Antoine Goujard
OECD
OECD Economic Surveys: Portugal 2026
Abstract
Portugal’s growth has been robust despite successive international shocks. Domestic demand remains strong, driven by easing inflation, recovering household demand, and supportive fiscal policy. While the resilience of the financial sector has improved significantly, recent house prices increases and vulnerabilities in the business sector to slowing external demand merit continued vigilance. Despite a rapid decline, public debt remains high, making it crucial to maintain sizeable primary surpluses over the medium term. The implementation of the Recovery and Resilience Plan in 2026 will support the economy facing increasing international uncertainty and lower global demand. Yet, the authorities should carefully consider further expansionary measures, such as corporate and personal income tax cuts, that risk fueling inflation and lower fiscal buffers. Reducing inefficient spending and tax expenditures and continuing structural reforms to boost productivity and employment would help sustain higher public investment, while meeting rising spending pressures from ageing and the climate transition.
1.1.1. Growth has been robust
Growth and the labour market have remained robust (Figure 1.1, Panel A). After the historically deep recession of 2020, the Portuguese economy recovered rapidly in 2021-22, productivity and exports rebounded, while unemployment declined quickly. Though Russia’s war of aggression against Ukraine, the surge in energy and food prices, and the associated slowdown in global demand have dented economic prospects, growth remained resilient in 2023 and 2024 supported by broad support measures for households and firms and the monetary policy response, the implementation of the Recovery and Resilience Plan, as well as the benefits of past structural reforms (OECD, 2023[1]). The unemployment rate fell to an historically low level of 6.4% in 2024 (Figure 1.1, Panel B).
High international uncertainty, increased trade costs associated with weak external demand and still elevated public and private debt levels pose significant risks for the Portuguese economic outlook. The economy has decelerated at the beginning of 2025, before rebounding in the second and third quarters. Household and business confidence have been volatile: they declined in early 2025, but they had recovered their end-2024 level by November. A deceleration of private investment could lower trend growth and put pressure on fiscal sustainability in the context of a rapidly ageing population and historically slow productivity growth. This chapter reviews the short-term macroeconomic outlook and the resilience of the financial system (Sections 1.1 and 1.2). It then turns to options to maintain fiscal sustainability (Section 1.3) and strengthen Portugal’s short and medium-term growth prospects through higher productivity (Section 1.4).
Source: OECD (2025), OECD Economic Outlook: Statistics and Projections (database).
1.1.2. Domestic demand is supporting growth
Fiscal policy has supported internal demand. Inflation related support totalled about 1.9% of GDP in 2022 and 3.7% in 2023 (OECD, 2023[1]), when private consumption slowed due to falling purchasing power (Figure 1.2 and Table 1.2). Over the same time, net exports contributed increasingly positively to GDP growth as global trade improved, while the contribution of investment was supported by the progressive implementation of Portugal’s Recovery and Resilience Plan (RRP, Box 1.1) despite tight financial conditions. From the second half of 2024, private consumption strengthened, reflecting the strong labour market, rising real incomes with the temporary reduction of the Personal Income Tax withholding rates and improving consumer confidence as price pressures eased. Private investment picked up at the same moment, largely owing to monetary easing, while international trade continued supporting the Portuguese economy until early 2025.
Headline consumer price inflation has declined from its peak of 10.6% in October 2022 due to lower energy and food price inflation and was at 2.0% in October 2025 and 2.1% in November, close to the euro area average (Figure 1.2). Slowing energy prices, partly driven by the decrease of electricity taxes in January 2025, have led to a further decline over 2025. Food inflation has however accelerated in the third quarter of 2025. Service inflation remains also around 2.9% in October 2025, reflecting capacity constraints against the background of strong domestic demand as well as the lagged adjustment of some prices, such as housing rents. Looking ahead, inflation expectations of consumers have moved upwards in 2025 with the announcement of the United States’ increased tariffs (Box 1.2), but declined in May and June, while firms’ inflation expectations remain contained, as the appreciation of the euro exchange rate in early 2025 moderates import price pressures.
Fiscal policy is set to remain accommodative, with expected fiscal easing of around 0.5% of GDP in 2026, before turning contractionary in 2027. Spending from RRP grants is expected to increase from 0.7% of GDP in 2024 to 2.2% in 2025 and 1.8% in 2026, boosting investment and public consumption without affecting the budget balance. However, public investment is set to decline after the end of the RRP in 2026 (Box 1.1). Persistent fiscal surpluses will lower public debt to 89.4% of GDP in 2027 (Maastricht definition). Activity will also be supported by increasing disbursements of RRP loans. In this context, the authorities should carefully consider further expansionary measures, such as higher public wages, the increases of pension benefits above the application of the indexation formula, a further reduction in the personal income tax, and business tax cuts that risk fueling inflation and lower medium-term fiscal space (see Section 1.3).
Y-o-y, % change
Source: Eurostat (2025), HICP - monthly data (annual rate of change); OECD (2025), OECD Economic Outlook: Statistics and Projections (database).
High uncertainty and declining global growth have weakened Portuguese and European growth prospects, although supply bottlenecks have eased (OECD, 2025[2]). The new international economic environment has hurt household and business confidence (Figure 1.3). Though Portugal direct exposure to the US export markets is limited and partly compensated by its high integration with European trading partners, some industries and exporting companies will bear direct adjustment costs (Box 1.2). Firm-level analysis by the Banco de Portugal (2025[3]) shows that business level export exposure to the United States is particularly high in textile industries, non-metallic mineral products and the beverage industry. Moreover, indirect effects will be significant. Portuguese exports have been particularly susceptible to economic developments in euro-area trading partners, where growth is set to soften. Both goods and services exports fell sharply in 2020, before recovering to their pre-pandemic level over 2022 and expanding further in 2023-25. In particular, the direct value added of the tourism sector has rebounded strongly, reaching 8.1% of domestic gross value added in 2024, well above its 2021 level of 5.5%, while increasing information and communication technology and knowledge-intensive services exports contibuted to diversification (INE, 2025[4]).
Note: Panel A: Business confidence corresponds to the average of the construction, manufacturing, retail trade and services sectors. Panel B: Shaded area indicates OECD projections.
Source:INE (2025), Short-term trends (database); OECD (2025), OECD Economic Outlook: Statistics and Projections (database).
Portugal’s Recovery and Resilience Plan (RRP) is intended to foster a stronger post-COVID recovery, while making the economy more sustainable, resilient and better prepared for the green and digital transitions. The 2023 updated RRP of Portugal is worth EUR 22.2 billion. It allocates 55% and 23% of the funds to climate and digital objectives, respectively, taking into account primary and secondary assignments of each measure (EC, 2025a).
The implementation of the RRP is set to boost public investment and spending in 2025-26 (Table 1.1). Supply-side disruptions and inflationary pressures have added to existing challenges from an ambitious initial timeline and expenditures are concentrated towards the end of the programming period. With the preliminary positive assessment of its seventh payment request, Portugal would have achieved 62% of the disbursements of its allocated funding and 47% of its milestones and targets (EC, 2025b). Yet, the full implementation of the RRP by 31 August 2026 still poses significant challenges, especially for larger-scale investment. The Portuguese authorities recently passed legislation to speed up procedures. As other European countries, Portugal also amended the allocation of funds to minimise implementation risks (Council of the EU, 2025[5]) and to use unspent RRF resources to guarantee instruments through the national promotional bank, and has submitted a further revision of its Recovery and Resilience Plan at the end of October 2025.
Note: 1. As included in the revenue projections. 2. Planned disbursements as reported in Ministry of Finance (2025).
Source: OECD calculations based on Ministry of Finance (2025), Orçamento do Estado para 2026 - Relatório.
Source: EC (2025a), Recovery and Resilience Scoreboard; EC (2025b), Commission greenlights Portugal's seventh payment request of €1.06 billion under NextGenerationEU - 14 October 2025; Council of the EU (2025[5]), Recovery and resilience fund: Council gives green light to amended plans of the Netherlands, Portugal, Slovakia and Spain, Press Release 13 May 2025.
Portugal’s trade with the United States
Exports of goods and services to the United States represented around 3.8% of Portugal GDP in 2024 (Banco de Portugal, 2025[3]). The United States were the destination of about 6.7% of Portuguese gross exports of goods in 2024 and Portugal is highly integrated in global value chains. Therefore, the effect of US tariffs would not only be direct, but also indirect, via Portugal’s key European partners, notably France, Germany and Spain (Banco de Portugal, 2025[3]). The OECD Foreign Market Reliance indicator shows the share of domestic outputs directly (face value) and indirectly reliant on the US export market, through other economies (Figure 1.4) (OECD, 2023[6]).
% of gross output, 2020
Note: Panel A & B: The figures depict the ten Portuguese sectors with the largest Foreign Market Reliance (FMR) for the United States (Panel A) and global markets (Panel B) as well as total exposure for Portugal (aggregate). The FMR indicator aims at measuring the risk of a downstream demand disruption in the United States and foreign markets on a given economy. For each industry, it considers (1) the size of exposure to the USA or foreign markets in the value chain, and (2) the distance to these partners in the value chain (Schwellnus et al., 2023). The FMR count value added each time goods or services cross borders, thus it can take values above 100%. Peers is the unweighted average of France, Germany, Greece, Italy and Spain.
Source: OECD calculations based on OECD (2024), Gross output flows in global value chains; Schwellnus, C. et al. (2023), “Global value chain dependencies under the magnifying glass”, OECD Science, Technology and Industry Policy Papers, No. 142, OECD Publishing, Paris.
