PORTUGAL: An Introduction to Public Law
Economic, Legal and Political Trends in 2025
For observers of the Portuguese economy, the start of 2025 has been a case of déjà vu, with figures very reminiscent of early 2024 despite some grounds for looking to the future with a little more enthusiasm.
The global geopolitical context is even more perplexing and complex than it was in 2024, with two very strong world powers - the United States of America and Russia – now seeking to reaffirm themselves, taking us back in time, with the only advantage being that Europe will perhaps be forced to unite and reposition itself in the global context, with Portugal naturally having to follow this same position.
Upcoming Portuguese elections
In political terms, 2025 in Portugal will be marked by three very important electoral moments.
March 23rd will see the elections for the Regional Legislative Assembly of Madeira, followed by the elections for the National Parliament on May 18th. And Portuguese citizens will then vote again in September or October – the final date has not yet been set – for the municipal bodies.
Elections are pivotal events that always have significant impacts on a country’s economic trajectory and these elections, especially those for the Madeira Regional Legislative Assembly and for the National Parliament, are two of the most relevant in the Portuguese context, since they will determine the political party that will lead Madeira’s regional government and the national government, respectively.
These two elections were scheduled unexpectedly, after the Madeira government and, more recently, the national government fell, the former after a motion of censure was voted in favour, and the latter after a motion of confidence was rejected.
These two sets of elections may lead to a change in the structural economic policies pursued to date, if there is any change in the political parties leading Madeira’s and the nation’s governments. It is important to note that competition between the left and right-wing parties is very tight since they are neck and neck in most polls, and it is thus impossible to predict which parties will win, as well as if the winning party in the Madeira will repeat this feat at the national level just two months later.
Positive economic signs
Despite the start of 2025 being marked by elections, which will be decisive for the country’s most important projects, and which always create critical moments to reflect on major strategic decisions and projects for the country, the economic signs are positive.
Recently, and as a result of the work carried out by the Portuguese government, which took office at the beginning of April 2024, the financial rating agency Standard & Poor’s (S&P) once again revised the risk rating given to Portugal’s debt upward, raising the rating from A- to A.
According to the agency, this development reflects confidence in the trajectory of the Portuguese economy and its ability to sustain itself in the medium term. In the official press release, S&P points out that “the positive outlook reflects our view that the Government’s solid policy track record, together with the trends supporting the economy’s external position - as reflected by the current account surpluses, despite global macroeconomic uncertainty - and the decrease in public debt as a percentage of GDP, could lead to a positive rating action over the next 24 months”.
The rating upgrade by S&P reinforces the already positive assessment of the decrease in Portuguese public debt by other international agencies and confirms the stability of national finances.
The Recovery and Resilience Plan and infrastructure investment
Despite the ongoing election period for the National Parliament, the current government, notwithstanding being in a pre-election period, assured, shortly after the date for the elections was set, that it will conclude all the contracts and launch all the tenders necessary to implement the Recovery and Resilience Plan (PRR), regardless of the dissolution of Parliament. And it has also guaranteed that it will continue to meet the milestones and targets for the seventh payment request, which should be completed next April.
The Portuguese government thus maintains its commitment to the execution of all PRR grants by 31 December 2026. The implementation of the milestones and targets relating to the seventh payment request is at an advanced stage and is expected to be completed in April. By then, Portugal will have reached 46% of the PRR’s milestones and targets.
Furthermore, with regard to the projects that, under the reprogramming, no longer receive funding from the PRR, the Portuguese government has also guaranteed that none of the works that are no longer funded by the PRR will cease to be carried out (only the source of their funding will change) and they will now benefit from European funds from the Portugal 2030 European funding programme and from the State Budget itself.
In addition to the commitment to fulfil the PRR, the current government, committed to the national goal that the economy will not stop, is insisting that it will continue to work to ensure that major infrastructure projects do not suffer any set-backs due to the pre-election period.
Before the motion of confidence was rejected, the government had approved the major strategic priorities for the years ahead and had also approved decisions and investments worth more than EUR7.4 million in the country.
With regard to railways, the National Rail Plan to be carried out by Infraestruturas de Portugal was announced, with a priority focus on developing the high-speed rail network currently underway (Porto-Lisbon, Porto-Vigo and Lisbon-Madrid), as well as the conventional rail network.
The biggest investment announced (in value terms) was the “Water that Unites” plan, which includes a total of 294 measures to be implemented from the North to the South of the country, and which will require an investment of EUR5 billion by 2030. Among the measures approved is the study and construction of new dams and new multi-purpose developments in the Middle Tagus and Mondego rivers.
Defence
Finally, a strong focus continues to be maintained on the defence sector due to Russia’s invasion of Ukraine and the new political positioning that the United States is seeking to implement.
In Portugal, the current government focus on the defence sector has increased substantially compared to previous years. Given concerns over the development of the technological and industrial base of national defence, significant investments have already been made in the modernisation of military goods and equipment, with some relevant acquisitions currently underway.
Simultaneously, at EU level, there has been a huge focus on European defence, which will have to be accompanied by action from the different member states. An investment of at least EUR800 billion is expected to be mobilised under the “plan to rearm Europe”, already approved by the EU’s heads of state and government at the extraordinary summit held at the beginning of March and next steps are now being discussed to be approved in the summit already scheduled for June.
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In view of the above, while one might expect a certain degree of temperance until May 2025 with the elections for the new National Parliament, with so many important projects in the pipeline, it is expected that from the second quarter of the year onwards, Portugal will be very active in terms of structuring investments for the country’s economy.