  actual  study  and 
living  costs,  seeking  to  address  the  growing 
difficulties  low-income  students  face  in  coping 
with rising housing expenses (see Annex 13). 

by 

poor 

affordability 

Housing  deprivation  and  overcrowding  are 
worsened 
and 
accessibility. There was a 2.1 pps increase in the 
severe housing deprivation rate (lack of adequate 
housing  space  and  poor  living  conditions)  from 
2020 to 2023, when it reached 6.0% (EU average: 
4.0%). This rate rises to 13.2% for those who rent 
at  market  prices,  which  is  double  the  EU  average 
of  6.4%  (2023).  The  overcrowding  rate  also 
increased by 2.7 pps from 2020 to 2025, when it 
reached 12.7%, but remains below the EU average 
of  16.8%.  Official  national  statistics 
from 
Statistics  Portugal  (INE)  report  that  22.7%  of 
immigrants lived in overcrowded dwellings (2023). 
Rural  and 
territories,  which  are 
increasingly affected by migratory trends that are 
necessary  to  the  local  economy,  face  major 
difficulties  in  providing  suitable  conditions  for 
these  workers  as  a  result  of  overcrowding,  illegal 
occupation,  and  low  and  precarious  stock  (349). 
These  data  reveal  a continuous  misadjustment  of 

low-density 

(347) Data from Observatório do Alojamento Estudantial from 
November 2025, pnaes.pt/observatorio-alojamento-
estudantil.  

(348) Novo Sistema de Ação Social no Ensino Superior, 

https://www.portugal.gov.pt/pt/gc25/comunicacao/noticia?i=n
ovo-sistema-de-acao-social-no-ensino-superior  

(349) Observatório das Migrações (2026), População estrangeira 
residente em Portugal (2024): Implicações para a coesão 
territorial, políticas públicas e governação das migrações. 

the  rental  market,  particularly  towards  vulnerable 
groups.  

Graph A16.3: Increase in homelessness in mainland 
Portugal (2020-2024) 

Definitions: (1) People in Homelessness - with no housing: 
people living in temporary accommodation centres, in specific 
accommodation for people without a home, or in rooms (fully 
or partially) paid for by social services or other entities.  (2) 
People in homelessness - rough sleeping: people living in the 
street, public spaces; emergency shelters or in precarious 
places 
Source: ENIPSSA official survey from 2021 to 2025, referring 
to the previous years 

Portugal  lacks  an  effective  public  response 
to  the rise  in  homelessness.  Portugal  recorded 
a historic high of 1.41 homeless people per 1 000 
inhabitants  in  2024,  up  from  0.84  in  2020, 
increasing for the fourth consecutive year (350). On 
the  mainland  the  number  reached  14 476  people 
(351).  Alentejo 
is  the  region  with  the  most 
significant  increase,  rising  from  517  people  in 
2020  to  3 234  in  2024  (352).  37%  of  homeless 
people were under 30 years old, a recurring trend 
in  the  past  years,  and  21%  of  people  had  been 

(350) The increase is partially explained by a refinement in the 
survey methodology to account for Portuguese Roma 
communities in some municipalities, as the definition of 
homelessness is ‘all people on the mainland without access 
to housing’. This suggests that previous surveys did not 
represent all the phenomena. 

(351) The Data provided by the 2024 ENIPSSA survey cover only 
the mainland. Official data provided by regional authorities 
indicate 383 homeless people in the Azores Region in 202 
and 177 in the Madeira Region in 2024. 

(352) The increase can be partially attributed not only to seasonal 
agricultural work and job precariousness in sectors where a 
high number of migrants work, but also to the survey taking 
into account Portuguese Roma communities that it had 
previously disregarded. 

123 

82099604107731312814476020004000600080001000012000140001600020202021202220232024Total No of people in homelessnessPeople sleeping roughPeople with no housing 
 
      
 
Graph A16.4: Housing affordability selected indicators 

Source: Eurostat and European Commission calculations.  The overburden rate should be read together with the tenure structure 
(homeowner, tenants), that may differ across country and regions. 

income 

to  access 

many  of  whom  are  migrants,  and  families  with 
insufficient 
conventional 
housing. Public authorities often enact demolitions 
and evictions without ensuring suitable alternative 
housing  arrangements,  which  can  exacerbate 
rough  sleeping.  Additionally,  there  are  several 
informal  settlements  inhabited  by  Roma  families 
across  the  country,  which  are  often  segregated 
(355)  and  lack  access  to  electricity,  water  and 
adequate  sanitation.  The  result  is  that  78%  of 
Roma people suffer housing deprivation, according 
to  the  2024  Fundamental  Rights  Agency’s  survey 
on Roma population (356). 

homeless for less than one year. There are several 
causes  of  homelessness,  but  in  9.7%  of  cases,  it 
was due to evictions or loss of housing. The public 
social  response  capacity  varies  between  regions, 
and  has  been  increasing  over  the  years  with  the 
expansion  of  the  homelessness  planning  and 
intervention  centres  (Núcleos  de  Planeamento  e 
Intervenção  Sem-Abrigo,  NPISAs)(353).  However, 
overall,  public  services  lack  sufficient  capacity  to 
provide  housing,  emergency  accommodation  and 
related integrated services for homeless people or 
dealing with imminent or recent housing exclusion.  
Overall,  there  has  not  been  sufficient  investment 
in  housing-led 
including  enough 
financing for measures to promote people-centred, 
personalised measures and reintegration. Likewise, 
measures  such  as  debt  counselling,  legal  advice, 
representation  and  continued  protection  are 
relevant  to  prevent  more  people  falling  into 
homelessness. 

initiatives, 

There has been a rise in informal settlements 
inhabited by workers and families. Civil society 
organisations  and  municipalities  report  a  surge  in 
informal  settlements  lacking  basic  services  in  the 
Lisbon  metropolitan  area.  Despite  the  absence  of 
official aggregated data, reports (354) indicate that 
by July 2025 around 3 000 families were living in 
27  self-built  or  informal  neighbourhoods  –  an 
nine 
increase 
neighbourhoods 
informal 
vs  2019. 
settlements  are  inhabited  mostly  by  workers, 

of  1  200 

families 

These 

and 

(353) The number of NPISAs increased from 19 in 2019 to 38 in 
2025, supported by ESF+ and coordinated under the 2025-
2030 national strategy for integration of people in 
homelessness. 

(354) Example of reports: ‘Barracas na área de Lisboa: O regresso de um 

problema que nunca desapareceu’, 28.09.2025, 
http://www.publico.pt/2025/09/28/infografia/barracas-lisboa-
regresso-problema-desapareceu-talude-loures-amadora-almada.  

(355) Example of Civil society reports: Cemitério dos Vivos, Rádio 

Renascença, https://especiais.rr.pt/o-cemiterio-dos-
vivos/intro.html.  