Recent main international trade policy announcements
Since February, the United States has announced multiple waves of tariffs against trading partners, some of which have invoked countermeasures. They have notably announced the introduction of a tariff of 25% on all steel and aluminium (effective since 12 March 2025), as well as tariffs of 25% on foreign-made auto imports (effective from 2 April 2025). In addition, the US Fair and Reciprocal Plan was introduced on April 2, imposing a 10 percent minimum tariff on all countries other than Canada and Mexico and country-specific rates as high as 50 percent for roughly 60 countries (effective from 5 April 2025). On August 21, an agreement was announced which would set a 15% tariff rate on most European exports, including cars, semiconductors and pharmaceuticals, and envisage a tariff-rate quota solutions on steel and aluminium.
The direct impact of the US import tariffs on Portugal is likely to be concentrated in the mining industry and related manufacturers, as well as manufacturers of rubber, plastic and wood products, which have the largest exposure to the US market (Figure 1.4, Panel A). These are also the sectors with the largest foreign market exposure (Panel B). However, the ten sectors the most integrated with the US economy according to this indicator only accounted for below 7% of Portugal value added.
Source: Banco de Portugal (2025[3]), Economic Studies March 2025 ; OECD (2023), ICIO-TIVA Highlights - GVC Indicators for Portugal, OECD Publishing, Paris.
1.1.3. The labour market is set to remain resilient
The labour market remains robust, with the unemployment rate projected to broadly stabilise below 6% in 2026-27 (Table 1.2). Participation and employment rates remain around historical highs, including for women, whose employment rate is around 7 percentage points higher than in the OECD average in 2024 (Figure 1.5, Panel A). The recent large inflows of working-age migrants have also supported labour supply, with a relatively high employment rate of the foreign-born population (Chapter 2), though their skills could be better used. However, labour-market opportunities for young people still appear limited, with a high unemployment rate among those aged 15-24 around 20% Panel B). At the same time, the persistent large share of long-term unemployment points at structural labour market mismatches (Figure 1.5, Panel B and Chapter 2).
Note: Panel B: Long-term unemployment refers to those who have been unemployed for 12 months or more. Panel C: Real wages are deflated by the private consumption deflator.
Source: Eurostat (2025), Labour Force Statistics (database); OECD (2025), OECD Economic Outlook: Statistics and Projections (database).
The improving labour market and enduring labour shortages in specific sectors have pushed up wages, unit labour costs and contributed to strong services price pressures. Labour shortages appear widespread across sectors, with 25% of businesses that report the existence of obstacles to business in the manufacturing sector and 75% in the construction sector considering a lack of skilled staff as the main obstacle to carrying out business in the second quarter of 2025 (INE, 2025[7]) (Chapter 2). Real wages have significantly picked up (Panel C), with nominal wage growth outpacing inflation. Nominal wages are projected to grow by 3.7% in 2026 and 3.4% in 2027, supported by the minimum wage hikes of 6.1% in 2025 and 5.7% in 2026, and the planned further increase of 5.4% in 2027. Tax incentives for firms to raise wages, where firms can deduct 200% of costs associated with salary increases from their taxable income (in place since 2023), are also supporting wage developments. Given the tight labour market and the weak international evidence about their positive impact on wage and employment and their cost-effectiveness (OECD, 2023[1]), they should be phased out. Unit labour costs have been increasing at a rapid pace (Figure 1.5, Panel D), reflecting unequal productivity growth despite its rapid growth in services sectors (Figure 1.6). While recent wage growth supports living standards, it is also pushing up the price of labour-intensive services, and ensuring this momentum does not erode competitiveness requires policies to strengthen productivity.
GDP per hour worked, index
Note: Panel A shows a 4-quarter moving average of labour productivity as GDP per hour worked by employees and self-employed at constant prices. Panel B shows yearly real labour productivity per hour worked by employees and self-employed at constant prices.
Source: Eurostat (2025), Annual and quarterly national accounts.
1.1.4. Growth will stabilise
GDP is projected to grow by 1.9% in 2025, 2.2% in 2026 and 1.8% in 2027 (Table 1.2). Spending of European funds is boosting investment, but the projected slowdown in global activity and European growth, rising trade barriers and an assumed 15% US tariff on Portuguese goods, including steel and auto parts, will weigh directly and indirectly on exports and private investment (Box 1.2). Sustained wage growth and robust employment will support consumption, especially as inflation and debt servicing costs are set to remain moderate. Tax cuts, increasing social transfers and higher public wages will support household incomes but also slow the decline in inflation. Headline consumer price inflation will moderate to 2.2% in 2026 and 2.0% in 2027 as import prices rise and services price pressures diminish slowly.
Note: 1. Contribution to changes in real GDP.
1. As a percentage of potential GDP.
2. As a percentage of household disposable income.
3. As a percentage of GDP.
Source: OECD (2025), OECD Economic Outlook: Statistics and Projections (database).
1.1.5. Risks around the outlook remain substantial
Significant uncertainty about economic prospects remains, and the major risks are on the downside, affecting both firms and households. Like in other OECD countries, businesses have been hit by two shocks in a row, as the pandemic was immediately followed by the war in Ukraine and increasing price pressures. High input costs, including for energy, have stretched thin financial buffers and some firms will face liquidity and solvency challenges that could potentially lead them into bankruptcy. Heightened international tensions, uncertainty and increasing trade costs and global value chain fragmentation are key risks for the Portuguese economy.
A further increase in trade barriers and a more significant slowdown among Portugal’s main trading partners could lead to an additional decline of exports. Portugal’s export performance has been strong since 2007 (Figure 1.7). However, according to simulations by the Banco de Portugal (2025[3]), a 25 percentage points increase in the tariffs imposed by the United States on the European Union associated by an equivalent retaliation could lead to a reduction of GDP by 0.7% in Portugal after three years and the impact could reach 1.1% once the associated shock to uncertainty and confidence is taken into account. Some sectors such as the mining industry and related manufacturers will likely be more affected (Box 1.2 and Figure 1.8).
Heightened and prolonged uncertainty and market volatility linked to the international trade situation and geopolitical tensions could also weigh on investment and growth. Historically, uncertainty had a significant negative impact on Portuguese economic activity during the financial and sovereign debt crises (Manteu and Serra, 2017[8]). Moreover, Portugal’s net external debt and net international investment position (NIIP) albeit steadily improving, remained 44.3% of GDP and -57.5% of GDP in 2024 (UTAO, 2025[9]). Risks are mitigated by the high share of non-defaultable instruments, such as foreign direct investments and equity, in Portugal’s net investment position (EC, 2024[10]), but the uncertain external environment and rising global interest rates could negatively impact Portugal's financing conditions. In addition, if RRP spending were implemented more slowly than projected, this would constrain investment and the green transition.
By contrast, growth could be supported by a further decrease in the historically high household saving rate and stronger-than-expected wage developments that could strengthen consumption but also fuel inflation. Higher than expected public expenditures, notably on defence, could also raise internal demand. The Portuguese authorities have commited to increase defence spending to 5% of GDP by 2035 (see below). Finally, several large potential shocks could alter the economic outlook (Table 1.3).
Index, 2010-Q2 = 100
Note: Panel A: Difference between export growth and export markets’ growth, in volume terms (based on export markets as of 2021).
Source: OECD (2025), OECD Economic Outlook: Statistics and Projections (database); INE (2025), National Account database.
Share of exports by sector and destination, 2023
Note: Panels A & B: regions are defined as in the United Nations Statistics Division’s areas code (M49). Panels A & C: data refer to balanced value adjusted for re-exports. Panel C: categories are based on the OECD BIMTS CPA 2.1 classification. The “Food and agricultural products” category corresponds to codes A and C10T12; “Machinery and electrical equipment” corresponds to C26 to C30; “Textiles” corresponds to C13_15; “Mining and basic metal products” corresponds to B and C24_25; “Fuels and chemicals” corresponds to C19T23; “Others” refer to the remaining, mostly manufactured, products. Panel D: the categories correspond to the EBOPS 2010 classification; “Others” refer to the remaining services exports (excluding the other categories shown).
Source: OECD Balanced international merchandise trade statistics (BIMTS), OECD International Trade in Services EBOPS 2010.
Portugal’s financial system has become significantly more resilient since the global financial crisis. Credit ratings of major banks have improved and key financial soundness indicators have strengthened (Figure 1.9). Banks’ funding structure has become more stable, with the share from customer deposits remaining high at around three quarters of bank liabilities at end-2024, helping to mitigate high market volatility. Non-performing loans (NPLs) declined sizably to 2.3% of all outstanding loans in the second quarter of 2025, yet they remain above the OECD and euro area averages (Figure 1.10, Panels A and B). Liquidity positions and capital buffers have improved, ranking favourably compared to European peers, signaling improved resilience to the volatile international macroeconomic environment (Panels C and D). Limiting dividend payouts and share buybacks could support capital accumulation. Despite a narrowing of net interest margins because of declining interest rates, bank profitability, as measured by the returns on assets and equity or the cost-to-income ratio, remains above the euro area average (Banco de Portugal, 2025[11]).
Index scale of -1 to 1 from lowest to greatest potential vulnerability
Note: Each aggregate macro-financial vulnerability dimension is calculated by aggregating (simple average) normalised individual indicators from the OECD Resilience Database. Individual indicators are normalised to range between -1 and 1, where -1 to 0 represents deviations from long-term average resulting in less vulnerability, 0 refers to long-term average and 0 to 1 refers to deviations from long-term average resulting in more vulnerability. Financial dimension includes regulatory capital ratio, regulatory Tier 1 capital ratio and the return on equity ratio. Non-financial dimension includes private bank credit (% of GDP), household credit (% of GDP) and corporate credit (% of GDP). The asset market dimension includes growth in real house prices (year-on-year % change), house price to disposable income ratio and house price to rent ratio. Fiscal dimension includes government budget balance (% of GDP) (inverted) and government gross debt (% of GDP). External dimension includes current account balance (% of GDP) (inverted) and real effective exchange rate (REER) (relative consumer prices).
Source: Calculations based on OECD (2025), OECD Resilience Database June.
