Title page
Contents
Foreword 4
Executive Summary 10
1. Key policy insights 15
The COVID-19 crisis is threatening social and economic progress 16
Mitigating the social and economic impact of the pandemic 19
The COVID-19 outbreak has triggered a major health crisis 19
The economic recovery is fraught with risks 22
Policy support should continue, but adapt to the evolution of the pandemic 28
Strengthening macroeconomic fundamentals for a sustainable recovery 38
Improving the sustainability and the quality of public finances 38
Further enhancing the stability of the financial system 42
Policy reforms for more inclusive and greener growth 46
Tackling in-work poverty 46
Strengthening social assistance 48
Improving housing affordability 49
Adapting long-term care to fast population ageing 50
Moving towards a green and sustainable economy 52
Ramping up efforts to fight corruption and money laundering 55
References 61
Annex 1.A. Progress on structural reforms 66
2. Getting the most of the digital transformation 67
Portugal needs to accelerate the digital transition 68
The digital transition can foster resilience and growth, but risks increasing inequalities 68
A large share of the population lacks digital skills 71
Firms' uptake of digital tools remains uneven 73
The COVID-19 crisis has accelerated some changes in firms' business models 74
The COVID-19 crisis can exacerbate existing gaps in digital innovation 76
A successful digital transition hinges on the effective implementation of the Action Plan for Digital Transition 78
Securing a safe and high-quality digital environment for all 79
Providing affordable access to high-quality communication infrastructure 79
Promoting the effective and inclusive development of digital government 83
Fostering digital security and improving users' perceptions 86
Equipping workers with the skills needed in a digital economy 89
Providing foundational and digital skills to all 90
Strengthening schools' capacity for ICT use for teaching 91
Addressing shortages in ICT and other STEM fields 92
Promoting adult education 95
Addressing barriers to the successful digital transition of SMEs 99
Increasing awareness and management competences 100
Removing barriers to firm growth 102
Diversifying financing sources for ICT and intangible investment 103
Supporting start-up activity 105
References 108
Table 1. The recovery is robust 11
Table 1.1. Macroeconomic indicators and projections 27
Table 1.2. Low-probability events that could lead to major changes in the outlook 28
Table 1.3. Estimated impact of selected policy recommendations on GDP per capita 29
Table 1.4. Illustrative direct fiscal impact of selected policy recommendations 29
Table 1.5. Past OECD recommendations on improving judicial efficiency and insolvency regime 35
Table 1.6. Past OECD recommendations to address fiscal and financial risks 46
Table 1.7. Past OECD recommendations on environmental policies 55
Table 1.8. Past OECD recommendations on anti-corruption policies 58
Table 1.9. Recommendations on macroeconomic and structural policies from the Key Policy Insight chapter 59
Table 2.1. Policy recommendations 107
Figure 1. The pandemic severely hit the economy 11
Figure 2. Job losses were concentrated on young and temporary workers 12
Figure 3. Adult digital skills are below average 13
Figure 1.1. The pandemic severely hit the economy 16
Figure 1.2. The pandemic risks accentuating pre-existing social issues 18
Figure 1.3. The population is declining and ageing faster than in most OECD countries 18
Figure 1.4. Productivity growth has been low 19
Figure 1.5. Portugal has been hit hard by the pandemic 20
Figure 1.6. The shortage of health professionals is significant 21
Figure 1.7. Prevalence of psychological distress is high 22
Figure 1.8. The shock to GDP was among the largest in the OECD, but the economy is recovering 23
Figure 1.9. Tourism has been hit hard 24
Figure 1.10. Labour market conditions have deteriorated 24
Figure 1.11. Activity and confidence have recovered, but remained below pre-crisis levels 25
Figure 1.12. Some macro-financial vulnerabilities have picked up 28
Figure 1.13. Public investment has declined in the past decade 31
Figure 1.14. Portugal will receive large amounts of EU funds 32
Figure 1.15. Efficiency of insolvency proceedings can improve further 34
Figure 1.16. Spending on active labour market policies has increased substantially 36
Figure 1.17. Unemployment is particularly high for young people 37
Figure 1.18. Public debt is among the highest in Europe 39
Figure 1.19. Sustained primary budget surpluses are needed to durably lower public debt 40
Figure 1.20. Increasing property taxes would improve the tax mix 42
Figure 1.21. The resilience of the banking sector has improved 43
Figure 1.22. Corporate indebtedness and weak profitability are important vulnerabilities 44
Figure 1.23. A large share of loans were under moratoria 44
Figure 1.24. In-work poverty and the share of temporary contracts remain high 47
Figure 1.25. The adequacy of minimum-income benefits can improve 48
Figure 1.26. Fast increases in housing prices deteriorated housing affordability 49
Figure 1.27. Investment in social housing needs strengthening 50
Figure 1.28. The long-term care sector is under-resourced 51
Figure 1.29. The energy and transport sectors are the main emitters of greenhouse gas emissions 52
Figure 1.30. Green Growth indicators: Portugal 53
Figure 1.31. Controlling corruption remains a challenge 56
Figure 1.32. Anti-money laundering efforts need to strengthen 58
Figure 2.1. Digitalisation can help strengthen Portugal's poor productivity performance 69
Figure 2.2. Estimates point to large automation risks 70
Figure 2.3. Adult digital skills are below average 71
Figure 2.4. Disparities in Internet use are large 72
Figure 2.5. Technology uptake by firms is limited, particularly in small firms 74
Figure 2.6. The crisis has increased interest in platforms 75
Figure 2.7. Teleworking has increased significantly, but its potential is uneven across sectors 76
Figure 2.8. Innovative activities remain below the OECD average 77
Figure 2.9. Connectivity to fixed broadband is good, with some regional disparities 80
Figure 2.10. The use of mobile broadband lags behind 81
Figure 2.11. Broadband prices are relatively high 82
Figure 2.12. The telecommunication markets are concentrated 82
Figure 2.13. Portugal is among the frontrunners of digital government, but its use can improve. 85
Figure 2.14. Trust in digital technologies is low, despite a limited number of cybersecurity incidents 87
Figure 2.15. Small firms lag behind in the adoption of digital security measures 88
Figure 2.16. Conditions for ICT use and teaching in schools need to improve 92
Figure 2.17. Significant shortages exist in ICT and other STEM related knowledge domains 93
Figure 2.18. STEM fields attract many young adults, but with a large gender gap 94
Figure 2.19. Participation in adult education is low, especially among low-educated adults 96
Figure 2.20. Improving information on and flexibility of adult training can raise participation 97
Figure 2.21. Room to develop online teaching is large 98
Figure 2.22. Investment in ICT and knowledge-based capital remains low 100
Figure 2.23. Relatively few firms are managed by professional managers 101
Figure 2.24. Regulation on retail trade is restrictive 103
Figure 2.25. Venture capital investment is low, especially in later venture stage 105
Boxes
Box 1.1. Main policy responses to the COVID-19 crisis 17
Box 1.2. Illustrative impact of structural reforms 29
Box 1.3. Portugal's Recovery and Resilience Plan 33
Box 2.1. Job automation risks in Portugal 70
Box 2.2. ICT tools and technologies 73
Box 2.3. Main initiatives promoting the digital transition 78
Box 2.4. The digital transformation in healthcare 86
Box 2.5. Portugal's initiatives for the development of digital skills 89
Box 2.6. Country examples on non-debt instruments for SMEs 104