(356) Rights of Roma and Travellers in 13 european countries -
perspectives  from the  Roma survey 2024, Fundamental 
Rights Agency, 2025 

124 

 
 
 
 
 
HORIZONTAL 
ANNEX 17: 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  SDG 8 
(decent  work  and  economic  growth)  and 

Graph A17.1: Progress towards the SDGs in Portugal 

SDG 9  (innovation  and  industry).  Basic  digital 
skills  among  the  adult  population  rose  (from 
55.3%  in  2021  to  59.2%  in  2025)  and  stand 
slightly  below  the  EU  average  (60.4%  in  2025). 
Early  leavers  from  education  and  training  fell 
(6.1%  of  population  aged  19  to  24  in  2025, 
compared 
level 
significantly below the EU average (9.1% in 2025). 
Tertiary  education  attainment  also  improved  to 
42.5%  of  the  population  aged  25  to  34  in  2025 
(against 38% in 2019) but is slightly below the EU 
average (44.8% in 2025). 

to  10.5% 

in  2019) 

to  a 

The  Portuguese  labour  market  is  performs 
relatively  well  compared  with  the  EU 
average,  although  it  needs  to  catch  up  on 
some  sub-indicators.  Portugal  has  a  high 
employment  rate  (79.6%  of  the  population  aged 
20 to 64 in 2025 vs an EU average of 76.1%). The 
long-term  unemployment rate  fell  to  2.2%  of  the 
active population in 2025 (vs a 1.9% EU average). 
Portugal  also  reduced  the  percentage  of  young 

For a detailed progress assessment towards the various SDGs, see the annual Eurostat report ‘Sustainable development in the 
European Union’; for extensive data on the short-term SDG progress of EU countries, see Key findings – Sustainable development 
indicators; for an interactive visualization of SDG progress of EU countries, see SDG country overview. 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 or six 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 29 April 2026. Data refer mainly to the period 2019-2024 or 2019-2025. Data on SDGs may 
vary across the report and its annexes due to different cut-off dates.  

125 

 
 
 
 
 
 
people neither in employment nor in education and 
training (NEET), going from 9.1% of the population 
aged  between  15  to  29  in  2019  to  8%  in  2025, 
below the EU average of 11% for that year. 

slow 

improvement,  R&D  and 
Despite 
innovation  remains  a  key  concern.  Only  1.7% 
of GDP was allocated to R&D in 2024 (EU average: 
2.2%)  while  the  number  of  patent  applications 
submitted  to  the  European  Patent  Office  per 
million  inhabitants  remains  very  low:  39  in  2025 
against  the  EU  average  of  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 business-
academia 
reform 
vocational education and training. 

increase  R&D,  and 

links, 

Portugal  is  improving  overall  on  the  SDGs 
related  to  sustainability  (SDGs 2,  7,  9,  12, 
13) but is moving away from SDGs 6, 11 and 
14  (Clean  water  and  sanitation,  Sustainable 
cities,  Life  below  water).  It  performs  well  on 
SDG 7  (Affordable  and  clean  energy)  and  SDG 2 
(Zero  hunger).  The  share  of  renewable  energy  in 
gross  final  energy  consumption  increased  from 
30.6%  in  2019  to  36.3%  in  2024,  standing  well 
above  the  EU  average  (25.2%  in  2024).  The 
environmental  impact  of  agriculture is  lower than 
the EU average. The percentage of inland bathing 
waters  with  excellent  quality  deteriorated  (from 
76.7%  in  2019  to  58.4%  in  2024  against  EU 
average  of  78.3%  in  2024).  On  sustainable 
agricultural  production,  Portugal  performs  very 
well  in  organic  farming  (21.2%  of  the  utilised 
agricultural area vs 10.9% in the EU in 2024), and 
the  use  of 
chemical  pesticides  declined 
substantially from  78 to reach the EU  average of 
42  out  of  100,  in  2023).  Nevertheless,  Portugal 
protects  less  than  5%  of  its  marine  areas  (well 
below the EU average of 13.7% in 2023). Circular 
economy 
indicators  are  also  well  below  EU 
averages, with a low rate of recycling of municipal 
waste  (30.6%  in  2023,  vs  47.9%  for  the  EU  in 
2023). 

SDG 12 

Conversely, it  needs to catch up with the EU 
average  on  SDG 9  (Sustainable  industry  and 
infrastructure), 
(Responsible 
consumption  and  production),  and  SDG 15 
(Life on land). The circular material use rate has 
slightly  improved  since  2019  but  is  only  around 
one fourth of the EU average. The share of buses 
and trains in passenger transport, and the share of 
rail  and  inland  waterways  in  freight  transport  are 

well  below  the  EU  average.  Terrestrial  protected 
areas  slightly  increased  from  22.4%  in  2018  to 
22.6%  in  2023 but  remains  below  EU  average  of 
26.4%. Various measures in Portugal’s RRP aim to 
further  contribute  to  emission  savings.  These 
in  energy  storage  and 
include 
renewables, renewable hydrogen, energy efficiency 
renovations,  public  transport,  increased  use  of 
bioproducts in industry, and the decarbonisation of 
industry. 

investments 

Portugal is improving on SDGs assessing the 
social  fairness  of  society  and  the  economy 
(SDGs 4,  5,  7, 8).  Even  if  the percentage  unable 
to  keep  their  homes  warm  enough  decreased 
(from 18.9% of the population in 2019 v. 15.7% in 
2024), it is still well  above the EU  average (9.2% 
in  2024).  Education  and  training  indicators  are 
better than the EU average. The tertiary education 
attainment rate (population aged 25-34) increased 
from  38%  in  2019  to  42.5%  in  2025  (vs  an 
increase in the EU average from 39.6% to 44.8%). 
Adult  participation  in  learning  is  also  higher  than 
the EU average (16.9% in Portugal vs 13.7% at EU 
level in 2025). 

Portugal  also  performs  better  than  the  EU 
average on gender equality. It has a low gender 
employment gap, and a gender pay gap below the 
EU  average  (7%  in  2024  vs  11.1%  at  EU  level, 
expressed  as  %  of  men’s  average  gross  hourly 
earnings).  The  percentage  of  women  in  senior 
management has progressed in the last few years, 
surpassing the EU average (35.9% of directors vs 
33.6% in 2025). 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. 

However,  it  is  moving  away  from  SDG 1  (No 
poverty)  and  SDG 10  (Reduced  inequalities). 
In  2024,  the  percentage  of  persons  at  risk  of 
poverty  or  social  exclusion  was  slightly  below  the 
EU average (19.7% vs 21%), but the percentage of 
the  population  at  risk  of  monetary  poverty  after 
social  transfers  was  slightly  higher  (16.6%)  than 
the  EU  average  (16.2%).  Portugal  performs  very 
well for people living in households with very low 
work  intensity  (4.8%  of  the  population  aged  less 
than  65  in  2024  vs  a  7.9%  EU  average),  but  the 
housing  cost  overburden  rate  has  worsened 

126 

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

(compared  to  the  country’s  2019  level  of  5.7%), 
and needs to catch up with the EU average (6.9% 
of population in 2024 vs 8.2% at EU level). On the 
in-work  at-risk-of-poverty 
rate,  Portugal  has 
improved  (10.8%  of  %  of  population  aged  18  or 
over in 2019 v. 9.2% in 2024) but is above the EU 
average (9.2%, vs 8.2% in 2024). The urban-rural 
gap  has  slightly  increased  since  2019  and  is  far 
above the EU average (6% vs 0% in 2024).  On a 
positive  note,  the  citizenship  gap  (difference 
between EU and non-EU nationals) narrowed both 
for  early  leavers  from  education  and  for  training, 
and for employment remaining well below the EU 
average  (0.3%  of  population  aged  20  to  64  v. 
11.8%, in 2025). 

