Portugal and the Productivity Challenge

Note: We are expanding our Policy Bite format to include op-eds by NPPI-affiliated academics and researchers. These will be clearly labelled as individual opinion pieces, and distinguished from Policy Bites that summarize policy-relevant research articles. Today’s op-ed is by António Nogueira Leite, Deputy Academic Director of the NPPI. It was published in Portuguese on June 1st, 2026, in the Jornal de Negócios.

There are numbers that hurt more than diagnoses. In 2024, labor productivity per hour in Portugal stood at just 67% of the European Union average, and 55% of the Eurozone. For every hour worked in Lisbon, less than half is produced compared to Munich or Lyon; even relative to Madrid, the gap is around twenty percentage points. And the worst part is the trajectory of this gap. Between 2000 and 2023, Portuguese productivity grew at an anemic 0.5% per year, against 1.1% in Europe and 1.8% in the United States. We are not catching up with anyone. We are, slowly but surely, falling behind.

Changing this fate requires political courage and strategic clarity. The menu is well known, achievable, and worth recalling. First, capitalize companies before they wither away. Portugal’s productive fabric is a “cloud” of undercapitalized microenterprises — on average, three and a half workers per company. We must reward the retention of equity, encourage mergers, and dismantle the perverse incentives that reward those who stay small. Second, we must educate for the century we are living in. More than four in ten adults have not completed secondary education. Without a serious commitment to dual training, digital reskilling, and a vocational education system that is finally given the dignity it deserves, any ambition for the future is empty rhetoric. Third, we really must free the economy from the weight of the State. Bureaucracy is suffocating, the courts are slow, licensing drags on for years. Digitalizing public administration, simplifying processes, and speeding up economic justice is not a luxury — it is a condition for survival. It seems we are finally making progress on some of these fronts.
Fourth, we must also invest in knowledge that translates into value. Portugal spends 1.7% of GDP on R&D, while Europe invests 2.3%. We need to bring universities and companies together, attract international research centers, and reward innovation that reaches the market. Fifth, it is urgent to stop the exodus and attract talent. The best leave, suffocated by a tax burden that punishes merit and by the lack of careers with clear progression paths. But improving taxation alone will not resolve this imbalance: entrepreneurs must be encouraged to invest in sectors that can sustain decent wages. Less mass tourism, more advanced industry, green technologies, and high-value exportable services.
Without a sustained national effort to raise productivity — the alpha and omega of the economic policy still to be delivered — Portugal risks becoming what it has always feared: a pretty periphery of low wages and short horizons for almost everyone.