Portugal

   
 

Key Challenges

 
Portugal faces six key challenges:
 
The first challenge is the capacity to govern with foresight. Portugal scored poorly in several areas related to strategic foresight and anticipatory innovation, societal consultation, impact assessment, and ex post policy evaluation. While efforts are underway to address these weaknesses, they continue to affect the quality of policymaking and the ability to address future problems. Enhancing capacity-building and accountability within public administration, promoting stakeholder engagement for diverse perspectives, and establishing transparent monitoring and reporting mechanisms are essential. Fostering a culture of learning and adaptation within government institutions will be key to improving policymaking effectiveness and sustainability.
 
The second challenge is the gap between government measures and actual policy delivery. Although Portugal produces ambitious programs and plans, these frequently fall short in terms of implementation. This recurring issue has persisted across successive governments.
 
The third challenge is the significant decline in the sustainability of key public services, particularly in education and health. This issue is partly a consequence of the first two challenges. The aging workforce in these fields was identified long ago. However, weaknesses in governance with foresight, along with the gap between planning and implementation, have resulted in these issues not being adequately addressed in a timely manner. Consequently, there has been a considerable decline in the quality of these public services.
 
The fourth challenge is Portugal’s aging population. In 2023, Portugal had the second-highest median age in the EU-27 at 47 years, surpassed only by Italy (Eurostat, 2024). Moreover, its old-age dependency ratio (population 65 or over to population 15 to 64) is the highest in the EU-27 at 38% (Eurostat, 2024). The country has done little to address both the causes and consequences of this demographic crisis.
 
The fifth challenge involves Portugal’s economic model, characterized by low wages and high youth unemployment, which fosters continued high levels of emigration. The profile of emigration is also changing to include those with higher qualifications, in addition to those with lower qualifications who have traditionally been the main source of emigration.
 
The sixth challenge concerns the lack of progressivity in taxation. Research on the distributional effects of indirect taxes in Portugal highlights fiscal policies that could markedly enhance tax progressivity. For instance, Araujo (2019) provides valuable insights into these policies. Additionally, the Organisation for Economic Co-operation and Development recommends two approaches to enhance fiscal justice in Portugal: the implementation of a combination of inheritance and gift taxes along with progressive capital income taxes, and the establishment of a comprehensive global wealth tax (OECD, 2018).
Citations:
Araújo, A. 2019. “The Distributional Effects of Indirect Taxes in Portugal.” Master Thesis in Economics from the NOVA – School of Business and Economics. https://run.unl.pt/handle/10362/66382

OECD. 2018. The Role and Design of Net Wealth Taxes in the OECD. Paris: OECD Publishing. https://doi.org/10.1787/9789264290303-en

OECD. 2020. Innovative Citizen Participation and New Democratic Institutions: Catching the Deliberative Wave. Paris: OECD Publishing. https://doi.org/10.1787/339306da-en
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