Portugal flag Portugal: Economic and Political Overview

The economic context of Portugal

Economic Indicators

After achieving several years of sustained growth, economic output in Portugal fell sharply following the outbreak of the COVID-19 pandemic. Nevertheless, the country recovered quickly, growing by 6.7% of GDP in 2022. After a strong start to the year, Portugal’s economic growth slowed down to 2.3% in 2023, still well above the eurozone average. Within the realm of domestic demand, both private consumption and investment contracted, influenced by rising interest rates and subdued confidence among consumers and businesses. The surge in interest rates has a pronounced impact on Portuguese households, given that nearly 90% of their mortgage portfolio, constituting more than three-quarters of their overall debt, is tied to floating-rate loans. On the external front, the export of goods saw a decline due to weakened demand from trading partners, while the export of services maintained a healthy expansion, primarily fueled by the tourism sector. Amid a weaker macroeconomic outlook among Portugal's main trading partners, the IMF forecasts growth at 1.5% this year, with an acceleration in 2025 (2.2%).

The Portuguese government managed to gradually reduce its budget deficit in recent years, reaching positive territory. This trend was reversed by the impact of COVID-19 first, and then by the energy prices shock that was exacerbated by the Russian invasion of Ukraine (-1.7% of GDP in 2022). In 2023, government revenue increased thanks to a robust labour market, wage increases and the still high inflation, with the overall deficit estimated at 0.7% of GDP by the IMF (although in contrast with the EU Commission estimates, which pointed to a 0.8% surplus). The general government balance is projected to narrow to 0.3% of GDP in 2024 (IMF). Government revenue is expected to decelerate, influenced in part by fiscal policy adjustments in direct taxes, as well as a moderation in inflation. Concurrently, government expenditure is poised to increase, driven by sustained upward pressures on current spending, particularly in areas such as the public wage bill and social transfers. The general government debt-to-GDP ratio remained on a sharp downward trend in 2023 (108.4%, from 113.9% one year earlier), driven by a favourable growth-interest rate differential and primary balance effect. The IMF projects a further decline over the forecast horizon, to around 99.9% by 2025. Consumer price inflation has eased during the year, averaging 5.3%, with the easing trend being primarily linked to energy prices, whereas underlying inflation, which excludes energy and food components, persisted in its upward trajectory. The rate should gradually return towards the ECB’s target by 2025 (2.4%).

The unemployment rate increased to 6.6% in 2023 (up from 6.1% one year earlier) and is projected to flatten over the forecast horizon due to the subdued near-term growth outlook. Overall, Portuguese GDP per capita (PPP) is estimated at USD 45,227 in 2023 (IMF), still 20.6% below the EU’s average. According to the latest figures from the National Statistical Office INE, 17% of the population is at risk of poverty, corresponding to the proportion of inhabitants with an annual net equivalent monetary income below EUR 7,095.

Main Indicators 20222023 (E)2024 (E)2025 (E)2026 (E)
GDP (billions USD) 255.40287.42298.95309.72321.83
GDP (Constant Prices, Annual % Change)
GDP per Capita (USD) 24,79927,88028,96929,98331,235
General Government Balance (in % of GDP) -1.30.3-
General Government Gross Debt (in % of GDP) 112.499.094.790.887.0
Inflation Rate (%)
Unemployment Rate (% of the Labour Force)
Current Account (billions USD) -2.933.954.694.704.70
Current Account (in % of GDP) -

Source: IMF – World Economic Outlook Database, October 2021

Main Sectors of Industry

The agricultural sector comprises around 1.9% of Portugal’s GDP and employs 5% of the active population (from 10% 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. Furthermore, the forests of Portugal provide a large part of the world's supply of cork. According to the first estimate of the Economic Accounts for Agriculture, the income of agricultural activity, in real terms, per annual work unit, registered an 8.7% year-on-year increase in 2023. Moreover, in the period from January to October 2023, exports of Agricultural products increased by 2.1% compared to the same period of the previous year, with imports increasing at a faster pace (+3.8%).

The industrial sector employs 24% of the workforce and contributes to 18.6% 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. Biotechnologies and IT are also growing. According to data from the World Bank, the manufacturing sector alone contributes 12% of GDP. Portugal has increased its role in the European automobile sector and has an excellent mould manufacturing industry. According to data from the National Statistics Institute, in 2022, the total sales of products and services in the manufacturing industries increased by 23.6%, in nominal terms, totalling EUR 119.6 billion.

The services sector comprises 66.1% of GDP and employs around 71% of the active population. Tourism, in particular, plays an important and rapidly increasing role in the Portuguese economy. After suffering following the COVID-19 pandemic, the revenue of the accommodation sector returned to its previous levels already in 2022. 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: 61 banks, 81 mutual agricultural credit banks and 3 savings banks, with the five largest banks accounting for 77% of total assets (European Banking Federation). One of the most dynamic sectors is that of wholesale and retail trade, which comprised 217.2 thousand enterprises and registered a turnover of EUR 186.1 billion in 2022 (+17.9% y-o-y, data INE).

Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 5.2 23.9 70.9
Value Added (in % of GDP) 1.9 19.1 65.5
Value Added (Annual % Change) -2.9 2.1 7.9

Source: World Bank, Latest Available Data. Because of rounding, the sum of the percentages may be smaller/greater than 100%.


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


Find out all the exchange rates daily on our service International currency converter.


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.

Return to top


Return to top

Any Comment About This Content? Report It to Us.


© eexpand, All Rights Reserved.
Latest Update: July 2024