The  country  is  improving  on  SDG 3  (Good 
health and well-being) but needs to catch up 
with  the  EU  average.  The  smoking  prevalence 
rate  dropped  from 26%  in  2017  to  21%  in  2023 
(vs 24% at EU level) for the population aged 15 or 
over, and healthy life expectancy at birth based on 
self-perceived health rose from 71 years in 2018 
to  73.6  years  in  2023.  However,  some  of  the 
health  and  well-being indicators  are  still  far  from 
the EU average. These include road traffic deaths 
(5.8 vs 4.4 per 100 000 persons in 2024) and the 
obesity  rate  (17%  vs  16.3%  of  the  population 
aged 18 or over in 2025). 

for  peace, 

While  Portugal  is  improving  on  some  SDG 
indicators related to macroeconomic stability 
(SDGs 8,  17),  it  is  moving  away  from  the 
target 
justice,  and  strong 
institutions  (SDG 16).  It  is  closing  its  gap  with 
the  EU  average  on  the  investment  share  of  GDP, 
with 20.7% in 2025 (EU: 21.7%). However, central 
government  expenditure  on  law  courts,  a  key 
indicator  of  the  quality  of  the  justice  system, 
remains below the EU average (in 2024, EUR 77.8 
per  capita  in  Portugal  vs  EUR 131.4  per  capita  at 
EU 
level).  The  percentage  of  the  population 
reporting  crime,  violence  or  vandalism  increased 
from  6.5%  in  2018  to  6.9%  in  2023  (EU:  10%). 
The death rate from homicide also increased, from 
0.76 in 2018 to 0.77 in 2023. So too did the share 
of  victims  of  human  trafficking  (up  from  1.7  per 
100 000  persons in  2019  to  2  in  2024).  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. 

127 

 
ANNEX 18: COMPETITIVE REGIONS 

Regional development trends 

tourism  sector  –  the  Algarve  and  Madeira  - 
standing out in terms of catching up (Map A18.1).  

recent 

across 

regions 

economic 

growth 
in 

Despite 
all 
years, 
Portuguese 
convergence with the EU average in GDP per 
head has remained slow(357). The capital region 
is the only region in Portugal with a GDP per head 
above  the  EU  average.  In  2004-2024,  Portugal’s 
Norte  and  Madeira  regions  registered  the  fastest 
average  annual  growth  in  GDP  per  head.  Internal 
convergence, whereby Portugal’s lower income and 
less productive regions catch up with the country’s 
better  performing  regions  (both  in  GDP  and  in 
productivity) has been driven by some catching up 
of  less  developed  regions,  but  mostly  by  slower 
economic  growth  in  the  capital  region.  In  recent 
years,  tourism  has  been  a  significant  subnational 
driver  of  growth  in  some  regions  such  as  the 
Algarve  and  Madeira,  most  notably  after  the 
COVID-19  pandemic  and  in  a  context  of  strong 
economic  convergence  of  the  whole  country  with 
the  EU  over  recent  years.  Key  challenges  to 
convergence  for  Portugal  include:  (i)  deepening 
innovation  and  strengthening  linkages  in  high 
value-added  markets  in  the  most  dynamic  areas 
of  its  economy;  and  (ii)  connecting  developing 
territories with dynamic urban centres. 

that  made 

the  most  progress 

Portuguese  regions  have  had  different 
convergence trends over the last 20 years. In 
2004-2024,  Norte  and  Madeira  were  the  two 
regions 
in 
convergence,  reducing  their  gap  with  the  EU’s 
average  GDP  per  head  by  close  to  seven 
percentage points. Economic convergence with the 
EU  was  more  modest  in  the  rest  of  the  country. 
The  capital  region  and  its  neighbour  regions  of 
Setúbal  and  Oeste  e  Vale  do  Tejo  lost  significant 
ground  compared  with  the  EU  average  over  the 
same  period.  Convergence  dynamics  among  the 
Portuguese  regions  since  2014  are  very  different 
to  those  in  place  before  2014.  Until  2014  only 
Norte  was  keeping  pace  with  growth  of  the  EU’s 
average  GDP  per  head,  while  the  rest  of  the 
country  fell  increasingly  behind  the  EU  average 
due  to  the  dramatic  impact  of  the  economic  and 
financial  crisis.  After  2014  however,  Portugal 
began converging again, with regions with a strong 

(357) The analysis is based on NUTS categorization as updated for 

Portugal in 2024.  

Map A18.1:  GDP per head compared with the EU 
average. 

Note: 2021-2023 average GDP per head in purchasing power 
standard compared with the EU average. 
Source: Commission calculations based on Eurostat 16 July 
2025 data 

trends. 

Disparities  in  GDP  per  head  continue  to 
mirror  significant  productivity  gaps  and 
In  2023, 
different  employment 
productivity  in  Portugal  (measured  as  GDP  per 
hour  worked)  was  67%  of  the  EU  average.  It 
varied  between 
region,  where 
the  capital 
productivity  was 79% of the EU average, and the 
country’s  other  regions,  most  of  which  ranked 
among the EU regions with the lowest productivity 
levels. The regions of Madeira and Oeste e Vale do 
Tejo  registered  annual  productivity  growth  above 
or in line with the EU average in 2013-2023. The 
corelation  between  productivity  growth  and 
convergence of GDP per head with the EU average 
is  only  partial,  with  some  regions  such  as  the 
Algarve displaying strong convergence in terms of 
GDP  over 
last  decade  while  showing 
productivity  growth  lower  than  the  EU  average. 
This suggests that the convergence process results 
from  increasing  employment.  Despite  the  falling 
productivity in the same period, labour productivity 
remains the  highest  in the  capital  region  because 
of  its  higher  concentration  of  high  value-added 
sectors 
(see  Graph  A18.1).  There  are  also 
significant  disparities  between  coastal  and  non-
coastal  areas,  with  productivity  levels  of  69%  in 

the 

128 

 
 
 
 
 
 
 
 
Table A18.1:Main development trends, challenges and the concentration of resources 

Source:  European Commission based on Eurostat data; categories of regions based on Map A18.1 

the  coastal  regions,  but  only  60%  of  the  EU 
average in non-coastal areas. 

While regions differ in the sectoral structure 
of  their  economies,  modest  or  stagnating 
productivity  growth  is  a  challenge  affecting 
most of Portugal’s regions. The services sector 
makes  the  largest  contribution  to  gross  value 
added  (GVA)  in  all  regions.  However,  the  share  of 
industry in GVA is above 20% in Centro and Norte, 
exceeding  the  EU  average.  Even  in  these  regions, 
productivity in industry is still among the lowest in 
the  EU.  In  Alentejo,  agriculture  accounts  for  12% 
of  GVA,  which  is  the  highest  contribution  among 

the Portuguese regions (358). The rising contribution 
of  accommodation  and  food  services  to  regional 
GVA  -  especially  in  the  Algarve,  the  Azores,  and 
Madeira  -  reflects  an  increasing  reliance  on 
tourism (359). 

