This article analyzes the sources of business cycle fluctuations in Portugal using the business cycle accounting methodology developed by Chari et al., (2007). In this approach, various types of distortions are represented as “wedges” in standard equilibrium relationships. This allows a quantitative assessment of the relative importance of those wedges. It is found that distortions affecting total factor productivity play a key role in explaining the behavior of output from 1998 through 2012.