Portugal is a sovereign republic, where the president has the power to dissolve parliament and presides over the Council of Ministers, which comprises the president of parliament, the prime minister, the head of the constitutional court and the leaders of the regional governments. Within this context, Portugal has sustained overall political stability. After the 2015 election, Prime Minister António Costa formed a government with his Socialist Party (PS), supported by two smaller left-wing groups. Following the October 6, 2019 elections, in which the PS won 36% of the vote, the party decided to form a minority government rather than renew its alliance with the Left Bloc (BE) and the Unitary Democratic Coalition (PCP-PEV). Nevertheless, it is likely to continue to work with the Left Bloc and Unitary Democratic Union to implement reforms and maintain the government. The executive's lack of a majority might lead to periodic instability and delays in passing policy between now and the 2023 general elections.

Until the advent of the COVID-19 virus pandemic, this relative stability reflected a benign external environment and sustained economic growth. The large share of the tourism sector in the economy makes Portugal particularly vulnerable to the impacts of the COVID-19 virus, and activity has indeed contracted in 2020, although the expectation for 2021 is that of a gradual recovery. According to the IMF, the economy contracted by 7.6% in 2020, and it is expected to grow by just 3.9% in 2021. The aid package established by the government in mid-March (worth 9.4% of GDP) should help to limit the downturn, but will also lead to a substantial widening of the fiscal deficit. Since 2015, continued GDP growth has significantly decreased the deficit, though Portugal maintains the third-highest level of debt in the eurozone, behind Greece and Italy. 

Current projections on COVID-19 predict the persistence of a decreasing trend in the number of infections during summer (IHME) although the pandemic has triggered a deep economic crisis that will persist longer. Moreover, given the uncertainity with respect to the pandemic, business are lilely to still face some operational challenges and disruptions. 

The state of emergency was replaced with a “state of calamity”, which gave the government continued powers to impose restrictions. Overall, despite its underfunded healthcare system, Portugal was comparatively less affected by the pandemic than its neighbours owing to swift action to impose restrictions when the number of cases in its territory was still low.

Portugal is politically stable and transitions between governments occur peacefully. Prime Minister António Costa and his centre-left Socialist Party (PS) were re-elected in the October 2019 general elections, and parliament gave its approval for the programme of his new minority government. Nevertheless, the government will likely face periods of instability, in particular, because the PS did not renew its alliance with its previous partners on the left of the political spectrum. As a result, the government will need to secure majority support to pass legislation and will need to negotiate with other parties on a case-by-case basis. However, Prime Minister António Costa is known for his pragmatism and ability to negotiate with parties across the political spectrum, which will alleviate most issues relating to gaining opposition party support. 

On 24 January, Marcelo Rebelo de Sousa was elected for a second term as president. De Sousa’s re-election was highly anticipated due to his high levels of public support. Over the coming year, his re-election will sustain political stability given his close working relationship with Prime Minister Antonio Costa, forged during the response to the COVID-19 pandemic. However, an increasing rift between the left-wing minority government and its far-left allies raises the potential for political instability in the longer term.

Although the new anti-immigration party Chega won its first-ever parliamentary seat in the October 2019 general election, it gained only 1.3% of the overall vote, confirming that there are currently no strong indicators suggesting a significant upsurge in populist nationalism or a significant current of Euroscepticism shaping the political environment. The presence of the far-right in politics is indeed very limited and is likely to remain so in the coming years. As a matter of fact, the re-election in October 2019 of a PS-led government will provide policy continuity, with radical policy proposals remaining unlikely. The next presidential election is scheduled for 2021, and the next general elections will take place in 2023. 

A strong economy has enabled Costa’s government to reverse the previous Social Democrat (PSD) government’s austerity measures. Between 2015 and early 2020, Portugal experienced continued GDP growth, a budget deficit at a record low, and a roughly 50% decrease in the unemployment rate which bolstered support for the PS. However, the COVID-19 pandemic has led to a contraction of GDP in 2020 and might also affect the Portuguese economy in 2021. 