(358) INE Statistics Portugal, Regional Economic Accounts. 

(359) INE Statistics Portugal, Regional Economic Accounts, Annual 

Regional Statistics, Integrated Business Accounts. 

129 

Main development trendsLess developed regions (population 7.8 million) Less developed regions in Portugal are characterised by  productivity far below the EU average.  Some regions have been converging with the EU average in terms of GDP per head (in PPS), supported by productivity growth. Norte and Centro, in particular, form a large part of the country’s industrial backbone, which presents both growth opportunities and challenges for the green industrial transition. However, in Oeste e Vale do Tejo the productivity growth has not resulted in improvements in GDP per head.  In other less developed regions, such as  Península de Setúbal, Alentejo and the Azores, productivity growth has stagnated over the last decade.Transition regions (population 741 000)In 2021-2023, the Algarve and Madeira had an average GDP per head (in PPS) greater than 75% of the EU average but less than 100%. They have experienced solid growth in GDP per head (in PPS), exceeding the EU average. Both regions are heavily dependent on tourism, which suffered during the COVID-19 pandemic. In 2020, they recorded the sharpest declines in GDP per head of anywhere in Portugal. Since 2021, they have rebounded the most, driven by growth in tourism and related services. However, these two regions have shown different patterns of productivity growth over the past decade. Productivity in absolute terms remains far below the EU average in Madeira, but Madeira’s productivity growth rates have been above EU average in the past 10 years, while productivity growth has largely stagnated in the Algarve. This difference can be attributed mainly to Madeira’s smaller seasonal difference in tourism numbers, offering more even tourist flows throughout the year, as well as its more explicit efforts to diversify economic More developed regions (population 2.1 million)The average growth in GDP per capita (in PPS) in Lisbon has kept pace with the EU average over the past decade, but fluctuations in this growth rate point to an economy increasingly dependent on sectors with volatile demand such as tourism. Although productivity is higher in Lisbon than elsewhere in Portugal, it is still only 78% of the EU average. Furthermore,  productivity growth in Lisbon has decreased over the past decade, suggesting a development trap. This is the case even though R&D investment in Lisbon is close to the EU average and the region hosts a relatively high concentration (compared with both the national and EU averages) of workers in high-tech and knowledge-intensive sectors. Specific territoriesThe continued concentration of economic activity in coastal regions presents challenges across Portugal. Low-density areas and non-coastal regions face the challenges of population loss and ageing populations. This translates into a loss of economic dynamism and difficulties in ensuring adequate access to basic services, problems which are particularly acute in remote rural areas.   Coastal areas, especially around larger urban areas experience challenges such as increased demand for public services, pressure in the housing sector, and congestion.  The outermost regions of Madeira and the Azores have specific challenges related to insularity, which affect access to services there. They also have: (i) rates of poverty and social exclusion above EU and national averages; (ii) difficulties in integrating young people into the labour market; and (iii) challenges related to early school leaving and the outmigration of young people. Support for Portugal’s outermost regions – like support for all of the EU’s outermost regions – needs to be sufficient to continue to take into account the structural social and economic situation of outermost regions compounded by their remoteness,  insularity, small size, difficult topography and climate, and economic dependence on a few products.National cohesion aspects Transport connectivity in Portugal is largely dependent on road transport and individual cars, even in urban areas, which indicates scope – and a need – for more sustainable mobility.  For rail to constitute a viable alternative to road transport,  urban/suburban and inter-regional connectivity as well as cross-border rail linkages between Portugal and Spain need to be improved. There have been positive developments in terms of water access, the quality of water supply and wastewater drainage. However, water leakage from supply systems remains widespread, and there are significant disparities in water prices across municipalities. Furthermore, water scarcity affects sectors such as agriculture, industry, and tourism across different regions necessitating changes to the way that water is managed. 
 
 
   
 
Graph A18.1: Labour productivity growth (2013-
2023) and labour productivity (2023), Portugal 
(NUTS 2 regions) 

Source: Commission calculations based on JRC data 

Key challenges for regional 
competitiveness 

increase 

Portugal  has  seen  an 
in  R&D 
investment,  driven  particularly  by  growth  in 
business  R&D  expenditure,  but  this  growth 
remains  concentrated  in  a  few  regions.  R&D 
expenditure increased from around 1.3% of GDP in 
2014 to 1.7% in 2024. In 2023, gross expenditure 
on  R&D  (GERD)  in  Norte,  Centro  and  the  capital 
region accounted for approximately 2% of regional 
GDP,  a  level  comparable  with  the  EU  average. 
These  were  the  only  regions  in  Portugal  where 
business  enterprise  expenditure  on  R&D  (BERD) 
exceeded  1%  of  GDP,  although  even  Norte  and 
Centro  are  still  below  the  EU  average  on  this 
metric (see Table A18.2 and also Annex 4).  

in 

specific 

Investments 
technological 
domains  foster  development  and  increase 
the  value  added  of  some  key  industrial  and 
economic  clusters,  particularly  in  the  less 
developed  regions  of  Norte  and  Centro.  In 
2023, the highest GERD in Portugal was recorded 
in production and industrial technologies, followed 
by  health,  transport  and  telecommunications  (360). 
These  R&D  domains  are  closely  linked  to  the 

focuses 

(Norte,  with 

‘competitive clusters’ – a network of economic and 
industrial  clusters  recognised  by  Portugal  and 
considered  essential  for  competitiveness  and  the 
national  economy.  In  particular,  the  high  level  of 
GERD was due to clusters such as: (i) PRODUTECH 
on  manufacturing 
(Norte),  which 
technologies;  (ii)  engineering  and  tooling  (Centro); 
and  (iii)  textiles  (Norte).  Other  examples  of  key 
clusters  span  across  other  sectors,  such  as:  (i) 
innovative  bio-tech  and 
health 
pharmaceutical  companies  also  located  in  Centro 
and the capital region); (ii) automotive (Norte); (iii) 
batteries  (Norte);  (iv)  railways  (Norte);  and  (v)  ICT 
(Norte,  Centro,  and  the  capital  region).  Defence 
and  security  R&D  expenditure 
in  Portugal 
increased  by  29%  in  the  period  2020-2023, 
reaching  EUR  485  million  in  2023  (361),  with  a 
strong  connection  to  the  ‘AED’  cluster  covering 
aeronautics,  space  and  defence  (Alentejo,  the 
capital  region,  Centro,  and  Norte).  However, 
Portugal’s innovation capacities are not being fully 
exploited  to  drive  industrial  modernisation  and 
economic transformation. The strategic framework 
for  innovation  is  not  sufficiently  developed  to 
support key industrial value chains and strengthen 
regional 
smart 
specialisation.  

competitiveness 

through 

remained  very 

in  R&D  and  other 

Both  cooperation  –  and  the  mobility  of 
researchers  –  between  academia  and 
industry  remains  low  in  regions  with  high 
concentration of enterprises such as Norte. In 
2020-2022, 
the  proportion  of  Portuguese 
enterprises  cooperating  with  other  enterprises  or 
organisations 
innovation 
low,  showing  only 
activities 
marginal changes compared with the period 2016-
2018  (362).  Cooperation  levels  were  below  the 
national  average  even  in  Norte,  which  has  the 
country’s highest concentration of enterprises and 
some  of  the  country’s  top  universities.  In  2023, 
despite  a  progressive  increase  over  the  previous 
10  years,  Portugal  continued  to  register  only 
modest  employment  of  researchers  in  enterprises 
(363),  even  in  the  capital  region  and  Norte,  which 
have the country’s highest rates of employment of 
researchers  in  enterprises.  This  weakness  persists 

(361) ANI - National Innovation Agency (2025), National Innovation 

Report 2024 – Security and Defence. 

