Economy

Portugal Leads EU with One of Its Strongest Economic Convergence Cycles

26 Nov 2024 min reading

Portugal is experiencing one of the most robust economic convergence cycles in the European Union (EU), with its economy consistently outpacing the bloc’s average growth rate. According to the European Commission’s Autumn Economic Forecasts, Portugal’s gross domestic product (GDP) is expected to grow by 1.7% in 2024—almost double the anticipated EU average of 0.9%. This marks the third consecutive year of above-average growth, with projections indicating this trend will continue until at least 2026.
The Commission’s forecasts suggest that Portugal’s GDP could rise by 1.9% in 2025 and 2.1% in 2026, compared to the EU averages of 1.5% and 1.8%, respectively. This sustained momentum underscores a remarkable five-year economic convergence cycle for Portugal, one of the longest in the Union. Beyond this, Eurostat data shows that since 2016, excluding the COVID-19 pandemic years, Portugal has consistently grown above the EU average. This points to a potential decade-long period of convergence, further cementing its position as one of the bloc’s standout performers.
Driving this growth is a combination of internal and external factors. Private consumption, buoyed by real wage increases, is expected to remain a key contributor to economic activity. Additionally, the accelerated implementation of Portugal’s Recovery and Resilience Plan (PRR) is forecasted to fuel investment, providing a critical boost to domestic demand. While tourism—a cornerstone of Portugal’s economy—may contribute less to growth compared to previous years, it remains an important pillar of economic stability.
Portugal’s resilience has also been evident in its ability to weather recent challenges better than most EU countries. While the COVID-19 pandemic and the Ukraine war disrupted economies across the continent, Portugal’s recovery was notably swift. Between 2020 and 2023, its economic performance consistently outpaced the EU average. Looking ahead, forecasts suggest that Portugal will maintain a 1.5 percentage point growth advantage over the EU average between 2024 and 2026.
However, the European Commission cautions that risks to these optimistic projections remain significant. Geopolitical tensions, particularly the ongoing conflicts in Ukraine and the Middle East, could exert downward pressure on growth across the EU. While the broader European economy is gradually recovering from stagnation, as described by EU Economy Commissioner Paolo Gentiloni, growth remains modest and vulnerable to external shocks.
For Portugal, this period of economic convergence represents a remarkable achievement, highlighting its ability to leverage domestic strengths and navigate international challenges effectively. Should the forecasts hold, Portugal will not only consolidate its position as a leader in the EU’s convergence process but also lay a strong foundation for sustainable growth in the coming years.

Economy