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Economics in a picture

Economics in a picture

The effects of NGEU in the Portuguese economy should be positive, although measurement uncertainty is high 


The NGEU is a temporary instrument providing funds for the Recovery Plan for Europe, proposed by the European Commission in May 2020 as a response to the pandemic shock. The Recovery and Resilience Facility (RRF) and, to a lower extent, REACT-EU (Recovery Assistance for Cohesion and the Territories of Europe) cover the vast majority of financial resources allocated to NGEU. The RRF encompasses grants and loans, made available for the Member States to finance their Recovery and Resilience Plans (RRP) until 2026. The RRP include both investments and reforms targeting the structural constraints of the economies and enabling the climate and digital transitions. The Portuguese RRP has an estimated cost of 16.4 billion euro, of which 13.9 billion correspond to grants. The disbursement of these amounts is conditional on the fulfillment of milestones and targets. The RRP foresees the implementation of 83 investment projects and 32 reforms.

Estimates suggest that, in the case of Portugal, implementing the NGEU plans yields a 1.4% increase in GDP level, on average, in 2022-24. The annual average growth rate is 0.5 percentage points higher than in a scenario assuming the absence of NGEU. In the long run, estimates suggest an increase in potential output by around 1%, mainly reflecting the effect of higher public and private investment in the Portuguese economy’s capital stock. Both labour market and total factor productivity (TFP) developments also imply positive, albeit smaller, contributions. Nonetheless, these ex ante estimates for the impact of executing these plans are surrounded by strong uncertainty.

For more details see Special Issue “NextGenerationEU in Portugal: opportunities and challenges”, published in Banco de Portugal June 2022 Economic Bulletin (in Portuguese only).

Prepared by Maria M. Campos and Cláudia Duarte. The analyses, opinions and findings expressed above represent the views of the authors and not necessarily those of Banco de Portugal or the Eurosystem.

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