The Portuguese economy has rebounded strongly from the COVID-19 crisis. Though high inflation and weak global economic conditions have slowed growth in 2022, renewed fiscal support helped to cushion the impact. Public debt relative to GDP has declined below its 2019 level, but rapid population ageing and strong investment needs are increasing fiscal pressures. Potential growth and productivity gains have declined and skill shortages have emerged. Implementing the ambitious Recovery and Resilience Plan and ensuring fiscal sustainability through more efficient spending and a strengthened fiscal framework are key to a sustained recovery.
Real GDP growth is projected to reach 2.5% in 2023 and 1.5% in 2024. The Recovery and Resilience Plan (RRP) should significantly boost public investment, though there are risks that implementation delays continue. Strengthening external demand will support exports, particularly of services. The employment rate will remain historically high and wages will accelerate.
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The pandemic highlighted gaps in the social safety net and risks aggravating the situation for disadvantaged students and vulnerable workers. Increasing the coverage of out-of-work benefits should become the top policy priority. Strengthening efforts to provide individualised support to students at risk remains crucial, as does upskilling of large parts of the workforce, especially with digital skills.
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2021 Structural Reform Priorities