Portugal

Growth driven by domestic demand and public investment despite external headwinds

In 2026 and 2027, the Portuguese economy is expected to continue to outperform its regional peers (0.8% in 2026 and 1.2% in 2027 in the eurozone). Private consumption will remain robust but is expected to grow at a more moderate pace. Despite the decline in inflation following the 2026 peak caused by soaring oil prices, household consumption is not expected to pick up again in 2027. Although the labour market will remain strong, with a low unemployment rate at around 6%, employment growth is expected to slow due to weaker migration flows following the peaks observed in 2023. Additionally, the positive effects of household income support measures will gradually fade. Geopolitical uncertainty will help keep the savings rate well above its historical average (12.5% of gross disposable income in Q1 2026). At the same time, public investment will slow as the EU-funded Recovery and Resilience Plan (RRP) comes to an end, although payments to final beneficiaries will continue to support economic activity in 2027. As at August 2026, Portugal had received EUR 17.2 billion (79% of the total RRP amount). Although the country could still receive a portion of the remaining funds by the end of the year (nearly EUR 5 billion, or 3% of GDP), persistent delays in project implementation will likely limit the actual amount received. Private investment will be supported by the continued reduction in the corporate income tax, from 20% in 2025 to 19% in 2026 and then to 18% in 2027. However, this supportive factor will be somewhat limited by tighter financing conditions following the ECB’s decision in June 2026 to increase its deposit rate to 2.25%.

The services sector (76% of GDP in 2025) is expected to remain dynamic, particularly in tourism and related activities (hotels, restaurants, retail). Despite an unfavourable environment for air travel in 2026 due to the conflict in the Middle East, tourism appears to benefit—much like Spain—from a reputation as a “safe destination.” Construction (5% of GDP) will continue to support growth, particularly in civil engineering, thanks to European funds. The residential real estate market is resilient due to the ongoing improvement in household financial health (a decline in the ratio of non-performing household mortgage loans to 0.8% in the first quarter of 2026). However, the sector will continue to face structural constraints, notably rising production costs for new housing (+7% year-on-year in June 2026) associated with a persistent labour shortage, which is holding back housing starts. Industry (15% of GDP), particularly manufacturing, will continue to be a thorn in the side of the economy. Industrial production is consistently 5% below its mid-2022 level. These results, far from being an exception in the eurozone, reflect the difficulties encountered in recent years by key sectors such as chemicals, apparel, furniture and the automotive industry.

Solid fiscal trajectory thanks to public accounts that are largely balanced

In 2026, Portugal could post a fourth consecutive budget surplus despite a fiscal policy focused on increasing public spending (public services, pensions, minimum wage), tax cuts (on income and corporations) and the introduction of relief measures following the storms that struck the country earlier this year. In addition, the government has increased defence spending by 25% (3.8 billion euros, or 1.3% of GDP) by invoking a national exemption clause, which allows for an annual increase in defence spending of 1.5% of GDP through 2028. In 2027, the fiscal stance is set to stay moderate, as maintaining a balanced budget is a top priority of the political agenda. Strong GDP growth, combined with persistent primary surpluses, will allow public debt to maintain its steady downward trajectory in 2026–2027, after having exceeded 130% of GDP at the height of the crisis in 2011. However, the Portuguese economy continues to face several structural weaknesses that will inevitably weigh on public finances in the medium term: rapid demographic ageing, low productivity and a housing crisis that is fuelling the exodus of young people.

After deteriorating in 2026, the current account surplus is expected to recover slightly in 2027 on back of lower energy costs. Exports to major markets are expected to remain broadly stable, with the slowdown in Spanish demand offset by accelerating economic activity in Germany and steady growth in France. The services surplus, driven by tourism revenue, will more than offset the structural deficit in the goods balance. Remittances from the Portuguese diaspora will continue to offset dividend repatriations by foreign investors.

Parliamentary fragmentation a harbinger of political instability

The snap parliamentary elections in May 2025 prompted by Prime Minister Luís Montenegro’s resignation following conflict of interest allegations, once again resulted in the formation of a fragmented Parliament just one year after the fall of the Socialist government. Montenegro was ultimately reappointed as head of the executive branch and now leads a center-right minority government (the Democratic Alliance, a coalition of the PSD and the CDS-PP) that holds 91 of the 230 seats in Parliament. For the first time, the far-right Chega party emerged as the main opposition force, with 60 seats, ahead of the Socialist Party (PS, 58 seats). Its leader, André Ventura, subsequently advanced to the second round of the February 2026 presidential election but was soundly defeated by the Socialist candidate António José Seguro, who was elected with nearly 67% of the vote. Chega’s rise in Parliament has led to more pragmatic relations between the traditional right and the far right, particularly on immigration issues. However, for the past two years, stability has depended on the “responsibility” of the Socialists, who agreed to abstain during voting on the 2025 and 2026 budgets, thereby enabling them to be passed. This cooperation remains fragile and circumstantial, however. In this context, it is unclear whether the 2027 budget will be passed. If rejected, snap elections may be called less than two years into the current parliamentary term. Regardless of the outcome of these negotiations, the current parliamentary fragmentation points to a period of uncertainty and possible political instability.

Payment

Cheques are frequently used in Portugal and it is common practice to establish payment plans with post-dated cheques which are payable on presentation. If the bank account is not sufficiently provisioned, they are borne by the bank up to a maximum amount of €150. In the case of bounced cheques, an individual person or a company is prohibited from receiving or issuing further cheques for a maximum term of two years (or eventually six years, if there is a court decision).