In 2015, the government adopted a new graft code to increase transparency, but corruption remains a concern, in particular, in public procurement and at the city council level. There is no specific regulatory body for public procurement, leading to instances of the exchange of “favors” in return for the awarding of a contract, or the tailoring of procedures to specific bidders. Nepotism is also a concern: it is not unusual for individuals in public positions to join the boards of private companies after their political careers.

Portugal is considered a Flawed Democracy in the 2020 Democracy Index, developed by The Economist Intelligence Unit (EIU), where the country ranks 22 out of 167 countries scored.

The country ranks 38 at the 2020 Human Development Index developed by the United Nations Development Programme.

The environment for businesses has improved rapidly since the 1990s, with significant investment in infrastructure, particularly in highways and utility provision. Regular strikes and protests – particularly by public-sector workers – relating to socioeconomic grievances, such as working conditions and demands for higher wages, will remain a feature of the operating environment in the coming years. The generally independent and impartial legal system can be slow-moving and inefficient, as can many areas of the country’s bureaucracy. The number of corruption cases involving prominent business leaders and politicians – including former prime minister José Sócrates – has increased in recent years, highlighting the government’s commitment to exposing and eradicating corruption, in particular in public procurement and city councils. 

The government displays a generally positive attitude towards foreign investment and is unlikely to adopt overtly protectionist measures to restrict foreign business. However, uncertainty persists over potential changes to tax legislation, which are usually incorporated into the annual budget. Privatizations completed as part of the government’s austerity program are unlikely to be reversed in the coming years.  

Portugal's stable social climate, low crime rate, and high-security standards mean that it offers a generally positive operational environment. Recent legislation has aimed to raise education levels, contain nominal wage growth, reduce public-sector bureaucracy, improve infrastructure, and expedite the creation and closure of companies. Excessive bureaucracy remains a problem, however, as does corruption in public works contracts. An unprecedented economic downturn as a result of the COVID-19 pandemic has moderately increased risks of widespread industrial action. (To check the most recent updates on COVID-19 measures, visit COVID-19: Measures, Guidelines and Recommendations).  Isolated sectoral strikes over wages and conditions remain more probable and are likely to affect ports, marine cargo, railways, and the public sector.

The quality of public transportation is high. However, it is necessary to be vigilant due to the presence of pickpockets on public transport, especially the Lisbon tramway system ("electricos" number E25 and E28). The Portuguese motorway network is in good condition. Most of the country is connected by physical roads, except in very remote areas or historical centers. The toll system is entirely electronic. After taking a picture of the license plate, the payment can be done by direct debit or in a post office. This last option is only possible if the license plate is Portuguese. If you are driving a vehicle with a foreign license plate, it is necessary to consult the Portuguese toll website. Driving in the Acores can be challenging due to the narrow paved streets, blind curves, and herds of livestock on countryside roads. Unlike continental Portugal, in the Acores, toll payments cannot be made directly. Violations of road regulations are registered by radar and sent to the offender by mail.

Buses and taxis are reliable. It is advised to check the price of a taxi ride on the meter before paying. It is recommended not to use informal taxi companies. In the Acores, taxis do not have meters: the fare is based on a starting fare price plus an indicated kilometric rate. Buses are inexpensive. The services start at 07:00 and usually finish at 20:00 depending on the destination. Portugal is served by five international airports: Acores - João Paulo II Airport (PDL), Faro (FAO), Lisbon - Humberto Delgado airport (LIS) -, Madera - Cristiano-Ronaldo Airport (FNC) and Porto - Porto-Francisco Sá-Carneiro Airport (OPO)-. The Acores (PDL) and Madera (FNC) airports are subject to temporary closures due to strong winds.

Overall, Portugal ranks 39 out of 190 countries scored at the 2020 Doing Business Index by the World Bank and 33 out of 198 at the 2020 Corruption Perception Index by the Transparency International Organization.