Households balance sheets have strengthened, helped by declining debt ratios and low unemployment. Gross household debt fell to 76% of gross disposable income in 2024, a decline of around 40 percentage points since 2013 (Figure 1.11, Panel C). Most mortgages have conservative loan to value ratios, with 94% of total mortgage loans in June 2024 below 80%. Although many loans are still variable rate (Panel D), new loans are dominated by mixed-rate agreements (at 82% of the mortgages issued in 2024) which have an average period of 3.4 years in which the initial rate is fixed and monetary policy in the euro area has become less restrictive and lower interest rates and rising real incomes are easing the repayment burden. The government has also introduced policy measures to improve access to housing and lower debt repayments for low-income households (Chapter 4).
Housing market risks persist requiring close monitoring. Financial stability risks stem mainly from a combination of elevated housing prices (Figure 1.11, Panels A and B), high household indebtedness, and high use of variable rate mortgages. While near term risks of a sharp fall in housing prices may be contained by tight housing supply and continued demand from non-residents (IMF, 2024[12]; Banco de Portugal, 2024[13]), affordability pressures remain high. Macroprudential measures such as borrower-based limits on loan-to-value and debt-to-service income ratios since 2018 have narrowed risk exposures, however, households remain vulnerable to future interest rate fluctuations and income shocks. The average mortgage payment has fallen (EUR 405 in July 2024 to EUR 395 in May 2025) but is still substantially higher than before the recent interest rate rise cycle, of EUR 237 over 2021 (INE, 2025[14]). A sectoral systemic risk buffer of 4% (implemented as of October 2024) for banking groups that use the internal ratings-based approach targeting sources of systemic risk from residential real estate and a countercyclical capital buffer (0.75%) set for 2026 aim to further strengthen resilience (Banco de Portugal, 2024[15]). Continued close monitoring of household debt and macroprudential policy adjustments, if needed, is essential. Moreover, continued reforms to boost housing supply, particularly easing land use restrictions and increasing the stock of social housing, are crucial to reduce housing market pressures, as discussed in Chapter 4.
Corporate sector financial conditions have also improved significantly. Gross corporate debt has declined to 76% of GDP in 2024 (Figure 1.12, Panel A), and debt servicing capacity has risen. Insolvencies remain below pre-pandemic levels in most sectors, though they have increased in some including manufacturing accommodation and food services. Firms’ profit margins remain historically low, and a slowing global economy poses downside risks (Panel B). Lower global demand could add to the financial challenges resulting from the pandemic, the rise in energy and other input costs and the maintenance of still high interest rates (Banco de Portugal, 2024[13]). Although the share of vulnerable firms is declining, financial risks in the business sector warrant ongoing surveillance.
Note: Panel A: 2025 data is up to the month of September. Panel B: The EU corresponds to the composition of European Union as of 2020. Panel C: Data for Luxembourg correspond to 2024Q4. Panel B & D: The OECD aggregate corresponds to the simple average of 37 countries (New Zeland is missing).
Source: Banco de Portugal, IMF: Financial Soundness Indicators, European Central Bank.
As in other OECD countries, climate-related risks are increasingly relevant for Portugal’s financial system, both in terms of physical risks (such as wildfires or floods) and transition risks arising from the shift to a low carbon economy. While some steps have been taken, like easing loan maturity rules for green investment in renewable energy and energy transition, Portugal should strengthen its financial supervisory framework further. While Banco de Portugal (2024[16]) has already carried out and published climate scenario analysis, additional stress testing should be regularly developed, as done in countries like France, and additional borrower and lender-based macro prudential tools should be considered to address vulnerabilities.
Amidst high geopolitical tensions, operational and cyber risks are growing and could disrupt the economy and the financial system. In Portugal, financial institutions often outsource part of the services and infrastructure to third parties to perform their core functions, such as payments, cloud storage and cybersecurity, which can be critical, notably for e-payments and cash services (Banco de Portugal, 2025[17]). The implementation of the European Digital Operational Resilience Act (DORA) is a welcome development and Portugal’s central bank has taken additional steps to map these risks in the banking system. Regular updates and extending this work to other financial institutions and critical service providers will be important to maintain systemic wide resilience.
Note: Panel B: Data for Costa Rica, Iceland, Mexico and Turkey are not available. OECD unweighted average is computed on available countries. Euro area aggregate corresponds to the 17 OECD countries of the Euro area. Data for Colombia, Chile and Luxembourg are not shown. Panel C: 2023 data for Norway correspond to 2022, for United Kingdom to 2019.
Source: OECD Analytical House Prices Indicators (database), Eurostat, Banco de Portugal.
Note: Panel A: Average of the OECD countries for which data is available. Panel B: The EU corresponds to the composition of European Union as of 2020.
Source: BIS, Credit Statistics (database); Eurostat (2025), National Accounts (database).
1.3.1. Fiscal performance has been strong
Portugal’s fiscal performance has been among the strongest in the OECD and the Euro Area in the past few years. A robust recovery, disciplined budget execution and favourable revenue dynamics have supported improvements in the fiscal balance and a decline in the public debt-to-GDP ratio, as well as a fall of long-term sovereign bond spreads with respect to Germany to an historically low level in the second part of 2025. Like in all OECD countries, the COVID-19 crisis triggered a deterioration of public finances, widening the fiscal deficit to 5.8% of GDP in 2020. However, since 2023, the fiscal balance has turned to surpluses of 1.3% of GDP 2023 and 0.5% in 2024, as COVID-19 measures and cost-of-living support were withdrawn (Figure 1.13, Panel A). The fiscal improvement was supported by strong nominal GDP growth, contained current public expenditures, dynamic tax revenues and a stabilisation in interest payments as a share of GDP, as well as regular under-spending on public investment (CFP, 2025[18]). Public debt declined to 93.6% of GDP (Maastricht definition) in 2024, 40 percentage points below its 2020 peak (Panel B), faster than most euro area countries, and more than fully reversing the pandemic era increase.
% of GDP
Note: Shaded areas indicate OECD projections.
Source: OECD (2025), OECD Economic Outlook: Statistics and Projections (database).
The fiscal situation is set to remain strong in the short term, with a further decline in the public debt-to-GDP ratio (Figure 1.13 and Table 1.2). This favourable trajectory reflects continued primary surpluses, stable growth and EU-funded investment under the Recovery and Resilience Facility. Fiscal policy will nonetheless remain accommodative in 2025 and 2026, with the fiscal balance projected to reach 0.1% of GDP in 2025, -0.6% in 2026 and -0.5% in 2027, as expenditures financed though RRP loans are set to temporarily increase to 0.7% of GDP in 2026 (Box 1.1). The expected fiscal easing in 2026 of around 0.5% of GDP, will help raise needed public investment. However, to maximize the impact of the RRP, prioritising high-impact investments and accelerating execution will be key. Moreover, the expected fiscal easing will also increase current spending and permanently reduce tax revenues, which would reduce fiscal room in the longer term. The 2025 measures include compensation of past purchasing power losses for public servants and pension increases beyond the regular indexation rule (0.5% of GDP), along with cuts to personal and corporate income taxes (0.5% of GDP), through the adjustment of the personal income tax brackets by 4.6%, above the projected headline inflation rate, the strengthened youth PIT scheme and the lowering of the corporate income tax rate. The government further reduced personal income taxes by 0.2% of GDP in August 2025 for low and middle-income households.
There is a risk of underinvestment after EU funds taper off. Despite the support of European funds, public investment remains below its 2005-10 levels (Figure 1.14). European support for public investment is set to significantly decline in 2027-29 after the Recovery and Resilience Plan concludes (CFP, 2025[19]), though the acceleration of the implementation of the EU cohesion funds after 2027 will dampen this decline. Unless nationally financed investment raises in parallel, the decline in European support risks undercutting long term growth. Fiscal risks also stem from rising defence and security expenditures, in line with Portugal's international commitments. Defence spending is expected to reach 5% by 2035 from 1.5% of GDP in 2023 (EDA, 2024[20]; CFP, 2025[21]). With other European countries, the request of the Portuguese authorities to activate the fiscal escape clause of the Stability and Growth Pact was accepted in early June 2025. The fiscal costs will only be partly eased by the European Readiness 2030 package and the SAFE (Security Action for Europe) loan instrument, and positive growth spillovers from a coordinated fiscal package (EC, 2025[22]), and would raise public debt (CFP, 2025[19]). Potential costs overruns on large infrastructure projects, like the Porto-Lisbon high-speed rail and significant contingent liabilities pose additional fiscal risks. At the same time, government guarantees have declined to 3.7% in 2023 and liabilities to non-financial State-Owned Enterprises (SOEs) have declined to a relatively low level of 2.3% of GDP, while contingent liabilities of SOEs involved in financial activities reached 28.4% of GDP (Eurostat, 2025[23]; CFP, 2023[24]).
To maintain debt on a firmly declining trajectory and create room for investment, Portugal should ensure the implementation of a medium-term strategy with gradual fiscal consolidation combined with policies to foster potential growth, building on the adoption of the national medium-term fiscal-structural plan (2025-28). In recent years, social expenditures have increased rapidly, while investment, notably in infrastructure, education and defence has lagged (Figure 1.14). This strategy should include improving expenditure quality, notably for the numerous overlapping social expenditures (see below), reducing inefficient tax expenditures and strengthening the use of spending reviews, which will be implemented in the annual budget process. Increasing nationally funded investment will require rebalancing spending towards growth enhancing spending. Stronger public financial management and budget evaluation tools can help ensure long term fiscal sustainability.
Note: Panel A: Expenditures are deflated by the GDP deflator. Public education and health expenditures are defined according to the COFOG classification. Panel B: Average gross fixed investment as a percentage of GDP over 2015-22. The OECD average is unweighted and includes 31 countries (excluding Canada, Chile, Costa Rica, Mexico, New Zealand, Türkiye and Portugal) and the euro-area average includes 16 countries (excluding Croatia, Cyprus, Malta and Portugal). Economic affairs cover transport, communication, fuel and energy and other industries.
