Portugal’s Economy is Booming – But Who Really Benefits?

A Thriving Economy with Cracks Beneath the Surface

Portugal has become Southern Europe’s surprise success story. The economy is growing faster than expected, national debt is falling, and for the third year in a row, the country enjoys a budget surplus. In Lisbon, the hum of drills and hammers fills the air — nearly every street has at least one building under renovation. Companies like Melom Obras, the country’s renovation market leader, report record growth. Yet, behind the numbers, not everyone shares in the prosperity.

The Hidden Cost of Progress

While hotels and luxury apartments are being restored, Portugal’s public sector is struggling. Over 85% of citizens say the national healthcare system is below par, and one in five parents now send their children to private schools. Many public schools are in such poor condition that some have even become unsafe for students.

From Financial Crisis to Conservative Recovery

After the 2008 banking crisis and the 2010 debt crisis, Portugal — like Greece and Spain — was bailed out with billions from Europe. The recovery that followed came with strict austerity measures. Even after the economy rebounded, the government kept cutting public spending and outsourcing essential services to private companies.

When Privatization Goes Too Far

Postal services, intercity transport, and even Lisbon’s historic trams were handed over to private contractors. The result? Less accountability and, in some cases, tragedy — like the 2024 tram cable disaster that killed 16 people. It became a painful symbol of what happens when profit outweighs public safety.

Education and Healthcare Under Pressure

Years of budget cuts have pushed teachers toward higher-paying private schools, and doctors toward private clinics. In public hospitals, waiting times can stretch up to ten hours. Recent nationwide strikes saw over 90% of public workers demand a 15% pay rise and significant reinvestment in essential services.

The Algarve Boom – Growth You Can See

Nowhere is Portugal’s growth more visible than in the Algarve. The region’s economy surged with a 48% increase in renovation projects last year alone. New hotels, boutique resorts, and luxury villas dominate the skyline, while tourism remains the lifeblood of the south. But locals are feeling the pressure — rising rents, housing shortages, and long queues at clinics show the downside of rapid development.

Tourism: A Blessing and a Challenge

Tourism fuels Portugal’s prosperity, especially in the Algarve and Lisbon. Millions visit each year for the sunshine, beaches, and safety. Yet, success has a price. Infrastructure strains under the seasonal crowds, and many workers can no longer afford to live near where they work. Sustainable tourism and balanced investment are becoming crucial to preserve the region’s charm — and its future.

Politics at a Crossroads

New prime minister Luís Montenegro has slightly increased spending on public services, but experts — even from the IMF — say it’s not enough. The 2026 budget again prioritizes debt reduction over rebuilding public trust.

Portugal’s Bright Future Depends on Balance

Portugal shines as one of Europe’s most dynamic economies, with tourism and investment driving impressive growth. But without stronger healthcare, education, and infrastructure, that shine risks fading. The country stands at a crossroads: continue chasing numbers, or build a society that truly shares in its success.

Source: FD