(362) Community Innovation Survey - 2022. 

(360) DGEEC  -  Directorate-General  for  Education  and  Science 
Statistics (2025), Research and Development (R&D): Principal 
Indicators per Region - 2023.  

(363) DGEEC  -  Directorate-General  for  Education  and  Science 
Statistics (2025), Research and Development (R&D): Principal 
Indicators per Region - 2023. 

130 

0.70.11.40.70.60.5-0.2-0.4-0.7-0.7-0.810067736264596563606579EUPortugalRegião Autónoma da MadeiraOeste e Vale do TejoCentro (PT)NorteAlentejoAlgarveRegião Autónoma dos AçoresPenínsula de SetúbalGrande LisboaAverage annual growth2023 (%)Productivity in 2023GDP/hour, EU27 = 100 
     
 
 
despite  the  overall  increase  in  the  number  of 
researchers (364).  

in  2024,  highlighting 
renovations (367).  

the  need 

for  deep 

from 

rural 

Ageing  and  migration 
to 
metropolitan  areas  entail  challenges  for  the 
sustainability  of  public 
provision  and 
services,  especially  in  the  country’s  interior 
areas  (see  also  Annex  7).  In  Portugal,  the 
population  ageing  index,  measured  as  the  ratio 
between the population aged 65 and over and the 
population  14  and  under,  reached  192.4%  in 
2024,  up  from  188.1%  in  the  previous  year.  This 
phenomenon of ageing is especially acute in rural 
regions.  The  eastern  parts  of  the  Centro  region 
recorded  the  highest  ageing  ratio 
in  2024, 
followed by Alentejo (368). This index is particularly 
high  and  continues  to  grow  in  non-coastal  and 
low-density  areas. 
In  2015-2024,  population 
growth varied across the regions, with the Algarve 
and  the  capital  region  registering  the  fastest 
growth  rates.  Alentejo  experienced  the  largest 
population  decline  during  this  period.  Population 
decline  is  most  evident  in  the  inland  areas  of 
Norte, Alentejo, and Centro, whereas coastal areas 
are  experiencing  population  growth  (see  Map 
A18.2).  Immigration,  which  reached  historically 
high  levels  in  2024,  is  no  longer  concentrated 
exclusively in major metropolitan areas, but also in 
suburban  areas,  largely  driven  by  the  housing 
shortage  and  high  housing  costs  in  city  centres. 
Recent trends also highlight an increasing reliance 
on  foreign  labour  in  sectors  such  as  intensive 
agriculture,  tourism,  industry,  logistics,  and  care 
services. This foreign labour has helped to mitigate 
depopulation  and  demographic  ageing  in  the 
country’s interior areas (369).  

Despite  growth  in  exports  during  the  last 
decade,  mostly  driven  by  Norte,  goods  with 
higher value added, although increasing, still 
account  for  only  a  small  share  of  total 
exports, and imports are growing faster than 
exports.  In  2015-2025,  exports  of  goods  from 
Portugal  grew  significantly  from  approximately 
EUR 49.6 billion to EUR 79.3 billion. However, high-
technology  products  accounted  for  only  5.14%  of 
these exports. During the same period, the export-
to-import  ratio  declined 
indicating  that 
imports increased more rapidly than exports. 

(365), 

is  high 

in  Setúbal  while 
Unemployment 
Alentejo  suffers  from  labour  shortages.  The 
unemployment  rate in  2024  was  particularly  high 
in  Setúbal  (8%),  even  when  compared  with  other 
regions.  At  the  same  time,  Alentejo  faces  severe 
labour  shortages,  with  43%  more  vacancies  per 
unemployed  person  than  Portugal  as  a  whole.  In 
contrast,  the  Algarve  has  the  least  severe  labour 
fewer  vacancies  per 
shortages,  with  39% 
unemployed  person  than  the  Portuguese  average 
(366) (see also Annex 11). 

Poverty  is  a  significant  challenge  in  the 
outermost regions of Portugal. While the share 
of  the  population  at  risk  of  poverty  and  social 
exclusion  (AROPE  rate)  in  2024  was  lower  in 
Portugal than the EU average, it was 28.4% in the 
Azores,  making  this  one  of  the  regions  with  the 
highest AROPE rates in Europe. The risk of poverty 
or  social  exclusion  is  greater in  rural  areas  (24%) 
than 
(18%),  underscoring 
geographical disparities. Energy poverty levels are 
significantly  higher  than  the  EU  average  in  most 
regions of Portugal, and are especially high in the 
outermost  regions  and  in  Norte  (see  Table  A18.2 
and  Annex  12),  while  only  27%  of  residences  in 
Portugal  achieved  energy  efficient  ratings  of  A-B 

in  urban  areas 

(364) DGEEC  -  Directorate-General  for  Education  and  Science 
Statistics  (2025),  Survey  of  the  National  Scientific  and 
Technological  Potential  (IPCTA)  Research  and  Development, 
Expenditure and Human Resources.  

(365) INE Statistics Portugal. 

(366) OECD (2024), Job Creation and Local Economic Development 

2024 – Country Notes: Portugal. 

(367) National Observatory on Energy Poverty - ONPE-P / Energy 

Agency – ADENE. 

(368) INE Statistics Portugal, Ageing Index (Number) by Place of 

Residence (NUTS – 2024); Annual.  

(369) Observatory of Migration (2026), Foreign Resident Population 
in  Portugal  (2024):  Implications  for  Territorial  Cohesion, 
Public  Policies,  and  Migration  Governance,  Observatory  of 
Migrations, Lisbon. 

131 

 
 
 
Map A18.2:  Average annual population change at 
NUTS 3 level (2015-2024) 

Source: Eurostat and JRC 

Population  dynamics  create  challenges  for 
accessibility to  healthcare, mostly in  remote 
rural  areas  and  in  Portugal’s  outermost 
regions. In remote rural areas, providing adequate 
public  transport  coverage  and  connections  to  the 
nearest  urban  centres  is  very  challenging.  Travel 
times to healthcare facilities in rural areas in all of 
Portugal’s regions are longer than the average for 
the  EU’s  other  rural  areas.  This  is  a  major 
challenge  for  both  the  most  remote  rural  areas 
and  the  outermost  regions.  There  are  also 
significant  regional  disparities  in  the  number  of 
licensed medical  doctors, with the highest density 
in  the  capital  region  (over  8  per  1 000  people) 
where there is still significant pressure due to high 
demand,  and  much  lower  levels  in  Alentejo  (3.6 
per 1 000 people) (370) (see also Annex 15).  