Portugal is a member of the EU and a founding member of NATO. Former prime minister António Guterres became UN secretary-general in January 2017, illustrating the country’s key role in international institutions. Portugal has no major security problems and the security environment is unlikely to see a major deterioration as a result of COVID-19. Levels of violent crime are low, though petty crime can be a problem in cities and tourist areas. The threat of a terrorist attack is very low. No domestic terrorist groups are present, and there have been few arrests of suspected Islamist extremist terrorists.

The crime rate in Portugal is generally among the lowest in Europe. Violent crime is comparatively rare and, despite a small increase in extortion, declined by 8.6% during 2018 (the most recent year for which full data is available). Many of the country's violent crimes are likely to remain, drug-related, given Portugal's status as an important staging post for drug and human trafficking from North Africa and Latin America. Petty crime, including pickpocketing and bag snatching, remains common in tourist areas in central Lisbon and Porto, as well as on these cities' public transport networks. This is generally opportunistic and does not usually involve weapons or violence.

Risks of social instability have declined overall since the PS administration first took office in 2015, largely thanks to economic recovery and the end of Portugal’s bailout program in 2014. Such developments have enabled the center-left administration to ease the austerity measures of its predecessor and to increase social welfare spending. A predicted 10% decline in GDP during 2020, following the COVID-19 pandemic and associated lockdown, is likely to bring an increase in protest risks, especially among public-sector workers. However, such demonstrations are likely to remain small and almost always peaceful.

The risk of inter-state war is likely to remain very low. The country's principal diplomatic disputes are with neighboring Spain over uninhabited islands in the Atlantic (Olivenza and the Savage Islands, known as "Ilhas Selvagens" in Portuguese), fishing rights, and environmental concerns. Nonetheless, the strong ongoing commercial relationship between the two, coupled with their shared membership of the EU and NATO, means that any disputes are extremely unlikely to degenerate into armed conflict. Beyond Europe, Portugal's ties with its former colonies, including Angola, are likely to remain stable overall.

Portugal does not face an elevated terrorism threat, either domestic or international, and there are no indications that this will change over the 12-month outlook. No group that advocates political violence is currently present in the country. The most credible terrorism threat is the possibility of a low-capability attack by a lone actor. Although unlikely, such an attack would probably come from jihadist militants. The most likely targets would be state institutions and foreign embassies in Lisbon and public places most frequented by foreign tourists.

Overall, Portugal ranks 3 out of 163 within the 2020 Global Peace Index by the Institute for Economics and Peace.

Vaccinations required to enter the country:

Proof of vaccination against yellow fever is required for all travelers entering the country from an endemic zone and wishing to travel to the Azores or Madeira islands.

Portugal ranks 20 out of 195 within the 2019 Global Health Security Index, a project of the Nuclear Threat Initiative (NTI) and the Johns Hopkins Center for Health Security (JHU), developed with The Economist Intelligence Unit (EIU).

Portugal is struck each year by forest fires, some of which cause significant damage. Always obey safety instructions issued by authorities. From June 1st to September 30th, it is strictly forbidden to create fire in forest zones. This interdiction includes campfires, barbeques, fireworks and firecrackers, matches, candles, and cigarettes. It is also forbidden to smoke on the roads crossing forest areas.

Furthermore, there is a substantial risk of earthquakes in the country; in 1755, Lisbon was destroyed by a powerful earthquake and tsunami, which was responsible for the deaths of nearly 100,000 people. Moreover, Portugal, as well as Acores and Madera, can be subject to dangerous storms.

Beachgoers should be aware that ocean currents along Portugal's coasts can be dangerously strong. It is advised to strictly follow the advice provided by authorities; a fine of EUR 55 is imposed for swimming when a beach flag is red or yellow.  

If you plan to visit Portugal, stay informed by the Emergency and Civil Protection.