Source: OECD (2025), National Account database and OECD calculations.
1.3.2. Rising long term aging expenditures challenge fiscal sustainability
Demographic change will significantly increase public spending pressures in the next two decades. Ageing-related expenditures are set to rise substantially by 3.8% of GDP by 2045, from 23.5% of GDP in 2025 to 27.3% in 2045, before declining thereafter to a still high 24.3% of GDP (Table 1.5) (EC, 2024[25]), driven by pensions, healthcare and long-term care. While the pension system includes automatic stabilisers through the link between the retirement age and life expectancy, expenditures are set to rise further. Therefore the Portuguese authoritiesare evaluating additional measures to raise older worker employment and contain cost pressures. Without reforms to improve spending efficiency and further contain rising ageing-related costs, public debt could rise above 100% of GDP by 2060 (Figure 1.15, Panel A, scenario A “Current policy and ageing costs”). On the other hand, the measures proposed in this Survey could alleviate some ageing costs pressures and raise potential growth, strengthening long-term sustainability and lowering public debt below 40% of GDP by 2060 (Panel A, scenario B “Scenario (A) and OECD recommendations” and Box 1.4 and Box 1.5). This would help to achieve Portugal’s commitments within the new European fiscal which foresee to maintain sizeable primary surpluses until 2038, despite rising ageing costs (Panel A, scenario C “Portugal fiscal plan until 2038”) (República Portuguesa, 2024[26]; EC, 2024[27]).
As a percentage of GDP unless otherwise indicated
Note: 1. AWG baseline scenario, 2. AWG Reference scenario. 3. The European Commission’s risk scenario assumes an upward convergence of coverage and costs profiles towards European Union averages for long-term care, as well as a partial continuation of the recently observed upward trends in health care expenditures. 4. Average of men and women’s life expectancy.
Source: EC (2024), The 2024 Ageing Report: Economic and Budgetary Projections for the EU Member States (2022-2070).
Moreover, ageing-related costs may raise more than expected in the baseline scenario of Table 1.5 because of additional spending on health and long-term care. Health spending may raise faster than projected, as Portugal currently spends less than the EU average and faces high unmet needs and out of pocket expenditures. Promoting prevention and cost-efficient behaviour through primary care providers is a rising priority. Spending on prevention amounts to less than 2% of health spending (OECD, 2023[1]; OECD/EC, 2024[28]). Around 12.8% of the population is not registered with a dedicated general practitioner and the excessive use of emergency rooms drives up costs without promoting better health outcomes. In addition, the organisation of primary care is fragmented and the different types of public care centres rely on various payment schemes that fail to encourage a systematic follow-up of patients from disadvantaged groups. Expanding the number of general practitioners and streamlining the different payment schemes for primary care centres would improve both access and quality.
Public expenditure on long term care is among the lowest in the OECD and could also raise above the baseline projections of Table 1.5 (OECD, 2024[29]). Much of the care burden falls on informal family carers, especially women, as the currently low public expenditure reflects Portugal’s historical reliance on informal care arrangements (OECD/EC, 2024[28]). Long-term care and unmet needs appear already high among older people (OECD, 2024[29]; Albuquerque, 2022[30]) and out-of-pocket costs (the share of the total costs that is left for older people to pay, after receiving public support) are high, notably for those with severe needs for which it could reach 80% of the median disposable income (OECD, 2024[29]). Portugal has been making efforts to scale up the availability of formal LTC services to more appropriate levels through its National Network for Long-term Care (RNCCI). However, regional disparities are significant (República Portuguesa, 2024[31]) and covered formal long-term care costs are low for both home and institutionalised care.
Portugal’s upcoming long-term care Action Plan will expand access to affordable and high-quality long-term care, potentially increasing public spending. Portugal is one of the few OECD countries where the public support system for long-term care reduces relatively little old-age poverty risks, as means-testing is only partly used to determine the degree of public support for home and institutionalised care (Llena-Nozal, Araki and Killmeier, 2025[32]; OECD, 2024[29]). To reduce financial pressures and improve effectiveness, public support for long-term care should be better targeted towards low-income individuals. For example, Germany introduced a new definition of long-term care needs in 2017 which allows acomprehensive assessment of support needs, including for physical and cognitive impairments (Llena-Nozal, Araki and Killmeier, 2025[32]). Moreover, in Germany as other OECD countries such as Austria, Finland, France and the Netherlands, older people with higher incomes contribute more to the cost of their institutional care (OECD, 2024[29]). Such design would mitigate old age poverty risks and encourage personal savings for care-related expenses for those able to afford it. Prioritising professional home-based and community care models by expanding the current training and supervision of care workers assisting the nurses that are currently in high shortages (OECD, 2023[1]) could also help. Integrated community care system, as developed in Japan, could emphasise preventive care and activities to promote longer healthy life expectancy (OECD, 2024[29]). At the same time, exploring voluntary private contribution options, such as group insurance by employers, and pre-funding mechanisms that build up wealth to ease future ageing-related cost pressures, could help support the delivery of services for medium and higher-income households and complement the public long-term care pillar (OECD, 2024[29]).
Gross government debt as a % of GDP, Maastricht definition
Note: 1. Scenario (A) is based on the OECD Long Term Model as described in Guillemette and Turner (2021). Nominal GDP growth is assumed to average at 3.8% over 2027-60 and the nominal long-term interest rate at 3.6%. The scenario sets the primary deficit at 1.1% of GDP on average over the 2027-60 and adds the costs of ageing as described in EC (2024), Table II.1.135. As a result, the primary balance deteriorates by 3.9 percentage points of GDP over 2027-47, before improving by 3 percentage points of GDP by 2060.
1. The “OECD recommendations” scenario (B) adds to the assumptions in (A) the estimated effects of the reforms recommended in this Survey (Tables 1.7 and 1.8). It does not account for potential improvements in the primary balance due to higher GDP growth as simulated in Table 1.8.
2. Portugal fiscal plan until 2038 (C) displays the public debt path over 2028-38 as projected in Portugal’s Medium-Term Plan published in 2024 (República Portuguesa, 2025).
3. In the “Higher interest rates” scenario, interest rates increase by 100 basis points relative to scenario (B). In the “Lower GDP growth rates” scenario, nominal GDP growth is lowered by 0.5 percentage point relative to scenario (B).
Source: OECD calculations based on OECD (2025), OECD Economic Outlook: Statistics and Projections (database), May; República Portuguesa (2025), Orçamento do Estado 2026; and EC (2024), “The 2024 Ageing Report: Economic and budgetary projections for the EU Member States (2022-2070)”; Guillemette and Turner (2021), “The long game: Fiscal outlooks to 2060 underline need for structural reform”, OECD Economic Policy Papers. Source: OECD calculations based on OECD (2025), OECD Economic Outlook: Statistics and Projections (database), May; República Portuguesa (2025), Orçamento do Estado 2026; and EC (2024), “The 2021 Ageing Report: Economic and budgetary projections for the EU Member States (2019-2070)”; Guillemette and Turner (2021), “The long game: Fiscal outlooks to 2060 underline need for structural reform”, OECD Economic Policy Papers.
Addressing rising pension spending
Public expenditures on pensions are set to rise markedly in the coming two decades (Figure 1.16, Panel A and Table 1.5). Portugal has a public pay-as-you-go pension scheme and a small voluntary private pension system. Over the years, Portugal has implemented a wide range of reforms that improve the sustainability of the pension system: the statutory retirement age increases in line with the evolution of life expectancy and pathways into early retirement have been restricted (OECD, 2019[33]). Yet, the European Commission’s projections foresee continuous increases in the public pension expenditures up to the late 2040s (Table 1.5), before they gradually start to decrease towards the European Union average (EC, 2024[25]; GPEARI, 2024[34]). The projected decline in pension spending is due to the foreseen stabilisation of the number of contributors per pensioners (Figure 1.16, Panel B), declining average pensions compared to wages (Panel C), and a rapid decrease in new pensioners under the public subsystem for workers who began public work before 2005 (Caixa Geral de Aposentações) (Panel D). However, the uncertain global outlook calls for caution, as weak growth, reduced social security contributions and labour market instability could prolong fiscal pressures. These challenges come on top of the already high number of older workers eligible to minimum pensions (OECD, 2019[33]). Portugal has set up a working group on pensions in January 2025 to further analyse its long-term sustainability and propose measures to strengthen the pension system.
Note: The EU corresponds to the composition of European Union as of 2020.
Source: EC (2024), The 2024 Ageing Report: Economic and Budgetary Projections for the EU Member States (2022-2070).
Efforts to further strengthen the sustainability of the pension system should ensure sufficient incentives to work longer and adequate retirement incomes, while minimising adverse effects on employment. This points to a limited scope for further increases in the social security contributions, as higher rates might harm employment, so adjusting the retirement age is seen as the main way to ensure long term fiscal sustainability (OECD, 2023[1]). Although both the statutory and the effective retirement age are already above the OECD average in Portugal (Figure 1.17), further reforms could still be considered. The statutory retirement age is already indexed to changes in life expectancy, but the minimum age for early retirement, set at 60 for individuals with a full contribution record, is not. One reform option would be to apply the same life expectancy indexation to the minimum age for early retirement. In 2023, around 20% of new retirees with full careers retired before 60 years old, though most retire when they approach the legal retirement age (INE, 2024[35]).
