Key Challenges

To begin, we must note that there are four challenges common to many other comparatively new democracies that are not a problem in Portugal.
Migrant issue not
yet salient
1) Migrants and refugees: Portugal remains outside the routes taken by the large populations of migrants and refugees currently leaving Africa, the Middle East and South Asia. Even so, the country has accepted more than 1,500 refugees since the end of 2015, the fifth-highest level in the European Union.
Islamist terror not
a problem
2. Portugal does not have the problem with Islamic terrorist radicalization (jihadists) that has been experienced by several other countries in the European Union, including neighboring Spain in August 2017. Its (small) Islamic community is generally well integrated and a participant in the country’s strong interfaith dialog. Indeed, President Marcelo’s inauguration in March 2016 included an interfaith ceremony held at Lisbon’s mosque.
Populist parties not
yet a force
3. Unlike a number of other European countries and the United States, Portugal has not seen the rise of populist, anti-system parties (or major political figures, as in the case of the current U.S. president) either on the right or the left of the political spectrum.
4. Unlike several other comparatively new democracies, there are no pending issues (e.g., the elimination of “prerogatives”) currently causing friction in civil-military relations, .
However, four real challenges do exist.
Budgetary risks
remain a concern
A first challenge will be to ensure that budgetary consolidation persists into the future. The excessive deficit procedure that was closed in 2017 was the third such for the country since 2002. In each of the preceding two cases, a new excessive deficit procedure was opened within less than two years of the preceding one closing. This risk is compounded by the high level of public debt; at 130.1% of GDP in 2016, this is the third-highest such ratio within the EU. Barring relief, bringing this debt under control will require an unprecedented sustained effort over many years. An April 2017 forecast by the Portuguese government estimated that debt would decline to 60% of GDP in 2032, some 14 years earlier than its previous estimation in the 2016 budget. However, this earlier date will continue to require an unprecedented degree of effort to sustain budgetary consolidation over a long time span, and across international and domestic economic and political cycles.
Public expectations
must be managed
A second and related challenge in the short- and medium-term will be to reconcile this budgetary consolidation with citizens’ expectations that the previous years’ austerity policies will be reversed. The Costa government managed to square this circle well over this review period. However, more pressure, not less, is likely to emerge in the future, especially as the economy recovers.
Governance capacity needs strengthening
The third challenge is the need to improve governance capacity. As made clear in the ratings in this report, and in all past SGI reports, Portugal scores poorly in a number of areas related to this topic, including the use of evidence-based instruments in policymaking; the degree of strategic planning and input in policymaking; societal consultation; policy implementation; and the degree to which institutional governing arrangements are subject to considered reform. Inevitably, weaknesses in these areas impinge on the quality of policy, both in terms of conception and implementation. This governance capacity pertains not only to decision-making arrangements, but also to broader oversight mechanisms. Indeed, the period under review here quite tragically highlighted the results of failures in the domains of territorial planning, forestation, forest-fire prevention and civil protection. Unfortunately, the country’s governance failures have also extended well beyond these domains.
Youth unemployment must be reduced
The fourth serious challenge has to do with youth unemployment. As noted in this report, youth unemployment rates have not followed the declining trend of unemployment in general, remaining fairly stable in this period above the EU and euro zone averages, over this period. Labor-market policies will need to engage with this issue in the future in order to avoid wasting the significant educational investment that has been made over the past decade.
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