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Portugal is a small economy within the Eurozone and rely comparatively more on its export. Intra-EU trade is crucial for the Portuguese economy. It accounts for around 70% of Portugal’s exports (mostly Spain, France and Germany), and 75% of its imports.

Despite managing well relatively the epidemic within its borders, the Portuguese economy has suffered strongly from the Covid-19, impacted by the collapse in tourism inflows and foreign activity, particularly in Spain.

During the Eurozone debt crisis, the country lost access to the financial markets and was placed under a European financing and adjustment programme. Painful reforms and fiscal consolidation had borne fruit, as Portugal left the excessive deficit procedure in the summer 2017. Strong and steady economic growth between 2014 and 2019 helped to further address economic imbalances. By the end of summer 2021, economic activity had almost fully recovered from the damage inflected by the coronavirus crisis.

Structural weaknesses and legacy issues from the financial crisis remain (low potential growth, high public and corporate debt, declining but still large stock of non-performing assets). Further public and private debt deleveraging is desirable. Low potential growth, fuelled essentially by low productivity – remains a major obstacle. Addressing these challenges, through higher physical and human capital investment remain a key challenge for the country in the coming years.