Increasing the minimum retirement age and adjusting early retirement ages for some specific professions could help strengthen the pension system’s sustainability as life expectancy increases. This would reduce the share of early retirees, while avoiding excessively large pension penalties for those who must retire early (OECD, 2019[33]). To support this, policies should better reflect the needs of low-income and physically demanding occupations, with a focus on improving working conditions and promoting lifelong learning. These reforms would also help limit early exit from the labour market for health reasons, which is common in Portugal (Chapter 2). The minimum pension age and retirement ages for specific professions should be regularly reassessed, as is currently done by the working group on pension, to ensure they are supported by solid evidence, especially since the gap between the normal and early retirement ages appear relatively high (Figure 1.17, Panels C and D) (OECD, 2023[36]).
Average across men and women, 2022
Note: Panel A: The average effective age of labour market exit is defined as the average age of exit from the labour force for workers aged 40 and over. Panel B: The normal retirement age is the age of eligibility of all pension schemes combined without penalty, based on a full career after labour market entry at age 22. Panel C: The early retirement age is the first age at which a pension can be claimed. In some countries, for individuals who started their full career from an early age, it is possible to retire at a very early age. Panel D: Workers in hazardous or arduous jobs may retire before the early retirement age that applies in general. The displayed minimum retirement age excludes ballet dancers and artists. In Austria and Poland, women can retire earlier than men, and shown values apply to men only. Panel A, B & C: The EU corresponds to the composition of European Union as of 2020.
Source: OECD, Pension at a glance 2023.
Moreover, few pensioners choose to defer retirement after the normal retirement age. In 2023, only 4.7% of old-age pension recipients benefited from a bonus for having postponed the age of receipt of their first old-age pension (INE, 2024[35]). In Portugal, relatively high bonus rates occur for each month of work after the personal pensionable age and depend on the contribution history. However, pension entitlements before any bonus applies are limited to the best 40 years of contributions and pension benefits with bonuses for deferement are capped at 92% of the reference wage at the personal pensionable age. This means that an average-wage worker receives less than in most other countries by deferring pension by one year (OECD, 2019[33]) and increasing the pace of additional benefit entitlements for each month of postponed retirement could help, as recently done in Spain. The current pathway to early retirement that allows the long-term unemployed over the age of 62 (or 57 if they have sufficiently long contribution periods) to retire is being reviewed as it may disincentivise the reintegration of older workers into the labour market (OECD, 2019[33]). Gradually withdrawing this pathway should be paired with stronger active labour market policies to help older workers return to work, notably effective support for active job-search efforts (Chapter 2).
Other options could include to shift part of the financing of pensions away from labour and reviewing the benefits formula. Diversifying the financing of the Portuguese system could be done by strengthening the Portuguese reserve fund for public pension schemes (FEFSS) which is holding and managing assets equivalent to pension expenditure of at least 2 years through additional property and corporate income tax revenues (CSSS, 2024[37]). Additional revenues from property taxes (see below) could help contain or lower the high average labour tax wedge and social security contributions. Further developing the capitalisation system, that is limited in international comparison, is being studied and could also raise alternative financing sources for retirement (OECD, 2024[38]). Given the high levels of benefits relative to the income of workers for public schemes (Figure 1.16, Panel C) and the relatively tight dependence of benefits to past wages compared to other European countries (EC, 2024[39])adjusting further the initial levels of pensions could also be considered, notably for higher-level pensions. The ongoing working group on pensions could help to adjust benefit formulas, to preserve adequacy and sustainability.
Improving the effectiveness of social protection
The social benefit system is fragmented and not well targeted and does not seem to significantly reduce poverty and income inequality (OECD, forthcoming[40]). Income inequality as measured by the Gini coefficient is above the OECD and relative poverty is close to the OECD average, but higher for children (OECD, 2025[41]). The complexity and overlap of Portugal’s 27 different national means-tested social benefits reduces accessibility and hinders its effectiveness (EC, 2024[42]; OECD, forthcoming[40]). The creation of a unified social benefit that combines several benefits, aimed at simplifying the system and reducing overlaps, is being studied for implementation by the Portuguese government.
Portugal’s main minimum income scheme (RSI or Rendimento Social de Inserção) has low benefit adequacy and limited reach. While it is effectively means tested, its low reference income threshold (EUR 242 for a single person in 2025, at 36% of the 2022 OECD poverty threshold) and the complexity of regulations and procedures to access the support (OECD, forthcoming[40]; forthcoming[43]) hinder access, with the system covering only around 20% of poor households in 2016, well below the OECD average (Hyee et al., 2020[44])
To ensure an efficient safety net and work incentives for their recipients, it will be key to better monitor and coordinate housing allowances and social housing programmes, including local ones (Chapter 4), with other social benefits. There is a large number of other social and means-tested benefits directed to vulnerable groups (e.g. Complemento Solidário para idosos, Prestação social para a inclusão, Pensão social, Complemento por dependência), often with overlapping entitlement provisions (OECD, forthcoming[40]). Moreover, while widely used in Portugal, national and local housing programmes are not systematically monitored (Tribunal de Contas, 2024[45]).
Streamlining and reducing the large number of means-tested benefits in Portugal is essential, as planned under Portugal’s revised RRP (Portuguese Republic, 2023[46]). Consolidating small overlapping schemes, as currently evaluated under the Social Unified Benefit project (PSU), should be a priority (OECD, forthcoming[40]; forthcoming[43]). Establishing a one-stop shop application within the public employment system as done in Austria, simplifying the eligibility criteria, and using data-linking to identify eligible non-applicants would also support take-up (OECD, 2023[1]), as well as making mandatory regular survey of the take-up rates of the new scheme. This would help to reevaluate the amount of solidarity support and reduce the risk of poverty (OECD, forthcoming[43]). More broadly, reducing fragmentation in the social protection system would help strengthen incentives to work and better align social benefits with active labour market policies and unemployment benefits. The proliferation of overlapping benefits is associated with high marginal effective tax rates on labour income, while offering limited support for the working poor (OECD, forthcoming[40]; forthcoming[43]).
Further strengthening the fiscal framework to ensure better quality expenditures
Continuing to strengthen the budgetary framework and ensuring its effective implementation would raise the efficiency of public spending and improve spending quality to face Portugal’s increasing spending pressures. The integration of spending reviews in the budgetary process, as committed through the Portuguese RRP, the development of their use and the expansion of the programme budgeting exercise are welcome (Box 1.3) (OECD, 2024[47]; CFP, 2024[48]). However, more remains to be done to ensure strengthened expenditure control, cost-efficiency, and appropriate budgeting to prioritise growth-enhancing expenditures and facilitate the rechannelling of public resources to strategic priorities, such as ensuring a better functioning of the health system and delivering on the green and digital transitions.
Portugal has been conducting spending reviews since 2010. From 2010 to 2016, under Portugal IIMF’s economic and financial adjustment program, the implementation of an expenditure review process focused on the main expenditure areas, such as social protection and health, leading to expenditure cuts and efficiency gains. However, implementation had mixed results and lacked monitoring (CFP, 2021[49]). Despite Portugal pursued further efforts to institutionalise spending reviews, weaknesses remained notably concerning the complexity of the process, the oversight and monitoring of results achieved; and the incentives for line ministries to participate (OECD, 2024[47]; Tribunal de Contas, 2024[50]).
As part of its RRP, Portugal has committed to integrate the spending review exercise into the regular budget process, including an ex-post evaluation of past efficiency gains. Assisted by the OECD via a Technical Support Instrument (TSI) Programme of the European Union, which lasted from May 2023 until October 2024, Portugal progressed significantly in the implementation of spending reviews. According to the September 2024 implementation report (OECD, 2024[47]), the Ministry of Finance has made significant progress in implementing the action plan prepared by the OECD. The Ministry of Finance has now the leading role, while line ministries have more room for involvement. A new framework has been established to better define methodologies and processes. Trainings and workshops also strengthened capacity for spending reviews. A follow-up TSI project supported by the EU is ongoing and aims to strengthen policy costing methodologies and medium-term budgeting practices (EC, 2025[51]). Nevertheless, challenges remain to maintain this momentum, while engaging line ministries, and to publish spending reviews (OECD, 2024[47]).
In 2024, the spending review exercise focused on the health sector and the energy efficiency programme in the public administration (Ministry of Finance, 2024[52]). In 2025, the reviews are focusing on public grants of national origin; operating expenses of the Tax and Customs Authority (AT), and interest charges associated with the payment of Traditional Own Resources of the European Union. In 2026, the scope of the spending review will include more topics on the health sector and tax expenditures, covering around 9% of eligible public expenditures. The implementation and monitoring phase of the measures planned to improve the efficiency of these expenses is ongoing (Ministry of Finance, 2024[53]).
Source: OECD (2024[47]), Supporting the implementation of spending reviews in Portugal - Final Report - September 2024 , OECD Publishing, Paris; Ministry of Finance (2024[52]), Spending Review - Revisão de Despesa Pública em Portugal - Maio 2024; EC (2025[51]), Strengthening policy costing methodologies and medium-term budgeting Practices in Portugal, European Commission; CFP (2021[49]), Riscos Orçamentais e Sustentabilidade das Finanças Públicas 2021, Conselho das Finanças Públicas; Tribunal de Contas (2024[50]), Auditoria ao Exercício de Revisão da Despesa (Spending Review).
The development and integration of spending reviews in the budgetary process requires further progress in terms of administrative capacity and data collection. The development of the foreseen new accrual-based public accounting system by all government sectors and bodies is still lagging (Tribunal de Contas, 2022[54]; IMF, 2024[55]). Broadening the collection of performance information and developing evaluation capacity is a necessary condition for the success of the foreseen future spending reviews (Box 1.3). Performance information is unevenly collected and data are not sufficiently used as a strategic asset to serve citizens (OECD, 2023[1]). The implementation of the 2015 Budgetary Framework Law (BFL) has a clear potential to strengthen overall budgetary planning and monitoring. However, it has experienced systematic delays since its adoption (OECD, 2021[56]; Tribunal de Contas, 2022[57]).
