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Economic Overview

For the latest updates on the key economic responses from governments to address the economic impact of the COVID-19 pandemic, please consult the IMF's policy tracking platform Policy Responses to COVID-19.

After achieving several years of sustained growth, economic output in Portugal fell sharply following the outbreak of the COVID-19 pandemic. Nevertheless, the country’s economy rebounded by an estimated 4.4% in 2021, as the gradual relaxation of pandemic-related restrictions pushed up consumer demand and employment. While tourism (accounting for around 15% of GDP) remained significantly below pre-pandemic levels with regards to international arrivals, domestic tourism performed particularly well, reaching historical highs in the summer. The implementation of the European Recovery and Resilience Plan is expected to support the economy over the forecast horizon, with the IMF forecasting a growth of 5.1% of GDP this year, followed by 2.5% in 2023. Growth will also be backed by an improvement in the current-account balance, although risks remain related to the evolution of the pandemic and to global supply constraints that could hinder industrial activity.

The Portuguese government had managed to gradually reduce its budget deficit in recent years, reaching positive territory. This trend was reversed by the impact of COVID-19, as the budget deficit stood at 1.6% of GDP in 2021, when continued growth in government expenditure in response to the crisis, higher spending on subsidies and social benefits, and the expansion of the public wage bill were only partially offset by an increase in government revenues and the intake of EU funds. Underpinned by the economic recovery, the deficit should float around 1.3% of GDP over the forecast horizon. After its peak at 135.2% in 2020, the general government debt-to-GDP ratio started a downward trajectory in 2021 (130.8%), driven by a favourable growth interest rate differential and a rebound in GDP. It is projected to moderate further to 125.7% in 2022, and to 122.8% in 2023. After stagnating for several years, inflation picked up to 1.2% in 2021 amid rising global energy prices. The IMF expects the rate to further accelerate to 1.3% this year and 1.4% in 2023.

The impact of the sanitary crisis on unemployment was partly offset by temporary forms of support granted by the government, which benefited around 750,000 employees or nearly 15% of the labour force. Hence, the unemployment rate increased only moderately, reaching an estimated 6.9% in 2021 from a pre-pandemic level of 6.6%. The rate is forecast to decline only marginally due to higher labour force participation rates and a gradual recovery in labour productivity, at 6.7% in 2022 and 6.3% the following year (IMF). Overall, Portuguese GDP per capita (PPP) is estimated at USD 36,079 in 2021 (IMF), still 23% below the EU’s average.

 
Main Indicators 20202021 (e)2022 (e)2023 (e)2024 (e)
GDP (billions USD) 228.36250.06255.85261.17275.89
GDP (Constant Prices, Annual % Change) -8.44.96.20.72.4
GDP per Capita (USD) 2224242526
General Government Balance (in % of GDP) -0.9-0.6-0.7-1.0-1.0
General Government Gross Debt (in % of GDP) 135.2127.4114.7111.2106.7
Inflation Rate (%) -0.10.97.94.72.6
Unemployment Rate (% of the Labour Force) 7.16.66.16.56.4
Current Account (billions USD) -2.38-2.97-2.88-0.97-1.72
Current Account (in % of GDP) -1.0-1.2-1.1-0.4-0.6

Source: IMF – World Economic Outlook Database , October 2021

Note: (e) Estimated Data

Country Risk

See the country risk analysis provided by La Coface.

 

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Main Sectors of Industry

The agricultural sector comprises around 2.1% of Portugal’s GDP and employs 5.5% of the active population (from 10.8% a decade ago - World Bank, latest data available). The main crops produced include cereals, fruits, vegetables and wine (Portugal is the ninth-largest wine exporter in the world). Mining, specifically copper and tin, represents a good part of the country’s GDP, with Portugal being one of the largest marble exporters. The forests of Portugal provide a large part of the world's supply of cork. According to the latest estimate from the National Statistics Institute, in 2021 the income from agricultural activity per annual work unit grew 11.1%, as a result of the expected increases for gross value added (+9%) and for other subsidies on production (+9.7%), after a stagnation in 2020 (-0.1%).

The industrial sector employs 24.7% of the workforce and contributes to 19.4% of Portugal’s GDP. The manufacturing industry is modern and dominated by small and medium-sized companies. Its main sectors of activity are metallurgy, machinery, electrical and electronics industries, mechanical engineering, textiles and construction. According to data by the World Bank, the manufacturing sector alone contributes 11.9% of GDP. Portugal has increased its role in the European automobile sector and has an excellent mould manufacturing industry. Biotechnologies and IT are also growing.

