Brussels names high debt and low productivity as some of Portugal’s biggest problems

The European Commission on Tuesday pointed to high public and private debt and low productivity as the biggest macroeconomic challenges facing the Portuguese economy, highlighting the “strong combination of reform and investment” envisaged in the Recovery and Resilience Plan (PRR).

The position is contained in information released on Tuesday by the community chief executive in the country chapter as part of the second annual report on the implementation of the Recovery and Resilience Facility, an instrument for reform and investment of €800 billion across the EU. , of which 22.2 billion belong to Portugal.

“Among the main macroeconomic problems of the Portuguese economy are high levels of public and private debt and weak productivity growth, constrained, among other things, by relatively low levels of investment. […]low R&D intensity [investigação e desenvolvimento]low general level of qualifications among the population and a business environment hampered by ineffective judicial systems and regulatory restrictions,” the institution lists.

Highlighting the “transformative impact” of the Portuguese PRR, Brussels notes that the plan “is the result of a powerful combination of reforms and investments that respond to Portugal’s specific challenges.”

“Reforms address bottlenecks that impede long-term and sustainable growth, while investments address barriers to productivity and potential growth, such as restrictions on regulated occupations and gaps in human capital, including digital skills and education. as well as strengthening public financial management and the efficiency of public administration and the judiciary,” the European Commission says.

In addition, “other important reforms and investments that support income convergence and the restoration of productivity and competitiveness of the Portuguese economy include those aimed at supporting the capitalization of companies, business research, innovation and digitalization, as well as the ecological transition, namely by supporting the reconstruction and improving the energy efficiency of buildings.”

“Finally, the Portuguese plan includes measures aimed at increasing the responsiveness and efficiency of health and long-term care services, as well as measures regarding housing affordability,” the institution concludes.

The European Commission also reminds Portugal that “all measures must be implemented within a short time frame, as the regulation creating the Recovery and Resilience Framework requires that all stages and targets of national plans be completed by August 2026.”

At the end of May last year, Portugal submitted to the European Commission its proposal to reprogram its PRR, the allocation for which now stands at 22.2 billion euros.

Brussels was due to assess the amended plan by the end of July to see whether it meets assessment criteria, but it has agreed with Portuguese authorities to extend that date and an assessment is expected shortly.

Taking into account the proposed changes, the total allocation will be 22.2 billion euros, including 16.3 billion euros in grants and 5.9 billion euros in loans.

This change also includes financial allocations from the European energy program RepowerEU (€704 million), as well as an unused portion of the Brexit adjustment reserve (€81 million).

In total, with the proposed reprogramming, the Portuguese PRR increases from 115 to 156 measures, from 31 to 43 reforms and from 83 to 113 investments, for a total of 501 targets to be achieved by the first half of 2026.

The implementation of the RDP continues at the level of 17% of the benchmarks and targets agreed with Brussels.

So far, the country has received 4.07 billion euros in grants and 1.07 billion euros in loans.