Strengthening medium-term budgeting would also help achieve fiscal objectives. In Portugal, medium-term fiscal plans are not binding, temporarily due to a transitional rule of the Budgetary Framework Law, and deviations from plans within a year were frequent even before the pandemic (OECD, 2021[56]). The national multi-annual framework still has several weaknesses regarding budget transparency and accountability (Tribunal de Contas, 2021[58]). Its updates are presented at the same time as the annual budget which makes it subject to frequent changes, the coverage of expenditure limits is not transparent about the inclusion of capital increases and transfers, and the prospective expenditure path is insufficiently documented (CFP, 2022[59]; Raudla, Douglas and MacCarthaigh, 2022[60]; UTAO, 2022[61]). Furthermore, estimated impacts of policy decisions on the budget are not detailed (UTAO, 2022[62]). The Fiscal Council (CFP) and the Parliamentary Budget Office (UTAO) regularly point to the lack of information and incoherence in budget documentation, including after the implementation of the new European framework (CFP, 2025[63]). The budget administration needs to devote more resources to the provision of timely, transparent and comprehensive information on the draft budget (OECD, 2019[64]). The implementation of medium-term budgeting by programmes, in addition to the current breakdown by economic function, will also help for evaluation and prioritisation and would allow linking medium-term targets to the government’s annual fiscal management (Tribunal de Contas, 2021[58]): after pilot-projects in 2022 to 2024, programme budgeting is set to be applied in all ministries from 2026 and medium-term budgeting by programmes is planned to be implemented from 2029.
1.3.3. Simplifying the tax system to ensure broader tax bases and fairness
Portugal’s tax system remains complex, fragmented and heavily reliant on labour and consumption taxes, while tax expenditures and exemptions limit fairness and efficiency. Tax revenues, including social contributions, have increased from 30.9% of GDP in 2000 to 35.7% in 2024 slightly above the OECD average (Figure 1.18) (OECD, 2024[65]), but the system is complex and imposes high compliance costs especially on small and medium-sized firms. At the same time, the preferential treatment of inheritance taxes benefits mostly high-income households.
Broadening the tax base by reducing tax expenditures, notably for recurrent property and environmental taxes and improving the design of income and consumption taxes would support fiscal sustainability and more inclusive growth, as the ageing of the population will put labour related tax revenues under pressure. Aligning emission prices across sectors, phasing out fossil fuel subsidies and promoting clean transport and energy renovations can make large inroads to reduce reducing greenhouse gas emissions (Chapter 3). At the same time, shifting from taxing transactions towards taxing property ownership and imposing higher effective taxes on underused properties could bolster supply and promote a more efficient allocation of housing (Chapter 4). This would help make room for needed investment and potential reductions of the relatively high labour tax wedge around the minimum-wage, which could raise employment (Chapter 2).
Streamlining tax expenditures
Tax expenditures accounted for 7.2% of GDP in foregone tax revenues in 2024, which is high in international comparison (Redonda, von Haldenwang and Aliu, 2024[66]). According to the government’s estimates, the VAT tax system (61%), the personal income tax (14%) and the corporate income tax (11%) concentrate most of the current tax expenditures (República Portuguesa, 2025[67]). Out of more than 500 identified tax expenditures, 120 do not appear to have a clear objective (Grupo de Trabalho para o Estudo dos Benefícios Fiscais, 2019[68]). Previous Economic Surveys pointed to the need to simplify the tax system. The tax system could be simplified including by broadening tax bases by reducing tax allowances, credits, exemptions and reduced tax rates. Tax expenditures can also make the tax system complex and some of them may undermine the green transition (OECD, 2019[69]; 2021[56]; Tribunal de Contas, 2022[57]). Reforms to broaden the tax base and evaluate whether all tax expenditures are cost-effective and meet their desired objectives should be considered. As recommended by the OECD, Portugal has set up a unit (U-TAX) to regularly monitor and assess tax benefits in September 2024 which published an assessment of the main tax expenditures in June 2025. Going forward, it should regularly monitor these through public reports which would assess their effects to help to reform the tax system.
Revenues as a share of GDP, 2023
Note: Data for environmental related taxes category refer to 2022. The EU- OECD aggregate corresponds to the OECD countries members of the European Union. The OECD and the EU- OECD aggregates refer to the unweighted average of member countries.
Source: OECD Comparative tables of Revenue Statistics in OECD member countries (2025) and OECD Environmental Related Tax Revenue Database.
Reforming the corporate income tax
There is scope to strengthen the design of the corporate income tax system (CIT). Portugal’s corporate tax system is complex, with multiple layers of rates and surcharges that raise compliance costs and create distortions. There is a state surtax ranging from 3 to 9% depending on firms’ profits, applying to less than 1% of firms, reduced rates for small and medium-sized enterprises depending on their location, as well as municipal surcharges at rates of up to 1.5%. In addition, extensive use of tax incentives (accounting for close to 20% of the CIT revenues), narrows the base, decrease tax liabilities and increases the administrative burden. Direct tax withholdings are often too high, resulting in sizeable refund claims in the subsequent year, whose overall volume was close to 1% of GDP in 2024. This entails considerable additional costs for businesses (EC, 2024[42]). Reducing ineffective tax expenditures could help financing the phase out of the state surtax. In addition, there may be a case for reviewing size-contingent tax rates that were extended in 2025, as they may hamper the growth of small firms (Garicano, Lelarge and Van Reenen, 2016[70]).
The effects of tax incentives to stimulate R&D and investment should be carefully evaluated. The tax incentive for business R&D and innovation (SIFIDE) represents the main tax expenditures of the CIT system in 2024, followed by tax incentives for investment (RFAI) and business capitalisation (ICE) (Ruano, 2025[71]; Banco de Portugal, 2024[72]; República Portuguesa, 2025[67]). However, the growing support to business R&D over the past decade from 0.1% of GDP in 2008 to close to 0.4% of GDP in 2023 has not yet translated into a significant improvement in Portugal’s innovation performance (Figure 1.19). The indirect part of the tax R&D incentive (SIFIDE II, worth 0.18% of GDP in 2023) is set to be phased out from 2026. To foster innovative activities, the government offers generous tax credits to business R&D expenditures and a preferential tax treatment to small firms. This is welcome since small firms are more responsive to tax incentives than larger firms (OECD, 2020[73]). Unused tax credits can be carried forward over twelve years, which is particularly important for young innovative firms, that often are unprofitable and do not have any corporate income tax liabilities in the first years.
Further targeting R&D tax incentives could increase their effectiveness, as there is currently no threshold or ceiling in the Portuguese scheme. Across OECD countries, R&D tax incentives often target firms and activities to induce larger R&D investment for a given tax expenditure. In particular, the R&D tax incentives could target more young firms and SMEs, given that the R&D investment by large firms is generally less responsive to tax incentives. An OECD study based on firm-level data on R&D found that across 20 OECD countries, one euro of R&D tax credit induces 1.4 euros of R&D by firms with less than 50 employees whereas it induces only about 0.4 euros of R&D by firms with 250 or more employees (OECD, 2020[73]; 2023[74]). One option could be to directly target the tax credits to smaller firms as in the United Kingdom. Alternatively, an upper bound on the amount of R&D spending that qualifies for R&D tax incentives could be set, as done in many OECD countries, and, following Germany, the tax subsidy could be increased below that threshold (Aghion, Chanut and Jaravel, 2022[75]). Some countries like Korea, Spain or Portugal also offer hybrids of a volume-based R&D tax incentive topped by an incremental one (OECD, 2022[76]). Moreover, in contrast to the strong tax incentives, and despite increases since 2016, direct public support to business R&D remains low by OECD standards, while it seems particularly important for encouraging basic research and in principle better suited for young and innovative firms (OECD, 2020[73]).
% of GDP, 2023 or latest available year
Note: Panel A: R&D investment, excluding real estate activities, public administration and defence, compulsory social security and education, human health and social work activities, and activities of households as employers. Panel A & B: Data refer to 2023 or latest available year.
Source: OECD (2025), R&D Tax Incentives Database; OECD (2025), Main Science and Technology Indicators Database.
Reviewing the personal income tax and inheritance taxes
The personal income tax system is progressive in design, but weakened by widespread deductions and exemptions, which reduce revenue and increase complexity. Though marginal PIT tax rates have increased since 2009, PIT revenues remain lower than the OECD average (Figure 1.18) (AT, 2024[77]). The average effective rate of personal income tax is low, despite the maximum rate of 48% being one of the highest in the OECD (Banco de Portugal, 2023[78]; OECD, 2025[79]). Deductions and allowances are close to 32% of total income (Banco de Portugal, 2024[72]) and have increased in recent years. Moreover, youth exemptions (reinforced in 2025 with an estimated cost of 0.2% of GDP) (Ministry of Finance, 2024[80]; 2024[81]) and local waivers (Municipalities may waive all or part of their 5% share of PIT) create variation without strong justification. A comprehensive review of PIT expenditures through the U-TAX system should be conducted to evaluate which exemptions can be eliminated without increasing the relatively high labour tax wedge of low- and middle-wage workers (Chapter 2). The government should phase out or cap high-cost exemptions, especially those poorly targeted.
Under the personal income tax system, most capital income, including interest income, dividends and capital gains, is taxed at a flat rate of 28% below the top marginal rate for labour income. As a result, dividend income is tax at a lower effective rate than wage income even after integrating firm-level taxes (Hourani et al., 2023[82]). While this can reduce distortions to saving, even if there is limited international evidence supporting the view that capital gains tax relief significantly increases aggregate savings and domestic investment, the preferential treatment primarily benefits high income households, as savings are highly concentrated and capital gains are lightly taxed, especially for housing. The option for taxpayers to choose to be taxed under the progressive schedule creates further complexity and scope for income planning. In addition, income shifting from businesses to personal consumption remains a concern particularly among owner managers (Leite, 2024[83]). To strengthen equity and reduce avoidance, Portugal should gradually align the taxation of capital income with that of labour, review exemptions for housing capital gains and strengthen enforcement against income reclassification.