The services sector comprises 65.7% of GDP and employs nearly 69.8% of the active population. Tourism, in particular, plays an important and rapidly increasing role in the Portuguese economy. Before the pandemic, it accounted for nearly 15% of GDP. However, the last couple of years have seen numbers decreasing following the global Covid-19 crisis: the latest data from the National Statistics Institute shows that overnight stays recorded in the first eleven months of 2021 increased by 40.4% compared to 2020 (+36.0% for residents and +45.3% for non-residents); however, when compared to the same period in 2019, overnight stays decreased by 47.7% (-10.8% for residents and -63.3% for non-residents). The Portuguese banking sector improved its liquidity and solvency in recent years, playing a critical role in supporting the economy’s financing and liquidity needs. It comprises 145 institutions: 60 banks, 82 mutual agricultural credit banks and 3 savings banks, with the five largest banks accounting for 77% of total assets (European Banking Federation).

 
Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 5.5 24.7 69.8
Value Added (in % of GDP) 2.0 19.2 66.1
Value Added (Annual % Change) -9.0 -5.5 -6.6

Source: World Bank - Latest available data.

 
Monetary Indicators 20162017201820192020
Euro (EUR) - Average Annual Exchange Rate For 1 USD 0.940.890.850.900.88

Source: World Bank - Latest available data.

 

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Foreign Trade

Portugal's economy is open to foreign trade, which represents 75.4% of its GDP (World Bank, latest data available). While the country has traditionally exported agricultural products, textiles and clothing, it has begun to export an increasing amount of technological equipment. In 2020, the country mainly exported motor vehicles and their parts, petroleum oils, and footwear; importing chiefly the same category of products (petroleum oils, motor vehicles and their parts), medicaments and petroleum gas.

Data from Statistics Portugal (INE) shows that in 2020 the main trading partners were Spain (25.4% of total exports), France (13.6%), Germany (11.9%) and the UK (5.7%). Exports to the United Kingdom, the main destination outside the EU, fell by 15.6%. Portugal’s main suppliers were Spain (32.4%), Germany (13.3%), France (7.5%), and the Netherlands (5.5%). The main extra-EU supplier of goods to Portugal continued to be China, with imports from this partner increasing by 3.9% (4.5% of total imports). The largest deficits continued to be registered with Spain (EUR -8,453 million), Germany (EUR -2,709 million) and China (EUR -2,500 million).

The country has a structural trade balance deficit. In 2020, Portugal exported goods worth USD 61.5 billion (-8.2% year-on-year), with imports decreasing at a faster pace (-13.3, at USD 77.6 billion). However, Portugal is a net service exporter (USD 25.3 billion of exports against USD 15.6 billion of imports - data by WTO). The country’s overall balance of trade turned negative in 2020 (-2.1% of GDP) after seven consecutive years in positive territory. In the accumulated period January to October 2021, compared to the same period one year earlier, exports increased by 17.9% (+4.3% compared to the same period in 2019, before the pandemic) and imports rose by 18.1% (-0.8% vis-à-vis 2019 – data INE).

 
Foreign Trade Values 20162017201820192020
Imports of Goods (million USD) 67,56778,76389,06089,53877,600
Exports of Goods (million USD) 55,66262,13068,36167,06361,531
Imports of Services (million USD) 14,76916,35018,75619,81115,606
Exports of Services (million USD) 29,29733,95139,17139,31325,335

Source: World Trade Organisation (WTO) ; Latest available data

Foreign Trade Indicators 20162017201820192020
Foreign Trade (in % of GDP) 79.384.486.486.775.4
Trade Balance (million USD) -11,062-15,102-18,415-18,226-13,861
Trade Balance (Including Service) (million USD) 3,5603,3512,1681,719-4,031
Imports of Goods and Services (Annual % Change) 5.08.15.04.7-11.9
Exports of Goods and Services (Annual % Change) 4.48.44.13.9-18.6
Imports of Goods and Services (in % of GDP) 39.141.743.043.238.7
Exports of Goods and Services (in % of GDP) 40.242.743.443.536.7

Source: World Bank ; Latest available data

Foreign Trade Forecasts 2022 (e)2023 (e)2024 (e)2025 (e)2026 (e)
Volume of exports of goods and services (Annual % change) 7.71.72.72.72.7
Volume of imports of goods and services (Annual % change) 2.12.12.42.62.6

Source: IMF, World Economic Outlook ; Latest available data

Note: (e) Estimated Data

 
International Economic Cooperation
Portugal is a member of the following international economic organisations: IMF, European Union, ICC, WHO, OECD, Schengen Convention, European Economic Area, Latin American Integration Association (observer), among others. For the full list of economic and other international organisations in which participates Portugal click here. International organisation membership of Portugal is also outlined here.
Free Trade Agreements
The up-to-date list of Free Trade Agreements signed by Portugal can be consulted here.
 

