Working Paper

The Erosion of Public Capital in Portugal

Abstract: This article documents the erosion of Portugal’s public capital stock since 2013 and assesses its macroeconomic implications. I extend the IMF capital series through 2027 using European Commission data and construct scenarios through 2035 for alternative infrastructure-project pipelines. In 2026, the stock is projected to remain 12.2 percent below its 2013 peak, while its ratio to GDP is projected to fall from 77.2 percent in 2013 to 52.6 percent. Short-horizon regressions show positive co-movement between public-capital and labor-productivity growth. A calibrated production-function exercise suggests that the capital decline may reduce 2026 GDP per capita by 0.7–5.3 percent, with a central estimate of 1.4 percent. Announced investment projects slow, but do not reverse, the projected decline in the capital-to-GDP ratio.

JEL Classification: E22; H50; H54; O47;

https://doi.org/10.20955/wp.2026.016

Bibliographic Information

Provider: Federal Reserve Bank of St. Louis

Part of Series: Working Papers

Publication Date: 2026-08-10

Number: 2026-016