Portugal does not tax transfers between close relatives, which significantly limit taxation of intergenerational wealth transfers. Since the abrogation of the inheritance tax (worth 0.2% of GDP) in 2003, children, grandchildren, spouses, parents or grandparents are exempted from a stamp duty with a 10% flat rate on the inherited assets. As a result, inheritance tax revenues are close to zero, among the lowest in the OECD, despite rising wealth concentration. Eliminating exemptions to immediate family members for large transfers and introducing progressive inheritance or lifetime wealth transfer could help reduce inequality and raise revenue (OECD, 2021[84]). This reform could start by using existing tax declarations to assess the distributional impact of inheritance wealth and design appropriate thresholds and rates. International experience suggests that such taxes can be made administratively feasible and socially acceptable when targeted at large transfers and paired with exemptions for modest inheritances.
Broadening the VAT base
The design of the Value Added Tax (VAT) needs to improve. Though Portugal displays a high headline rate of 23% in 2025, compared to an OECD average of 19.3% in 2024, and a low compliance gap, numerous reduced rates and exemptions tend to significantly lower VAT revenues (Figure 1.20).
2022
Note: The (actionable) VAT policy gap is the difference between revenues from applying a uniform VAT rate and total tax liabilities, excluding services and notional values that are unlikely to be taxed, provision of public goods and services, and financial services. The VAT compliance gap is the overall difference between the expected VAT revenue and the amount actually collected. It is expressed as a percentage of the VAT Total Tax Liabilities. The EU corresponds to the composition of European Union as of 2020.
Source: EC (2024), VAT gap in the EU – report 2024.
The multiple reduced rates increase the affordability of some goods and services but do not appear to significantly contribute to reducing income inequality (Braz and Da Cunha, 2009[85]; Banco de Portugal, 2025[86]). In particular, the reduced rates on hotels and restaurants should be reviewed as, in other OECD countries, they tend to largely benefit the owners of these businesses, tourists and the most affluent households (Benzarti and Carloni, 2019[87]). Moreover, the reduced rate on housing maintenance and renovation work do not target the most efficient renovations, tend to benefit the wealthiest households, and do not appear as the most effective tool to reach low-income households (Chapter 4), while evidence about the cost-effectiveness of such scheme is lacking (Cour des Comptes, 2019[88]). Broadening the VAT base by reducing or eliminating reduced rates on domestic consumption while compensating poorer households through well-targeted and simplified social benefits (see above), could help to reduce distortions and make the tax system more efficient and effective.
The potential fiscal impacts of policy recommendations made in this Survey are presented below (Table 1.6). These estimates do not consider indirect effects, such as those induced by the positive impact of the reforms on growth (see Box 1.5) and public revenues, and some recommendations are not quantifiable.
Note: These estimates roughly quantify the medium-term annual fiscal impact of selected recommendations in this Survey. They are based on the following assumptions: i) improving public spending efficiency as in OECD (2021); ii) an increase in subsidies to business R&D as a share of GDP by 0.2 percentage points and rebalancing existing support by 0.2 percentage points; iii) an increase in active labour market spending as a share of GDP by 0.1 percentage point; iv) an increase of family in kind benefits by 0.2 percentage points; v) an increase in environmental taxation as a share of GDP to the average of the top quintile of the OECD (from 2.6% to 3.6% of GDP), with most of the revenues used to compensate poor households and to invest in electric mobility and public transportation; vi) a reduction of headline VAT and CIT rates financed through the streamlining of reduced rates and exemptions; and vii) an increase of taxes on immovable property by 0.5 percentage points while lowering the tax wedge.
Source: OECD (2023), OECD Economic Surveys Portugal, OECD publishing, Paris and OECD calculations.
The long-term fiscal situation and gain in living standards will crucially depend on further productivity and employment growth. Although Portugal has recovered strongly from recent shocks, long term convergence in living standards has stalled. Over the past two decades, GDP per capita has remained far below the OECD average (Figure 1.21), driven by persistently weak labour productivity and limited investment. Multi-factor productivity, which measures the efficiency with which production factors are combined and is more closely related to innovation, has accelerated since 2015 but it has increased slowly for the past two decades. Despite recent gains in employment, the labour market remains unequal, with the widespread use of temporary contracts for the youth and the high share of long-term unemployed workers (Chapter 2).
According to illustrative OECD simulations, the key recommendations made in this Survey could generate further gains of 4.1% in GDP per capita GDP after 10 years and 9.4% in the long term, through higher employment and productivity growth (Box 1.5). Measures to improve the institutional environment, such as those to ease regulatory barriers, would generate stronger growth, largely through higher productivity growth and investment. Labour market reforms to improve skills and lifelong training, prolong working lives, promote hiring on permanent contracts, reduce labour taxes and increase the provision of early childcare services would help to further increase employment, reduce gender disparities and curb long-term unemployment rates as described in Chapter 2.
Note: Panel B: Data refer to 2024 or latest available year. Labour productivity is defined as real output per worker. The OECD aggregate is the unweighted average of 33 countries.
Source: OECD (2025), National account database.
1.4.1. Boosting productivity growth in the longer term
Labour productivity growth has accelerated over the last five years, mostly due to private services sectors, but productivity remains 17% below the OECD average (Figure 1.6). Portugal’s laggard firms, as defined by the least productive firms within a sector, still tend to have very low productivity compared to their OECD and European peers (OECD, 2021[89]). Compared to European firms, fewer Portuguese firms are investing (EIB, 2025[90]) and many firms suffer from a legacy of relatively low investment. Cumbersome regulations are partly to blame, as they tend to hinder the flow of resources towards more efficient incumbent firms. In international comparison, productivity and R&D investment gaps between small and large firms and at the regional level are significant, (EC, 2024[42]).
Helping small and innovative firms to grow
The productivity gap of Portuguese businesses relative to other OECD economies is particularly large for micro and small firms. Micro and small firms are markedly less productive than larger ones (Figure 1.22). Start-ups and young firms grow slower than in other OECD countries, while employment is concentrated in micro firms and SMEs (OECD, 2019[91]; forthcoming[92]): micro firms (those with up to nine employees) account for 39% of total business employment and those with up to 50 employees for around 60%, significantly more than in most OECD countries. Portugal also counts relatively more self-employed workers compared to the rest of the OECD. On the other hand, medium-sized and large firms account for only 17% and 25% of employment respectively, below the shares seen in many other OECD countries. While this is partly due to Portugal’s economic structure, small firms also account for relatively high shares of total employment in the manufacturing and knowledge-intensive services sectors.
The estimated impact of some of the key structural reforms proposed in this Survey is calculated using historical relationships between reforms and growth in OECD countries (Table 1.8). These estimates assume a full and swift implementation of reforms.
Note: 1. All figures are rounded to the nearest decimal point. The estimates assume full implementation of the reforms. 2. The estimate for judicial efficiency corresponds to increasing the Rule of Law indicator from the World Bank “Worldwide Governance Indicators” from 1.1 to 1.2, bridging half of the gap with the OECD median. 3. Reforms in regulations in regulated professions are assumed to reduce the OECD sub-indicator of “barriers to entry in service sectors” by 0.2 point. 4. Reforms are assumed to help ensure a more predictable and lower compensation for unfair dismissals. This is assumed to reduce the related OECD Employment Protection Legislation indicator for compensation for unfair dismissals from 20 months to 12.4 months (as in France). 5. Increased in property taxes environmental taxes are assumed to lower the tax wedge by 0.6 percentage points. 6. Based on Guillemette and Chateau (2023), this corresponds to a raise of 3.5 percentage points of the employment rate of the 55 and older workers. 7. Based on bridging half of the gap in Fluchtmann et al. (2024), Tables A.6 and A.7, and subtracting the impact of the increase in family benefits. The long-term effect is the effect estimated in 2060.
Source: OECD estimates based on based on B. Égert and P. Gal (2017), “The quantification of structural reforms in OECD countries: A new framework”, OECD Journal: Economic Studies, Vol. 2016/1; OECD (2021 and 2023), OECD Economic Surveys Portugal, OECD publishing, Paris; Guillemette, Y. and J. Château (2023), “Long-term scenarios: incorporating the energy transition”, OECD Economic Policy Papers, No. 33, OECD Publishing, Paris; Fluchtmann, J., W. Adema and M. Keese (eds.) (2024), “Gender equality and economic growth: Past progress and future potential”, OECD Social, Employment and Migration Working Papers, No. 304, OECD Publishing, Paris.
Portugal has a reasonably supportive regulatory and incentive environment for entrepreneurs overall, strengthened by recent reforms. Portugal ranks relatively well on average in the OECD Product Market Regulation (PMR) indicator, which measures regulatory barriers to firm entry and competition as of January 2023, although the detailed sub-indicators point to specific sectors where regulations remain relatively stringent, including some professions and the retail (Figure 1.23) (OECD, 2024[93]). Further progress has been made in several areas in 2023 and 2024 (Table 1.9). For example, the 2023 reforms of professional associations and multidisciplinary firms eased many unnecessary regulatory restrictions to access and exercise, as advocated by the Portuguese Competition Authority and the OECD (AdC, 2024[94]; 2023[95]; OECD, 2018[96]). This also helped foreign practitioners’ access to professions related to construction, legal and accounting services, abolishing explicit nationality requirements to practice law and accounting, and introducing recognition for qualifications gained abroad (OECD, 2025[97]).