Portugal’s  regions  are  facing  different 
challenges  in  providing  education  linked  to 
their 
recent  demographic  changes  and 
specific 
In 
socio-economic 
metropolitan areas, rising populations are straining 
school  capacity  and  require  greater  efforts  from 
the  education  system  to  integrate  students  of 
different migrant backgrounds. In contrast, regions 
facing  accelerated  depopulation  struggle  with 
declining  enrolment  and  the  potential  closure  of 

features. 

schools,  while  certain 
territories 
face 
experiencing 
increasing  pressure  to  expand  their  education 
capacity. 

immigration 

low-density 

significant 

face  significant  challenges 

Alentejo, the Algarve and the two outermost 
regions 
in 
education  and  training.  Inequalities  in  tertiary 
education  attainment  are  most  acute  in  Alentejo, 
the  Algarve,  the  outermost  regions,  and  Oeste  e 
Vale  do  Tejo  where  levels  are  low  (see  Table 
A18.2).  These  differences  are  in  part  associated 
with  the  students’  socio-economic  conditions.  In 
2024, adult participation in education and training 
(in the preceding four weeks) also differed across 
the country’s regions, with the highest level in the 
capital  region  (25.9%),  and  the  lowest  in  the 
autonomous  outermost  regions  of  the  Azores 
(14.1%), Madeira (16.8%) and Alentejo (19.1%). In 
addition,  there  are  significant  regional  disparities 
in  the  rate  of  early  leaving  from  education  and 
training (see also Annex 13). These weaknesses in 
human  capital  and  skills  pose  risks  to  the  long-
term  growth  prospects  of  those  regions  and  their 
ability  to  further  converge  with  Portugal’s  best-
performing regions. 

Housing  affordability  is  a  particularly  acute 
problem  in  Lisbon  and  the  Algarve.  In  2024, 
the housing cost overburden(371) reached 10.5% in 
Lisbon  and  8.3%  in  the  Algarve.  Alentejo  and  the 
Azores  had  the  lowest  values  at  3.9%  and  4.6%, 
against  a  national  average  of  6.9%  (372).  In 
addition,  house  purchase  capacity,  measured  as 
the number of square metres that can be financed 
via  a  mortgage  using  one  third  of  disposable 
income,  varies  between  more  than  70 m2  in 
certain  interior  regions  of  Centro  and  Alentejo,  to 
23 m2  in  Madeira  and  around  30 m2  in  Porto, 
Lisbon, coastal Alentejo and the Algarve (see Map 
A18.3).  Low  housing  affordability  is  a  major 
obstacle to labour mobility within the country and 
the  regions.  It  also  undermines  the  purchasing 
power  of  the  population,  which  is  a  risk  for  the 
economic growth and development of the regions 
concerned (see also Annex 16). 

(371) This measures the percentage of residents who spent more 
than  40%  of  their  disposable  income  on  housing.  The 
overburden  rate  should  be  read  together  with  the  tenure 
structure  (homeowner,  tenants),  that  may  differ  across 
country and regions. 

(372) IHRU  (2025),  Territories  in  Portugal  with  a  shortage  of  –  or 

(370) INE Statistics Portugal (2025), Statistics of Health – 2023. 

inadequate – housing supply. 

132 

 
 
 
 
 
 
Map A18.3:  House purchase capacity relative to 
income (2024) 

transport connections to both reduce the pressure 
on house prices in urban centres and increase the 
attractiveness  of  other  territories.  However,  most 
railway  investments  in  Portugal  in  recent  years 
have encountered various problems, delaying their 
completion.  In  addition,  in  the  metropolitan  areas 
of  Lisbon  and  Porto,  where  house  prices  are  the 
highest 
in  the  country,  urban  and  suburban 
mobility  and  accessibility  remains  a  significant 
challenge as well.  

leading 

The  southern  regions  of  Portugal  face 
in  relation  to  water 
serious  problems 
management  and  resources,  while  coastal 
erosion  is  a  threat  to  coastal  population 
centres,  and  wild-fire  vulnerability  affects 
mostly Norte and Centro. Both the Algarve and 
Alentejo  regions  are  already  affected  by  severe 
water  scarcity, 
to  overdrawing  of 
groundwater  resources,  a  situation  that  requires 
the adaptation of agriculture, industry and tourism. 
The  current  uptake  of  recycled  water  reuse 
remains  modest.  This  means  that  there  are  still 
significant  challenges  in  ensuring  water  recycling 
and  reuse,  especially  in  water-scarce  regions.  At 
the same time, high levels of water leakage (376) - 
caused  by  ageing  infrastructure  -  and  significant 
the  price  of  water  between 
disparities 
municipalities  continue  to  hinder  efficient  and 
equitable water management (see also Annex 10). 
Moreover,  wild-fire  vulnerability 
is  a  growing 
source of concern, especially for Norte and Centro 
(377).  All  Portuguese  regions  experience  coastal 
erosion to varying degrees, with a particular threat 
to large population centres on the coast.  

in 

The  ‘blue  economy’  accounts  for  a  relevant 
share of the economy and employment in the 
regions  of  Portugal.  In  2022,  Portugal's  ‘blue 
economy’ accounted for 3.7% of the national GDP 
and  6.3%  of  employment,  dominated  by  coastal 
tourism  and  marine 
resources,  which 
respectively  account  for  70%  and  21%  of 
Portugal’s  blue  economy  GVA,  and  73%  and  23% 
of  its  blue  economy  jobs.  The  continental  shelves 
off  Norte,  Centro,  Oeste  e  Vale  do  Tejo,  and 

living 

(i) Square metres that can be bought via mortgage using 1/3 
of median disposable income in 2024 by NUTS 3 region. (ii) 
Disposable income is an estimate taken from Mikou et al. 
(2024). 
Source: ESPON-H4ALL 

challenges  vary 

Transport 
significantly 
across  the  regions.  The  population  in  rural  and 
more  dispersed  areas  of  Portugal  is  largely  car 
dependent. Private cars  also remain the preferred 
mode  of  transport  in  the  urban  areas  of  Lisbon 
and Porto (373), which face significant challenges in 
air quality and traffic congestion. In 2025,Portugal 
received  a  Country-specific  recommendation,  to 
invest  in  sustainable  transport,  particularly  in  rail, 
taking 
into  account  regional  disparities.  Rail 
connectivity  (374)  is  particularly  low  in  Centro  and 
Alentejo. 
is 
gradually  promoting  better  and  more  sustainable 
public transport. However, urban low-emission and 
limited-traffic  zones  are  either  non-existent  or 
inadequately enforced. The outermost regions face 
additional challenges due to their insularity and, in 
the  case  of 
the  archipelago’s 
In  addition,  Portugal  was 
geography 
efficient  public 
recommended 

In  metropolitan  areas,  Portugal 

to  promote 

the  Azores, 

(375). 