Main Partner Countries

Main Customers
(% of Exports)
2021
Spain 26.7%
France 13.1%
Germany 11.0%
United States 5.6%
United Kingdom 5.2%
See More Countries 38.3%
Main Suppliers
(% of Imports)
2021
Spain 32.8%
Germany 12.4%
France 6.7%
Netherlands 5.3%
Italy 5.1%
See More Countries 37.6%

Source: Comtrade, Latest Available Data

 

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Political Outline

Current Political Leaders
President: Marcelo Rebelo de Sousa  (since 9 March 2016) - PSD
Prime Minister: António Luis Santos da Costa (since 24 November 2015) - PS
Next Election Dates
Presidential: January 2026
Legislative: January 2026
Current Political Context
Presidential elections were held on 24 January 2021. The incumbent president, Marcelo Rebelo de Sousa, was re-elected for a second term.
Prime Minister Antonio Costa and his Socialist Party have been leading a minority government in recent years, with Portugal also holding the presidency of the Council of the European Union in the first half of 2021, under the motto “Time to deliver: a fair, green and digital recovery”. Nevertheless, early elections were called after Costa’s Cabinet failed to win parliamentary approval for the 2022 budget.
The development of Portugal’s lithium deposits has been a new government focus in light of the fact that the country sits on an estimated 10% of overall lithium deposits in Europe, sparking (peaceful) protests from environmental groups.
Main Political Parties

The main political parties in Portugal include:

Executive Power
The President is the Head of State and the commander-in-chief of the army. He or she is elected by universal suffrage for a five year term. After a general election, the leader of the majority party or coalition is usually appointed to be Prime Minister by the President, for a four year term. The Prime Minister is the head of the Government and holds executive power, which includes implementing laws and overseeing the everyday running of the country. The Council of Ministers is appointed by the President on the recommendation of the Prime Minister. There is also a Council of State, which acts as an advisory body to the President.
Legislative Power
Portuguese legislative power is unicameral. The parliament, called the Assembly of the Republic, has 230 seats. The members are elected by universal suffrage for a four year term. The executive branch of government is directly or indirectly dependent on the support of Parliament, often expressed by a vote of confidence. The Prime Minister cannot dissolve the Assembly, but the President can do so and call for an early election. Portuguese citizens enjoy considerable political rights.
 

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COVID-19 Country Response

COVID-19 epidemic evolution
To find out about the latest status of the COVID-19 pandemic evolution and the most up-to-date statistics on the COVID-19 disease in Portugal, please visit the Portuguese government platform with the official data. Official information on the progress of the epidemic in Portugal is consolidated by the Directorate-General of Health (DGS).
For the international outlook you can consult the latest worldwide data in the daily situation reports published by the World Health Organisation as well as the global daily statistics on the coronavirus pandemic evolution including data on confirmed cases and deaths by country.
Sanitary measures
To find out about the latest public health situation in Portugal and the current sanitary measures in vigour, please consult the national government platform Portugal's Response to COVID-19 including the up-to-date information on the containment measures put in place and public health recommendations. Updates in English are available on the website of the US embassy in Portugal.
Travel restrictions
The COVID-19 situation, including the spread of new variants, evolves rapidly and differs from country to country. All travelers need to pay close attention to the conditions at their destination before traveling. Regularly updated information for all countries with regards to Covid-19 related travel restrictions in place including entry regulations, flight bans, test requirements and quarantine is available on TravelDoc Infopage.
It is also highly recommended to consult COVID-19 Travel Regulations Map provided and updated on the daily basis by IATA.
The US government website of Centers of Disease Control and Prevention provides COVID-19 Travel Recommendations by Destination.
The UK Foreign travel advice also provides travelling abroad advice for all countries, including the latest information on coronavirus, safety and security, entry requirements and travel warnings.
Import & export restrictions
For the information on all the measures applicable to movement of goods during the period of sanitary emergency due to the COVID-19 outbreak (including eventual restrictions on imports and exports, if applicable), please consult the site of the Portuguese Tax and Customs Authority (in Portuguese).
For a general overview of trade restrictions due to COVID-19 pandemic, please consult the section dedicated to Portugal on the International Trade Centre's COVID-19 Temporary Trade Measures webpage.
Economic recovery plan
For the information on the economic recovery scheme put in place by the Portuguese government to address the impact of the COVID-19 pandemic on the Portuguese economy, please visit the official government website of the economic response to Covid-19 (in Portuguese). The information on the Portuguese economic emergency plan is available here. Further details in English can be found on KPMG's website.
The information on the EU’s economic response to COVID-19 and the actions to minimise the fallout on the EU member states’ economies of the COVID-19 outbreak is available on the websites of the European Commission and the European Council.
For the general overview of the key economic policy responses to the COVID-19 outbreak (fiscal, monetary and macroeconomic) taken by the Portuguese government to limit the socio-economic impact of the COVID-19 pandemic, please consult the section dedicated to Portugal in the IMF’s Policy Tracker platform.
Support plan for businesses
For the information on the local business support scheme established by the Portuguese government to help small and medium-sized companies to deal with the economic impacts of the COVID-19 epidemic on their activity, please consult the dedicated section on the official platform of the Portuguese government (in Portuguese).
For a general overview of international SME support policy responses to the COVID-19 outbreak refer to the OECD's SME Covid-19 Policy Responses document.
Support plan for exporters
To find out about the support plan for exporters put in place by the Portuguese government, please consult the official website of Portugal's response to COVID-19 (in Portuguese).
 

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