Portugal

Portugal is located in Southern Europe on the Iberian Peninsula. Covering an area of 92,212 km², it ranks as the 15th largest European country by area. As of January 1st, 2023, according to data from the Portuguese National Statistics Institute, the population in Portugal is 10.3 million, with a modest increase of 0.2% from the previous year. The capital, Lisbon, has 547,733 inhabitants, or 5.3% of the total population, while the Lisbon metropolitan area includes 2.8 million people (27% of the population). Other important cities include Porto (214,349 inhabitants), Vila Nova de Gaia (300,035 inhabitants), and Amadora (175,857 inhabitants).

Economic Situation

Portugal’s GDP in 2023 is estimated at €284.4 billion, with growth of +2.6% from 2022. The per capita GDP is approximately €27,500.

In 2023, FOB exports amounted to €71.2 billion, while CIF imports reached €104.3 billion, generating a trade deficit of €33.1 billion. Exports increased by +6.5% from the previous year, while imports grew by +4.2%.
The balance of payments recorded a deficit of €11.5 billion in 2023, an improvement from the €12.1 billion recorded in 2022. The public deficit for 2023 was estimated at €4.5 billion, or 1.6% of GDP. Public debt as of December 31, 2023, reached €263.4 billion, equivalent to 93% of GDP.
Foreign Direct Investments (FDI) in Portugal reached €5.8 billion in 2022, a 14% increase from the previous year. In the foreign exchange market, the average exchange rate in 2023 was €1 to $1.1.
Inflation in December 2023 was +6.1% compared to December 2022, driven by increases in food and energy prices. The unemployment rate in December 2023 stands at 6.2%, down from the previous year. Youth unemployment (ages 15-24) is higher at 14.5%.
The average gross monthly salary in 2023 was approximately €1,520, while the average net salary was €1,130. The legal minimum wage was set at €1,200 per month starting January 2024, up from €1,135 in 2023. According to Eurostat, about 19% of the Portuguese population was at risk of poverty or social exclusion in 2022, a slight decrease from previous years.

Forecasts

The National Forecasting Commission has estimated economic growth of 2.9% for 2024, with expected GDP growth of 3.1% in 2025. Inflation is projected to decrease to 4.5% in 2024 and to 3% in 2025.

Forecasts indicate that the Portuguese economy will continue to benefit from strong private consumption and investment supported by European funds, contributing to sustainable growth in the medium term. However, challenges related to inflation and competitiveness remain.

Country Risk

Portugal presents a moderate country risk, with a stable political environment and a solid banking system. However, the twin deficits (budget and current account) and high public debt could negatively affect long-term economic stability.

Foreign Direct Investments

In 2022, FDI in Portugal was primarily concentrated in the services, industry, and real estate sectors. Major investors include Spain, France, and Germany. Portugal is expected to continue attracting investments, particularly in the renewable energy and technology sectors, thanks to favorable policies and government incentives.

Geopolitical Analysis

Although Portugal is relatively small in terms of population and economy, it occupies a strategic position in the European and Atlantic geopolitical context, influenced by its colonial history, relations with the European Union (EU), and its geographic location between Europe and the Atlantic.

Role in the European Uniuon

Portugal is a founding member of the Eurozone and a strong supporter of European integration. Its accession to the EU in 1986 was a turning point for the country’s economic and political development, enabling Portugal to modernize its infrastructure and integrate more deeply into global markets. Portugal benefits from European structural funds, particularly for regional development, and its economy is heavily dependent on intra-EU trade. However, it is one of the most highly exposed countries to external debt in the Eurozone, making it vulnerable to potential financial crises. Politically, Lisbon has taken a pro-European stance even during crises, such as the sovereign debt crisis of 2011-2014, when it adhered to austerity measures imposed by international creditors (the so-called “Troika”: ECB, IMF, and EU). Generally, Portugal maintains a mediating position within the EU, supporting a balance among major European powers, particularly France and Germany, and seeking to promote greater cohesion within the bloc.

Transatlantic relations and NATO

Portugal has a longstanding tradition of transatlantic ties, reinforced by its membership in NATO since the organization’s founding in 1949. Portugal’s geopolitical importance in NATO lies in its Atlantic location, with the Azores archipelago serving as a strategic bridge between Europe and America. The Azores airbase is of particular interest to the U.S. military and for NATO joint operations. Bilateral relations with the United States are strong, although Portugal has maintained an independent stance on certain foreign policy issues (e.g., it did not participate in the 2003 invasion of Iraq). Nonetheless, it remains a key strategic ally for the United States both militarily and economically and is a supporter of cooperation between NATO and the EU on defense matters.

Relations with the Lusophone world and Africa

One of Portugal’s unique features is its connection with the “Lusophony,” the community of Portuguese-speaking countries (CPLP), which includes Brazil, Angola, Mozambique, and East Timor, among others. Portugal maintains close relations with these countries both diplomatically and commercially, benefiting from its historical role as a former colonial power. Notably, Brazil is a strategic partner for Lisbon in economic and cultural terms. In Africa, Portugal has strengthened its presence in former colonies such as Angola and Mozambique, which in recent decades have experienced significant economic growth thanks to natural resources (especially oil and gas). Portuguese companies are particularly active in the construction, telecommunications, and finance sectors in these countries. Despite some past tensions related to the colonial period, Portugal is now considered a respected partner in these nations.

Geopolitical challenges post-covid and impact of the war in Ukraine

The Portuguese economy was severely affected by the COVID-19 pandemic, primarily due to its strong dependence on tourism, which represents a significant portion of national GDP. The economic crisis generated by the pandemic highlighted the country’s vulnerability to external shocks, such as dependence on European funds and global economic stability.

Moreover, the war in Ukraine has had an indirect impact on Portugal, particularly in the energy sector. Although Portugal does not depend directly on Russian gas like other European countries, rising energy prices have affected the national economy, and the government has had to implement measures to mitigate the effects on citizens and businesses. Geopolitically, Portugal has supported EU sanctions against Russia and has welcomed Ukrainian refugees, maintaining a stance of solidarity with European and transatlantic allies. However, the country also seeks to balance its participation in European security issues with its traditional neutrality policy in some international conflicts.

Migration policy and security

Portugal is one of the EU countries that has adopted relatively open migration policies in recent years, mainly to counter demographic decline and labor shortages in certain sectors. The country has also been praised for its handling of refugee admissions, though migratory pressure, particularly from North Africa, remains a challenge. In terms of security, Portugal is considered a stable country, with a low level of terrorist threats compared to other European countries. However, its geographic position on the western border of Europe and its long Atlantic coast makes it vulnerable to drug trafficking and international organized crime, problems the government seeks to combat through closer cooperation with European and international security forces.

Relations with China

In recent years, Portugal has developed increasingly close economic ties with China, particularly through Chinese investments in critical infrastructure, such as in the energy and port sectors (Port of Sines). These investments have raised concerns among some Western allies, especially for the potential impact on the country’s security and strategic independence. However, Portugal has sought to balance attracting foreign investment with protecting its strategic interests, remaining a reliable partner within NATO and the EU.