Portugal faces economic shift toward productivity as growth drivers fade

Portugal is facing a critical economic transition as traditional growth drivers—tourism, immigration, and European funds—begin to lose their impact. Nazaré da Costa Cabral, president of the Public Finance Council (CFP), warns that the country must shift its focus toward productivity gains to sustain growth, especially as demographic aging and changing migration policies limit the expansion of the active workforce.

The CFP’s updated economic and budgetary outlook for 2026-2030 projects a gradual deceleration in GDP growth, reaching 1.6% by 2030. While the economy has grown above the EU average, experts note that productivity remains approximately 17% below the OECD average, suggesting that much of the recent growth has relied on increasing the volume of labor and consumption rather than increasing value per worker.

In response to these fiscal challenges, Minister of the Presidency António Leitão Amaro stated that the government’s margin for negotiating the 2027 State Budget is “very limited.” He emphasized a strategy of balanced accounts and tax relief, arguing that public spending is growing at a rate below GDP growth.

Additionally, a retrospective analysis of the Porter Project, originally launched in 1994, highlights the importance of industrial clusters and new specialization niches—such as batteries, aeronautics, and sports technology—integrated with artificial intelligence to enhance long-term competitiveness.