Bills of exchange are commonly used for commercial transactions in Portugal. In order to be valid, they are subject to stamp duty, the rate of which is set each year in the national budget. A bill of exchange is generally deemed independent of the contract to which it relates.

Cheques, bills of exchange, and promissory notes offer effective guarantees to creditors against defaults, as they are legally enforceable instruments which entitle debt holders to initiate “executory proceedings”. Under this process, creditors can petition the court to issue a writ of execution and notify the debtor that this has been done. When debtors still fail to settle their debts, the creditors may request that the court officer issues an attachment order against the debtors’ property.

Electronic transfers via the SWIFT network are widely used by Portuguese companies and are a quick, reliable and economic means of payment. If the buyer fails to make a transfer, the legal recourse is to institute ordinary or summary proceedings, based simply on an unpaid invoice.

In the event of a payment default, creditors are not required to issue a protest notice before bringing an action to court, but such a notice can be used to publicise the matter and thus put pressure on debtors to honour their obligations, albeit belatedly.

Debt Collection

Amicable phase

Amicable collection begins with the debtor being sent four demands for the payment of the principal amount. Interest on the principal can be requested, but is normally difficult to collect in Portugal. Payment agreements subsequently made between creditors and debtors can include guarantees to ensure payments will take place as agreed.

Interest rates are set by the Treasury Department. The rates are published in the Diário da República during the first fortnight of January and July each year, and are applicable for the following six months. These interest rates are applied by default, unless the parties involved in a commercial agreement have contracted otherwise.

Legal proceedings

Fast-track procedure

The order to pay procedure (Injunção), which is applicable to uncontested commercial claims, was established in March 2003. These proceedings, whatever the amount involved, are heard by the court in whose jurisdiction the obligation is enforceable, or the court where the debtor is domiciled. Since September 2005, these injunctions can also be served electronically.

The National Injunctions Office (Balcão Nacional de Injunções, BNI) has exclusive jurisdiction throughout the country for the electronic processing of order to pay procedures.

Ordinary proceedings

In cases of disputed claims, creditors can initiate formal, but more costly, declarative proceedings (acção declarativa), to obtain a ruling which establishes their right to payment. Once the claim is filed with the court and the debtor notified, a defence can be filed within 30 days. Failure to reply entitles the court to deliver a default judgment. If the judge rules in favour of the creditor, the court may order damages, if requested by the demanding party. They then need to initiate “executive proceedings” (acção executiva) to enforce the court’s ruling.

Under the revised Code of Civil Procedure, any original deed established by private seal (i.e. any written document issued to a supplier) in which the buyer unequivocally acknowledges his deb, is deemed to be an agreement that is enforceable by law. Since 2013, when the most recent revision of the Code of Civil Process was made, written signed payment plans can only be used to initiate executory proceedings when they have been recognised by a notary.

In the scope of the recent restructuring of Portuguese courts which has been ongoing since 2014, more courts specialising in commercial issues have been created. The number of Courts of First Instance has been reduced to 23 (in each district capital), while there are now 21 specialised courts (Secções de Competência Especializada) for commerical issues (secção de Comercio), commercial issues. These latter sections deal specifically with insolvencies and commercial company matters. During this same period, 16 sections specialising in Enforcement Procedures (Secções Especializadas) have also been created.

Legal actions in Portugal can take several years, depending on the complexity of the case. Enforcement proceedings can be faster, depending on the existence of assets.

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Enforcement of a Legal Decision

Once all avenues of appeal have been exhausted, a judgment normally becomes final and can be enforced. If the debtor fails to comply with the decision, the creditor can request compulsory enforcement mechanisms before the court – either through an Attachment Order, or by allowing payment of the debt to be obtained from a third party which owes money to the debtor (Garnishee Order).

Foreign awards rendered in other EU countries benefit from specific enforcement mechanisms, such as the European Enforcement Order (which can be used if the claim is undisputed), or the European Small Claims Procedure. Awards rendered in non-EU countries must be party to a bilateral or multilateral agreement with Portugal on the recognition and enforcement of court decisions.

Insolvency Proceedings

Out-of court

A special extrajudicial administrative procedure (Regime Extra Juditial de Recuperação de Empresas, RERE) came into effect on July 1, 2017. This procedure for restructuring company debts is carried out by specialised mediators. It has been designed to enable creditors and debtors to reach a compromise, in a confidential and consensual manner.

Restructuring proceedings

The reforms implemented in 2012 included the introduction of a special rescue procedure (Processo Especial de Revitalizaçao, PER). The aim of this new procedure is to ensure the recovery of debts from debtors that are in a ‘difficult economic situation’ without starting an insolvency procedure. The management is obliged to request permission from the provisional judicial administrator in order to perform “particularly relevant acts”. During this process, the administrator prepares a recovery plan which must be approved by the creditors and a judge.

Bankruptcy

Insolvency law in Portugal also provides for insolvency proceedings (Processo de Insolvência). The main goal of these proceedings is to obtain payment for the company’s creditors through the implementation of an insolvency plan. Insolvency plans can be established under which the company is restructured and can continue to operate. Should this prove unfeasible, the insolvent’s estate is liquidated, and the subsequent proceeds are distributed among the creditors.

Last updated:August 2026