Economy

ABOUT

Portugal’s economic climate plays an essential role in how trade dependence, tourism, and energy reliance shape national growth and social equity. While tourism and urban development drive investment and employment, they also exacerbate housing pressures and regional inequalities. Coupled with climate risks, rising costs, and infrastructure centralisation, these dynamics highlight the importance of balancing economic benefits with social and environmental resilience to ensure sustainable, inclusive development across both urban and rural communities.

How does the economy shape Portugal’s communities?

Current Economic Climate

Portugal has a largely service-oriented economy and relies heavily on trading within the EU to countries like Spain, France, and Germany.

Public debt currently sits above 90% of the country's GDP but nevertheless is experiencing steady growth and declining unemployment rates (European Commission, 2025). Several main exports include electrical and motor machinery, cork, olive oil, wine, and agricultural produce.

On the flip side Portugal still depends heavily on importing energy, vehicles, and industrial machinery. As such, energy dependence is a key concern that the Portuguese government is currently aiming to rectify by investing heavily in renewables through the EU’s Recovery and Resilience funding (UN Comtrade Database, 2025).

Tourism Impact

Tourism is a fundamental component of Portugal’s modern economy, contributing approximately 20% of total GDP and fuelling wider investment, urban revitalization and job creation (WTTC, 2024).

This economic shift has also led to challenges in major cities like Porto and Lisbon, where rising housing prices and seasonal over-tourism have left significant strain on local communities and infrastructure. The growing frustration over displaced residents, rental price saturation, and the uneven distribution of tourism wealth has led to many citizens taking to the streets in protest (Reuters, 2025). As such finding a balance between the economic advantages of tourism and its impact on social equity is a key national priority.

An imbalance in home ownership can often lead to internal displacement of locals

Cost of Living

Portugal has a relatively low cost of living compared to other western European countries, however this is mostly a reflection of more modest average wages (approx. €25,000 annually), and affordability in larger cities is a growing concern (Global Residence Index, 2023).

Moreover, the gap between urban and rural prosperity remains vast as economic activity is primarily concentrated in coastal areas, in cities and with access to ports. Infrastructure is similarly centralized, making it difficult for rural communities to easily access basic facilities. Coupled with an aging rural population, agricultural fields and settlements are slowly dwindling and younger generations flock to the cities in search of higher education and innovation opportunities (OECD, 2023).