Economic and Political Overview

flag Portugal Portugal: Economic and Political Overview

In this page: Economic Outline | Political Outline | COVID-19 Country Response


Economic Outline

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) -
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 (%) -
Unemployment Rate (% of the Labour Force)
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, Latest available data

Note: (e) Estimated Data


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.


Find more information about your business sector on our service Market Reports.

Indicator of Economic Freedom


The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.

World Rank:
Regional Rank:

Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation


Business environment ranking


The business rankings model measures the quality or attractiveness of the business environment in the 82 countries covered by The Economist Intelligence Unit’s Country Forecast reports. It examines ten separate criteria or categories, covering the political environment, the macroeconomic environment, market opportunities, policy towards free enterprise and competition, policy towards foreign investment, foreign trade and exchange controls, taxes, financing, the labour market and infrastructure.

World Rank:

Source: The Economist Intelligence Unit - Business Environment Rankings 2020-2024


Country Risk

See the country risk analysis provided by Coface.


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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:

Type of State
Portugal is a republic based on a parliamentary democracy. The constitution establishes a 'semi-presidential' regime for the country.
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.

Indicator of Freedom of the Press


The world rankings, published annually, measures violations of press freedom worldwide. It reflects the degree of freedom enjoyed by journalists, the media and digital citizens of each country and the means used by states to respect and uphold this freedom. Finally, a note and a position are assigned to each country. To compile this index, Reporters Without Borders (RWB) prepared a questionnaire incorporating the main criteria (44 in total) to assess the situation of press freedom in a given country. This questionnaire was sent to partner organisations,150 RWB correspondents, journalists, researchers, jurists and human rights activists. It includes every kind of direct attacks against journalists and digital citizens (murders, imprisonment, assault, threats, etc.) or against the media (censorship, confiscation, searches and harassment etc.).

World Rank:

Indicator of Political Freedom


The Indicator of Political Freedom provides an annual evaluation of the state of freedom in a country as experienced by individuals. The survey measures freedom according to two broad categories: political rights and civil liberties. The ratings process is based on a checklist of 10 political rights questions (on Electoral Process, Political Pluralism and Participation, Functioning of Government) and 15 civil liberties questions (on Freedom of Expression, Belief, Associational and Organizational Rights, Rule of Law, Personal Autonomy and Individual Rights). Scores are awarded to each of these questions on a scale of 0 to 4, where a score of 0 represents the smallest degree and 4 the greatest degree of rights or liberties present. The total score awarded to the political rights and civil liberties checklist determines the political rights and civil liberties rating. Each rating of 1 through 7, with 1 representing the highest and 7 the lowest level of freedom, corresponds to a range of total scores.

Political Freedom:
Civil Liberties:

Political freedom in the world (interactive map)
Source: Freedom in the World Report, Freedom House


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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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Latest Update: November 2022