(373) INE Statistics Portugal (2023), What does the census tell us 

about territorial dynamics. 

(374) Measured by the average share of people within a 120 km 

radius that can be reached within 1h30 by rail. 

(375) OECD  (2025),  Preparing  for  Demographic  Change  in  the 

Azores, Portugal. 

(376) ERSAR - Regulatory Authority for Water and Waste Services 
(2025),  Annual  Report  on  Water  and  Waste  Services  in 
Portugal – 2024, Volume 1  – Characterisation of the Water 
and Waste Sector. 

(377) National  Roadmap  for  Adaptation  2100  -  Portuguese 
Territorial  Climate  Change  Vulnerability  Assessment  for  the 
XXI Century (RNA 2100). 

133 

 
 
 
 
 
 
framework. 

governance 

Health  Service  (SNS).  The  programme  contracts 
between  the  Portuguese  government  and  each  of 
the  CCDRs  represent  a  new  tool  in  Portugal’s 
multi-level 
These 
frameworks  enable  both:  (i)  the  monitoring  of 
reform  implementation  and  associated  outcomes; 
and (ii) assessments of the regions’ contribution to 
the  country’s  development  and  cohesion  goals 
(378).  Both  CCDRs  and  municipalities 
face 
challenges in implementation and in fulfilling their 
new  devolved  responsibilities,  in  part  due  to 
efficiency  and  capacity  limitations  as  well  as 
insufficient funding. The CCDR leadership elections 
are  now  largely  complete,  but  the  new  expanded 
mandate  and  its  dual  accountability  structure  are 
still  finding  their  footing,  with  a  number  of 
governance questions yet to be resolved.  

shortages 

skilled-labour 

Alentejo  hold  untapped  potential  for  floating 
offshore wind and wave energy. At the same time, 
these  areas  are  important  for  fishing,  cultural 
heritage,  and  biodiversity.  Shipbuilding  in  Centro, 
Norte,  Greater  Lisbon,  and  Península  de  Setúbal 
low 
and 
faces 
productivity.  The  Algarve, 
reliant  on  coastal 
tourism  with  its  dense  network  of  marinas  and 
fishing  ports,  grapples  with  seasonality,  drought, 
and  climate  risks.  The  Azores  and  Madeira  are 
even  more  dependent  on  the  blue  economy  in 
relative  terms  (e.g.  16.6%  of  the  Azores'  regional 
GDP comes from blue-economy activities), making 
them  vulnerable  to  climate  and  ocean  risks  and 
insularity costs.  

Greenhouse 

challenges. 

in 
Greenhouse  gas  emissions  per  head 
Portugal  are  below  the  EU  average  and 
continue  to  fall,  but  there  are  specific 
territorial 
gas 
emissions  from  various  sources  are  a  challenge 
for  Portugal.  These  sources  include:  (i)  energy 
production (along the coastal line north of Lisbon); 
(ii)  transport (around  major  urban  agglomerations 
such  as  Lisbon  and  Porto);  (iii)  specific  industrial 
processes  (particularly  in  the  Norte,  Centro,  and 
Oeste  e  Vale  do  Tejo  regions);  (iv)  agriculture 
(mainly 
(v)  housing.  There 
for 
remains 
renewable  energy  generation  across  Portugal’s 
regions, including in the outermost regions.  

significant  untapped  potential 

in  Alentejo);  and 

to 

of 

decentralisation 

central 
The 
administration  reform 
is  underway.  The 
ongoing  process  of  Portugal’s  decentralisation 
reform was initiated in December 2022. As part of 
this  decentralisation,  Portugal  took  a  decision  to 
devolve  some  of  the  services  of  the  central 
administration 
the  five  Commissions  for 
Coordination  and  Regional  Development  (CCDRs), 
which  in  2023  acquired  the  status  of  public 
institutes.  This  status  gave  the  CCDRs 
legal 
personality,  while  maintaining  their  administrative 
and financial autonomy. The CCDRs assumed new 
responsibilities  in  six  sectoral  areas  (agriculture 
and  fisheries,  culture, 
the  economy,  spatial 
planning,  nature  conservation  and  education)  out 
of  the  nine  initially  identified  in  2022,  which  also 
included 
and 
infrastructure.  Following  the  recent  amendments 
to the CCDRs Organic Law in 2025, in the field of 
health  the  CCDRs  have  been  assigned  an  active 
role in regional public health planning, the planning 
of  health  infrastructure  and  equipment,  and  in 
coordinating  regional  policies  with  the  National 

vocational 

training, 

health, 

(378) Contractualisation  between  levels  of  government:  Capacity 

building, monitoring and evaluation in Portugal | OECD 

134 

 
 
Table A18.2:Key regional indicators (at NUTS 2 level) for Portugal 

Dark green - the indicator is 120% or more of the EU average. 
Light green - the indicator is 100% or more, but less than 120% of the EU average. 
Yellow - the indicator is 90% or more, but less than 100% of the EU average.  
Light red – the indicator is 75% or more, but less than 90% of the EU average. 
Dark red – the indicator is below 75% of the EU average.   
This colour scale applies to ‘positive’ indicators, where higher values are favourable. 
For ‘negative’ indicators (where higher values are unfavourable), the colours are reversed. 
Source: Eurostat and JRC 

135 

GDP per head (PPS, index)Real GDP per head growthProductivity: GDP (PPS) per hour worked (index)Real productivity growth (per hour worked)Population aged 25-34 with high educational attainmentAt-risk-of-poverty or social exclusion rate (AROPE)Energy povertyR&D expenditureR&D expenditure in business enterprise sector (BERD)Access to healthcare - Rural areasEU27=100Average annual % changeEU27=100Average annual % change% of population aged 25-34% of population% of total population% of GDP% of GDPPopulation within 10 minutes by car from nearest hospital  (%)20242014-202420232013-2023202520252025202420232023EU1001.4100.00.744.821.09.22.241.51+Portugal821.966.60.142.518.615.61.731.0612.4Norte712.059.50.541.318.717.32.021.3016.4Algarve892.763.2-0.432.417.110.60.440.1913.8Centro (PT)711.863.90.646.419.914.22.051.1211.0Grande Lisboa1291.679.5-0.849.016.013.92.171.310.3Península de Setúbal551.665.2-0.741.018.914.10.900.561.4Alentejo772.064.8-0.234.519.77.80.820.4810.1Oeste e Vale do Tejo651.362.40.740.720.420.60.870.7314.3Região Autónoma dos Açores731.759.7-0.726.621.621.40.410.123.4Região Autónoma da Madeira882.973.31.437.820.519.70.410.270.0  
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ANNEX 19: TRANSPORT 

This  Transport  Annex  presents  the  state  of  play 
and  the  challenges  Portugal  faces  with  the 
implementation  of  the  trans-European  transport 
network  (TEN-T),  the  European  railway  traffic 
management  system  (ERTMS),  road  safety  and 
the roll-out of sustainable aviation fuels (SAF). 

