Portugal’s PRR changed the country, but not structurally
As Portugal reaches a key PRR deadline, economists and former officials told ECO the EU-funded plan boosted investment but did not fundamentally change the economy.
Portugal’s EU-funded Recovery and Resilience Plan (PRR) has had a clear economic impact but did not fundamentally reshape the country’s economy, according to economists and former officials interviewed by ECO, as beneficiaries face an August 31 deadline to meet the targets and milestones agreed with Brussels. The issue matters because the plan has channelled €21.9 billion into Portugal and its end will test whether the country can sustain growth without extraordinary EU support.
Brussels approved Portugal’s PRR on June 16, 2021, and has since transferred €17.23 billion, with payments tied to agreed milestones apart from the initial €2.2 billion pre-financing tranche. Financial execution will continue until the end of this year, but several of the people interviewed by ECO said high disbursement and formal compliance should not be confused with structural reform. Economist Óscar Afonso said the plan enabled investments that would have been difficult to deliver at the same scale and speed, but added he had “many doubts” that it had structurally changed the Portuguese economy.
Former planning minister Nelson Souza told ECO that structural transformation “was never on the table” because the PRR was designed to mitigate the effects of the pandemic through targeted measures rather than solve Portugal’s deeper economic constraints. Ricardo Arroja also said it was “an exaggeration” to claim the PRR had structurally transformed the economy, though he said some projects may help create longer-term foundations.
The article points to Portugal’s heavy reliance on EU money for public investment as one reason the debate matters. Citing the European Court of Auditors, ECO notes that Portugal was the EU country most dependent on European funds for public investment in 2014-2020, with 90% financed by cohesion funds. Several interviewees said the PRR helped fill long-standing public investment gaps, but also warned that more than half of its resources went to the public sector, limiting its ability to drive a deeper shift in productivity and private investment.
ECO’s reporting also highlights execution delays, fragmented programmes and doubts over whether 100% implementation is the right measure of success. Afonso said the “real test” starts when the extraordinary funding ends: if the investments raise productivity and support autonomous growth, the PRR will have left a structural legacy; if not, Portugal may have modernised parts of the country without reducing its dependence on the next EU funding cycle.
Originally published at Eco.pt