The Portuguese economy grew 3.1% in 2023 and 2.1% in 2024, according to the latest data from the National Statistics Institute. Growth this year is expected to reach 2%, and projections for the coming years point to increases between 2% and 2.5%. But could the economy outperform expectations and repeat the excellent results of 2023? The report by the Center for Applied Studies of CATÓLICA-LISBON, which I presented this week at the Portugal Capital Markets Day, suggests that it can, as there are structural conditions in place to launch a strong cycle of private investment. This investment cycle is rooted in Portugal’s competitiveness in infrastructure and innovation potential, topics the study examined in depth.
Let us begin with present-day Portugal and the performance of the economy from 2022 to 2025, a period during which cumulative growth reached 12.2%, twice the European average. This growth can be explained by an increase in employment of more than 6%, reaching a record of 5.3 million workers. Such growth was only possible due to an annual increase of roughly 100,000 in the resident population, the result of a positive migratory balance of 150,000 people, which more than offset the demographic deficit, leading to an annual increase of 1.5% in the employed population. It is important to note that, in the field of immigration, Portugal enjoys a significant advantage over other countries: 75% of its immigrants come from culturally similar backgrounds, and 50% share the same language, making integration in the labor market easier.
It is remarkable that this growth was achieved despite a restrictive fiscal policy, with budget surpluses every year since 2023 and the fastest reduction in public debt on record falling from over 131.5% of GDP in 2016 to close to 90% in 2025. With employment at record highs and unemployment below 6%, savings are increasing, and the share of the population at risk of poverty or social exclusion fell to under 20% in 2024, a figure below the European average.
The growth potential of the Portuguese economy, supported by knowledge-related factors and rising employment, already stands above 2.5%. However, investment remains the Achilles’ heel of the Portuguese economy. If investment increases, the economy could grow above 3% in a sustained manner. This is where the report examines Portugal’s infrastructural and innovation advantages. Contrary to the traditional view of an economy heavily dependent on tourism and low-cost labor, Portugal is now modern and competitive in key dimensions aligned with Europe’s investment priorities. This is the analysis of Portugal’s future.
Portugal’s competitiveness in renewable energy production stands out immediately, with a uniquely strong position in three areas: hydropower, wind, and solar. This energy mix already allows the country to produce 75% of the electricity it consumes and 35% of total energy consumption, ensuring energy costs for industrial clients that are below the European average. This is a key competitive factor for reindustrialization and, in particular, for investments linked to the digital economy. Added to this is Portugal’s leadership in fiber-optic telecommunications penetration with more than 95% of households covered full national 5G coverage, and privileged data connections through submarine cables linking the Americas and Africa, positioning Portugal as an interconnection hub for the digital economy and boosting investments in data centers and technologies associated with the energy transition.
Portugal’s structural advantages also extend to natural resources. Portuguese reservoirs currently show high water availability around 80% and above the historical average at a time when the rainy season approaches. Portugal will have sufficient water for the next economic cycle of three to four years, supporting energy production and the expansion of irrigated agricultural areas, a process that has advanced particularly in the south with Alqueva and has driven a revolution in agricultural productivity in recent years. Portugal should also capitalize on its unique natural assets, namely its forests (essential for sectors such as paper pulp, cork, olive oil, and wine, where the country holds strong global positions), its vast exclusive economic maritime zone, and its lithium reserves, the largest in the European Union.
Another transformation highlighted by the study is the explosion of human capital since the year 2000. Between 2000 and 2025, the proportion of the population with higher education more than tripled, raising the qualification level of the Portuguese workforce between ages 18 and 45 to the European average. Portugal has also been the European country that, in recent years, most increased the number of students enrolled in higher education, boosted by the growing internationalization of its universities, particularly in business, engineering, and science schools. Management studies offer a clear example of this potential: half of the 3,000 students at CATÓLICA-LISBON are now international. This reflects another of Portugal’s strengths in the global context. The country has competitive advantages in attracting qualified talent and has benefitted from strong growth in skilled immigration and in the arrival of high-net-worth individuals, placing Portugal among the top global destinations for expatriates and millionaires.
The third anchor of Portugal’s transformation is the vibrant innovation ecosystem the country has developed in recent years. Innovation hubs now enrich several Portuguese cities beyond Lisbon, with multinational competence centers and research clusters emerging throughout the country, particularly in Porto, Braga, Aveiro, Coimbra, and Évora. Portugal now produces science of global quality and has built an ecosystem capable of transferring technology to the market and fostering startups and scaleups which, although global in scope, establish their competence centers in Portugal.
The Portuguese economy is therefore much more than tourism and immigration. It is talent and innovation materialized in innovation hubs distributed across the country, strengthening different sectors and regions. And there is one region, Sines, with the potential to become a global industrial and digital hub, thanks to its deep-water port, access to renewable energy, and excellent energy and digital connections. The recent announcements of large energy, industrial, and digital investments in Sines come as no surprise.
It is true that the geopolitical context is challenging. But Portugal presents favorable conditions to compete in an era in which Europe seeks to reaffirm its strategic and industrial autonomy. Portuguese industry (footwear, textiles, metalworking, among others) spent 20 years modernizing after the competitive shocks of the Euro and globalization and now benefits from the near-shoring movement of European value chains.
The report we developed presents a “glass half full” view of Portugal’s future, focused on structural and competitive factors. In the daily noise of small political scandals, we often forget to focus on what truly matters. It is no coincidence that the Portuguese economy has outperformed the European average since 2022. And there is hope that this momentum may continue and even strengthen, not hope based on illusion, but hope grounded in structural conditions that reinforce the economy’s competitiveness and its ability to keep attracting talent and investment, creating value in a sustainable way.
Filipe Santos, Dean of CATÓLICA-LISBON