2019 Index of Economic Freedom

Portugal

overall score65.3
world rank62
Rule of Law

Property Rights71.5

Government Integrity59.5

Judicial Effectiveness64.3

Government Size

Government Spending35.6

Tax Burden59.9

Fiscal Health69.8

Regulatory Efficiency

Business Freedom79.7

Labor Freedom44.3

Monetary Freedom83.0

Open Markets

Trade Freedom86.0

Investment Freedom70.0

Financial Freedom60.0

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Quick Facts
  • Population:
    • 10.3 million
  • GDP (PPP):
    • $313.4 billion
    • 2.7% growth
    • 1.2% 5-year compound annual growth
    • $30,417 per capita
  • Unemployment:
    • 8.9%
  • Inflation (CPI):
    • 1.6%
  • FDI Inflow:
    • $6.9 billion

Portugal’s economic freedom score is 65.3, making its economy the 62nd freest in the 2019 Index. Its overall score has increased by 1.9 points, with an improvement in fiscal health far outweighing declines in judicial effectiveness and business freedom. Portugal is ranked 30th among 44 countries in the Europe region, and its overall score is below the regional average but above the world average.

Over the years, despite sound institutions that contribute to an efficient business framework and independent judicial system, Portugal’s indebted and inefficient public sector has worn away the private sector’s dynamism and reduced the economy’s overall competitiveness. The current center-left government has done little to stop this deterioration, leaving many right-leaning and classical liberal voters disenchanted. With growth rates now stabilizing in low but positive territory, there are opportunities for freedom-enhancing reforms that can increase foreign investment and create new jobs.

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Background

Portugal returned to democracy in 1976 and joined the European Union in 1986. Former Lisbon Mayor António Costa, a Socialist, has been prime minister since his leftist coalition defeated the previous center-right coalition in 2015 parliamentary elections. Terminating many of his predecessor’s austerity reforms increased his popularity at the expense of rivals. Portugal’s increasingly services-based economy continues to recover from the European financial crisis. Leading sectors include financial services, telecommunications, and a buoyant tourism industry. Chinese investments have increased steadily, and a Chinese state-owned enterprise launched a €9 billion takeover bid for Portugal’s largest utility and main energy provider in 2018. Unemployment has reached its lowest point since 2002, but joblessness among youth remains persistently high.

Rule of LawView Methodology

Property Rights 71.5 Create a Graph using this measurement

Government Integrity 59.5 Create a Graph using this measurement

Judicial Effectiveness 64.3 Create a Graph using this measurement

It is fairly easy to register property online. According to the World Bank’s 2018 Doing Business report, registration involves just one procedure and takes only one day on average to complete. The constitution provides for the independence of the judiciary, which is generally respected by the executive branch. The country continues to struggle with corruption, and legal safeguards to counter it appear to be ineffective.

Government SizeView Methodology

The top personal income tax rate is 48 percent, and the top corporate tax rate is 23 percent. Other taxes include a value-added tax. The overall tax burden equals 34.4 percent of total domestic income. Over the past three years, government spending has amounted to 46.3 percent of the country’s output (GDP), and budget deficits have averaged 2.5 percent of GDP. Public debt is equivalent to 125.6 percent of GDP.

Regulatory EfficiencyView Methodology

The overall regulatory framework is efficient. Rules regarding the formation and operation of private enterprises are relatively straightforward. Despite reform efforts, labor regulations on dismissals and the use of temporary contracts remain burdensome and costly. Although some state-owned enterprises have been privatized in recent years, the continuing inefficient operation of remaining SOEs such as transport and water requires ongoing subsidization.

Open MarketsView Methodology

The combined value of exports and imports is equal to 85.2 percent of GDP. The average applied tariff rate is 2.0 percent. Portugal implements a number of EU-directed nontariff trade barriers including technical and product-specific regulations, subsidies, and quotas. In general, the government does not discriminate against foreign investment. About 94 percent of adult Portuguese have access to an account with a formal banking institution.

Country's Score Over Time

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Regional Ranking

rank country overall change
1Switzerland81.90.2
2Ireland80.50.1
3United Kingdom78.90.9
4Iceland77.10.1
5Netherlands76.80.6
6Denmark76.70.1
7Estonia76.6-2.2
8Georgia75.9-0.3
9Luxembourg75.9-0.5
10Sweden75.2-1.1
11Finland74.90.8
12Lithuania74.2-1.1
13Czech Republic73.7-0.5
14Germany73.5-0.7
15Norway73-1.3
16Austria720.2
17Macedonia71.1-0.2
18Latvia70.4-3.2
19Bulgaria690.7
20Malta68.60.1
21Romania68.6-0.8
22Cyprus68.10.3
23Poland67.8-0.7
24Armenia67.7-1.0
25Belgium67.3-0.2
26Kosovo670.4
27Albania66.52.0
28Spain65.70.6
29Slovenia65.50.7
30Portugal65.31.9
31Hungary 65-1.7
32Slovakia65-0.3
33Turkey64.6-0.8
34Serbia 63.91.4
35France63.8-0.1
36Italy62.2-0.3
37Bosnia and Herzegovina61.90.5
38Croatia61.40.4
39Montenegro60.5-3.8
40Moldova59.10.7
41Russia58.90.7
42Belarus57.9-0.2
43Greece57.70.4
44Ukraine52.30.4
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