2023
Note: Data refer to the ISIC Rev4 economic activity K, division 66 (Business sector excluding financial and insurance activities). Panel A: Data refer to 2023 apart from Costa Rica (2022), Israel and Japan (2021) and New Zealand (2020). Data for 10-49 category for Czech Republic and Slovenia refer to 2022. Panel B: Data refer to 2023 apart from Switzerland (2020), Israel, Luxembourg and Slovenia (2021). Data for 10-49 category for Czech Republic, France, Latvia and Slovak Republic refer to 2021.
Source: OECD (2025), Structural Statistics on Industry and Services and Business Statistics by Size Class and National account database.
Nevertheless, some regulatory settings still do not sufficiently promote competition in important industries that produce intermediate inputs, such as professional services, which can raise costs to firms and hamper growth. Legal barriers remain for some reserved technical activities, as well as for the capital and management of professional societies and the establishment of notaries (AdC, 2024[94]; 2023[95]). In addition, regulatory settings in retail distribution are more restrictive than in most other OECD economies due to relatively strict registration and licencing requirements (Figure 1.23). Further simplifying procedures by reducing the number of permits, the number of entities involved, shortening procedural deadlines by using more tacit approval and reducing the cost of expanding businesses should contribute to supporting firm growth. The Ministry of State Reform, created in 2025, aims at streamlining administrative processes, notably licensing procedures.
Further use of regulatory impact assessments would also strengthen evidence-based policymaking (OECD, 2025[98]). The Government of Portugal has undertaken a range of key reforms to implement and strengthen regulatory impact assessments (RIA). Although the role of RIA has expanded, they are not yet used in consultations on regulatory proposals with stakeholders and preliminary RIA and RIA could be shared at various stages of consultations, as in Canada (OECD, 2016[99]). Moreover, there is no mandatory requirement for consultation with the general public or for conducting regulatory impact assessments for the numerous primary laws initiated by the parliament. More extensive use of ex post reviews would also help to ensure that existing rules remain up to date and continue to deliver their policy objectives, for example by introducing “in-depth” reviews in particular sectors or policy areas (OECD, 2021[100]; 2023[101]).
Another factor holding back productivity growth is a lack of skills (Chapter 2), particularly management skills. The large productivity gap between small and large firms is partly linked to the skills of their workers (Criscuolo, Gal and Freund, 2024[102]). Portugal has one of the highest proportions of managers without a secondary diploma and managerial practices in medium-sized and large firms appear to be lagging behind those in other countries (OECD, 2023[1]). As in other OECD countries, these shortcomings have consequences for the allocation of resources, the ability to find appropriate staff, the adoption of new technologies and the development of skills (Baltrunaite, Bovini and Mocetti, 2021[103]). Surveys of management quality and organisational practices among industrial firms show that Portugal is significantly behind in adopting successful organisational delegation practices (Eurofound and Cedefop, 2020[104]).
Index scale from 0 (most competition-friendly regulatory set-up) to 6 (least competition-friendly)
Note: “OECD best performers” is the average of the five OECD countries with the least distortive regulations. "Entry regulations" refer to the regulation of new entrants to the profession while "Conduct regulations" refer to the regulation of the conduct of existing professionals.
Source: OECD (2024), Product Market Regulation indicators.
Stimulating technology diffusion and innovation
The broader diffusion of digital technologies could also enhance the efficiency of business processes. Portuguese firms, notably smaller ones, lag in adopting information and communication technologies, especially those that are well-suited to small firms, such as cloud computing (Figure 1.24). R&D expenditures are also concentrated in the capital and Norte regions (EC, 2024[42]; OECD, 2025[105]), including for European innovation funds (Santos and Conte, 2024[106]). In a welcome move, Portugal’s 2022-25 “Mobilising Agenda for Business Innovation” in the RRP aimed at accelerating the diffusion of technology and innovation, through collaborative projects. However, further progress is needed. Though Portugal’s communication infrastructure is well developed with fast and ultrafast broadband connectivity in most areas (ANACOM, 2024[107]), in small businesses, a lack of training among managers and employees and poor knowledge of support mechanisms acts as a barrier to the take-up of digital technologies (see above). Lowering the high and rapidly increasing costs of broadband and telecommunications use would also ease access for smaller firms, as broadband prices appeared above the OECD average in 2023 (OECD, 2024[108]) and continued to outpace inflation and the European average in 2024. As recommended in past Surveys, reducing switching costs and lock-in periods for consumers, as well as providing information on the quality of services could spur competition. In addition, public support could increase its focus on subsidising the cost of cloud computing and other efficiency-enhancing technologies.
2023, or latest available year
Note: Data refer to 2023 or latest available year. “Best performers” category corresponds to the average of the five countries where take-up rates are the highest.
Source: OECD calculations using OECD (2025) ICT Access and Use by Businesses (database).
1.4.2. Continuing efforts to reduce corruption
Continuing the efforts to control corruption is important to improve the business environment. Transparency International’s Corruption Perceptions Index and the World Bank’s Corruption Control Indicator placed Portugal below the median of OECD countries in 2023 and 2024 (Figure 1.25, Panels A to C). A recent survey suggests that 51% of Portuguese firms considered corruption a problem when doing business, above the EU average of 37% (Eurobarometer, 2024[109]). Moreover, business and citizens tend to have low confidence that the police or prosecutors will deal effectively with corruption (Eurobarometer, 2024[109]; 2024[110]).
Progress in the implementation of the national anti-corruption strategy for 2020-24, which aims to improve the levels of prevention, detection and prosecution of corruption, is welcome (OECD, 2024[111]; EC, 2025[112]; GRECO, 2024[113]). Overall, the OECD Public Integrity Indicators show that Portugal’s strategic framework has a broad coverage and was elaborated in a relatively participative way, but weaknesses remain in terms of adequacy of implementation structures and evaluation practices, despite a still weak lobbying framework (Figure 1.25, Panel D) (OECD, 2024[114]). Over the past two years, the new Anti-Corruption Mechanism (MENAC) has taken up the majority of its tasks. Steps were taken to ensure sufficient resources for preventing, investigating, and prosecuting corruption. New legislation on revolving doors introduced stricter penalties, a new Code of Conduct applicable to high-level officials was adopted and regulatory compliance programmes in the public sector and in private entities with fifty or more employees became mandatory (EC, 2025[112]; GRECO, 2024[113]) (Table 1.10). Portugal also established a committee for the monitoring of the implementation and implementation of the Anti-Corruption Agenda in 2024.
Going forward, Portugal should build on these efforts to further strengthen the prosecution mechanism and the capacity of the judicial system to address domestic and foreign corruption cases (Figure 1.1). Portugal has prioritised prosecuting corruption and foreign bribery cases and indicted eight natural persons and one company in two complex ongoing foreign bribery cases but never sanctioned a foreign bribery case (FATF, 2024[115]). Whistleblower protection, self-reporting, waiver of sanctions, and the mechanism for suspension of proceedings also appear perfectible (FATF, 2024[115]). Moreover, continuing efforts to ensure adequate human resources of the justice system and improve its efficiency, notably Administrative and Tax Courts, should remain a priority (GRECO, 2024[113]; EC, 2025[112]). The fines applicable to legal persons for foreign bribery should also be reviewed to ensure that they are effective, proportionate and dissuasive (FATF, 2024[115]). Though the authorities announced 32 additional intended measures to fight corruption in June 2024, which notably foresees higher fines, a strengthened whistleblower protection and increased control of lobbying activities (República Portuguesa, 2024[116]), they remain to be implemented.
Note: Panel B shows the point estimate and the margin of error. Panel C: Peers corresponds to the simple average of France, Italy, Germany and Spain. Panel D: The national anti-corruption mechanism (MENAC) is the central co-ordination function responsible for coordinating the implementation, monitoring, reporting and evaluation activities of the action plan of the National Strategy to Combat Corruption. No institution responsible for monitoring lobbying activities.
Source: Panel A: Transparency International; Panels B & C: World Bank, Worldwide Governance Indicators; Panel D: OECD anti-corruption and integrity outlook 2024.
Further measures to improve the accountability and integrity of senior public officials would also help. In particular, the effective prevention and management of conflict of interest should be made stricter, as there have been repeated reports of engagement of high-ranking public officials in the private sector, especially practicing law, while holding office due to the non-exclusive nature of their mandate (Lisi et al., 2022[117]; GRECO, 2024[113]). The Authority for Transparency, which is responsible for assessing compliance by holders of political and high public offices with rules on declarations of interest and assets, has been set up but further progress remains needed to ensure the effective monitoring and verification of asset declarations (EC, 2025[112]; GRECO, 2024[113]). After a pilot project on the legislative footprint on lobbying during the legislative process, draft laws on lobbying have been approved by the Parliament in July 2025. The approval of a Law on lobbying would be another step forward to ensure transparency in the decision-making process. A broad mechanism should be set up to ensure the transparency of all lobbying activities, in which interest groups would disclose their activities and certain categories of public officials (ministers, members of cabinet, appointed advisors, members of Parliament) would disclose their meetings with interest groups. As announced, rules and codes of conduct on how Members of Parliament engage with lobbyists and other third parties who seek to influence the legislative process should be introduced (OECD, 2021[118]).
Note: Panel A summarises the overall assessment on the exchange of information in practice from peer reviews by the Global Forum on Transparency and Exchange of Information for Tax Purposes. Peer reviews assess member jurisdictions' ability to ensure the transparency of their legal entities and arrangements and to co-operate with other tax administrations in accordance with the internationally agreed standard. The figure shows results from the ongoing second round when available, otherwise first round results are displayed. Panel B shows ratings from the FATF peer reviews of each member to assess levels of implementation of the FATF Recommendations. The ratings reflect the extent to which a country's measures are effective against 11 immediate outcomes. "Investigation and prosecution¹" refers to money laundering. "Investigation and prosecution²" refers to terrorist financing.
Source: OECD Secretariat’s own calculation based on the materials from the Global Forum on Transparency and Exchange of Information for Tax Purposes; and OECD, Financial Action Task Force (FATF).
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