Portugal is crossed by the Atlantic European 
transport  corridor.  The  TEN-T  network 
in 
Portugal  comprises  3 216 km  of  rail  (of  which 
1 443 km are on the core network) and 2 960 km 
of road (of 946 are on the core network). Portugal 
has  311 km  of  inland  waterways,  17  airports 
(including  two  core  airports),  18  ports  (including 
three core ports) and 13 urban nodes. 

Portugal  is  developing  its  high-speed  rail 
network  using  the  Iberian  railway  track 
gauge  of  1  668  mm.  At  this  stage,  Portugal 
considers  a  migration  to  the  European  standard 
gauge of 1 435 mm only by 2040. 

and 

to  modernising 

The  ERTMS  is  essential  to  digitalising  the 
railways 
and 
harmonising 
railway  operations  across 
Europe.  The  ERTMS  ensures  the  safety  of  rail 
networks by providing a unified signalling system 
that  significantly  reduces  the  risk  of  accidents.  It 
also  provides  interoperability  between  national 
train 
rail 
movements. Finally, the ERTMS enhances network 
capacity and operational efficiency, increasing the 
competitiveness of the rail sector. 

cross-border 

improving 

systems, 

ERTMS  was  not  operational  on 
the 
Portuguese TEN-T rail network by the end of 
2024. To meet its national plan’s ERTMS roll-out 
target  by  2035,  Portugal  aims  to  deploy  ERTMS 
on a length of 1 501 km, for an estimated cost of 
EUR  360  million.  A  priority  for  Portugal  is  the 
completion  of  the  Porto-Lisbon  TEN-T  corridor 
(completion of Phases 1 and 2 expected in 2032–
2033).  This  corridor  will  form  the  backbone  of 
Portugal’s entire high-speed rail network.  

The network will be further extended by two 
key  cross-border  connections:  Porto-Vigo  and 
Lisbon-Madrid  (currently  planned  for  2034).  The 
Lisbon-Madrid  link  is  particularly  strategic,  as  it 
connects the two capitals of the Iberian peninsula 
and offers a competitive rail alternative of around 
three  hours  to  the  current  average  of  40  daily 
flights.  The  Porto-Vigo  high-speed  line,  although 

part of the extended core network, is a priority for 
Portugal and northern Spain as it serves the most 
densely  populated  cross-border  axis,  with  a  total 
population across both sides of the border that is 
close to seven million people.  

through 

Another critical step is the reinforcement of 
rail  connectivity  between  Sines,  Portugal’s 
leading  port,  and  Spain 
the 
modernisation and capacity increases of the 
exiting  railway  line.  The  country  has  recently 
started  to  implement  major  rail  projects  through 
public-private 
the 
partnerships, 
responsibility  for  the  timely  implementation  of 
projects  to  the  concessionaire.  Given  that  so  far 
only  a  small  number  of  projects  has  been 
launched under the new framework, it is too early 
to draw conclusions on whether it had the desired 
effect of accelerating project implementation.  

shifting 

in 

the 

staff 

safety 

railway 

limited  scale  of 

Portugal  faces  delays  in  authorising  newly 
built  or  upgraded  railway  lines  for  ERTMS 
and  high-speed  rail.  This  is  due  to  several 
factors  such  as 
the 
Portuguese  railway  market,  the  shortage  of 
and 
qualified 
interoperability,  and  the  lack  of  high-speed  rail 
rolling stock. These delays are a source of concern 
given the  high-speed  rail  programme  of  Portugal 
planned  for  the  next  15  years,  that  will  also  be 
equipped  with  ERTMS.  As  of  today,  two  lines  are 
concerned:  the  modernised  Beira  Alta  line  where 
the  ERTMS  is  not  authorised  and  the  new  high-
line  Evora-Elvas  which  would  require 
speed 
Spanish  high-speed  rail  rolling  stock,  equipped 
with ERTMS, to enable its authorisation.   

The  capacity  and  capabilities  of  Portuguese 
authorities and bodies to ensure testing and 
authorisation  of  ERTMS 
is  a  concern. 
Moreover, Portugal would benefit by continuing to 
the  National  Safety  Authority’s 
strengthen 
operating  conditions,  as  it  still  faces  challenges 
related  to  its  autonomy,  the  effectiveness  of 
supervision,  and  the  proper  functioning  of  key 
processes  such  as  vehicle  and  fixed  installation 
authorisations. Portugal is drawing up its roadmap 
for the transition to adopt the European standard 
railway  gauge.  The  assessment  shall  include  a 
socio-economic  cost-benefit  analysis  on 
the 
viability of the possible migration to the European 
standard  nominal  track  gauge  of  1 435  mm and 
an assessment of the impact on interoperability.  

136 

 
 
 
Table A19.1:ERTMS deployment in Portugal. 

Source: Based on ERTMS – Third work plan of the European Coordinator Matthias Ruete. 

Map A19.1:  TEN-T cross-border & national priority sections in Portugal. 

Road  crashes  impose  an  enormous  social, 
economic  and  health  burden  on  the  EU 
economy.  The  external  socio-economic  costs  of 
fatal,  serious  and  minor  injuries  have  remained 
persistently  high  despite  the  progress  made  in 
reducing  crash  frequency  and  severity.  These 
innovation, 
resources 

could  otherwise 

fuel 

education,  healthcare  and  other  crucial  public 
investments (379).  

2024, 

Portugal  was substantially 
In 
above the  EU  average  (45)  with  58  road 
fatalities  per  million  inhabitants.  Compared 
to the EU average, the distribution of fatalities in 
Portugal  shows  a relatively  high proportion  of 
fatalities  among  riders  of  powered  two  wheelers 

(379) Report on the implementation of the EU Road Safety Policy 

framework at the Mid-Point, COM(2026) 77 final. 

137 

 
 
 
 
 
 
 
 
 
 
 
(PTWs)  and  on  urban  roads.  Portugal  is  currently 
not  on  track  to  meet  the  2030  targets.  Progress 
is arguably hampered by the fact that the national 
strategy  has  not  been  formally  approved  since 
2022. Approval of the strategy would be an major 
step forward (380).    

Graph A19.1: Portugal's road fatalities per million, 
2024 

Source: Report at the Mid-Point - Portugal, SWD(2026) 54 
final. 

SAF 

reach 

are still no 

in 
Portugal  has  taken  active  measures 
shaping  national  production of  sustainable 
aviation  fuels  (SAF),  launching tenders  for 
domestic  SAF  production  in  2025. However, 
production 
active 
there 
facilities, with projects  under  development  failing 
Investment  Decision (381). 
to 
Investment  is  needed  to  secure  and  de-risk 
projects.  Portugal  could participate in  double-
sided  auction  mechanisms projects  as  part  of  its 
contribution to the eSAF Early Movers Coalition, as 
well  as  ensure  EU  ETS  and  ReFuelEU  Aviation 
penalty revenues are directed towards supporting 
the deployment of SAF. 

Final 

(380) More details in Report on the implementation of the EU 

Road Safety Policy framework at the Mid-Point – Portugal, 
SWD(2026) 54 final. 

(381) EASA ReFuelEU Aviation Technical Report (2025). 

138