Portuguese Households Reach Post-Crisis High in Purchasing Power, but Regional Gaps Grow

Portugal’s households are ending the year with slightly deeper pockets and a renewed sense of optimism—yet the story behind the numbers is more nuanced than the headline figure suggests. The latest snapshot from the National Statistics Institute (INE) shows that Portuguese purchasing power reached 82.4 % of the European Union average in 2024, the country’s best showing since the euro crisis. Still, the benefits are trickling down unevenly across regions and income brackets.

Quick view: what changed in 2024?

• Purchasing power index climbed to 82.4 % of the EU-27 average, up 1.3 points.

• Household-focused indicator — Individual Consumption per capita — improved to 85.7 % of the EU mean.

• Inflation eased to 2.4 %, less than half of 2023’s pace.

• Real disposable income grew 6.0 %, the second-fastest increase in the EU.

• Portugal remains 18th out of 27 EU members by GDP per capita in purchasing-power terms.

Why this jump matters for Portuguese wallets

A move of 1.3 percentage points may look modest on paper, but it nudges Portugal closer to the long-held policy objective of converging with Western European living standards. Since 2015, the country has narrowed the gap with the EU average by nearly 10 points, reversing years of stagnation that followed the sovereign-debt bailout. For families, that aggregate progress translates into slower price rises, higher pay cheques and some tax relief—a trio that finally allowed wages to outpace inflation for the first time since the pandemic.

Many households discovered that everyday items no longer required as large a slice of their budget. Utilities and fresh produce, for instance, posted the sharpest slowdown in price growth, according to INE’s consumer basket. The change was enough to lift Portugal’s rank in the euro area from 16th to 15th on the purchasing-power table, a symbolic but long-awaited shift.

The economic drivers: beyond softer inflation

Economists point to five interlocking forces that pushed the index higher:

Tamer consumer-price inflation – The retreat from 4.3 % to 2.4 % gave incomes breathing room.

Broad-based wage growth – Private-sector wages rose in almost every industry, while the public sector locked in above-inflation pay deals.

Extra social-security transfers – Pensions and means-tested benefits received mid-year top-ups, cushioning low-income households.

Lower direct taxes – Adjusted IRS brackets and a wider zero-VAT basket left more cash in consumers’ hands.

Sturdy nominal GDP expansion – An unexpected 7.1 % rise in the cash value of output lifted GDP per capita by 5.9 %.

Taken together, these factors produced a 6 % jump in real disposable income, a performance beaten only by Croatia inside the bloc. PwC Portugal believes the combination could add 1.3 % to private consumption this year, partly offsetting weaker exports.

A country of contrasts: Lisbon soars, interior still lags

Zooming in on the map reveals an uncomfortable truth: Portugal’s gains remain highly concentrated. The Lisbon metropolitan area sits at 128.9 % of the EU average, a figure that rivals many Northern European capitals. Nearby municipalities—Oeiras, Cascais and Alcochete—all log per-capita purchasing-power indicators at least 50 % above the national mean.

At the opposite end, the Tâmega-e-Sousa sub-region must make do with 53.1 % of the EU average. Even broader regions such as the Centro and Norte hover near 71 %, despite housing most of the country’s export-oriented factories. The Alentejo was the only area that failed to improve on 2023, stuck at roughly three-quarters of the EU level.

Inequalities also cut across islands. While Funchal and Ponta Delgada outperform the national benchmark, the archipelagos overall sit below it. DECO, Portugal’s leading consumer association, warns that housing costs now absorb nearly 40 % of household budgets, muting any statistical gains. For young families in Porto or Lisbon, higher wages simply chase rising rents.

Experts and consumers weigh in

Bank of Portugal researchers highlight the “rare alignment” of a cooling CPI and a historic rise in nominal wages. Yet they caution that much of the ground lost during the energy-price shock of 2022 is only now being recovered. The average real salary still trails its 2019 level once housing costs are factored in.

Consumer advocates strike a similar note. “These numbers are encouraging, but the middle class is shrinking,” says Natália Nunes, who heads DECO’s financial-protection unit. She points to fuel, electricity and grocery bills that remain well above pre-pandemic norms. Her verdict: “The headline index does not capture the stress many families feel at month-end.”

Looking ahead: can 2025 keep the momentum?

Whether Portugal can push past the 85 % threshold next year will depend on three variables:

• Productivity gains – The country ranks low in output per worker; closing that gap is crucial for sustained wage growth.

• European funds delivery – The pace at which Recovery and Resilience Plan money hits the real economy could add up to 0.7 % to GDP in 2025.

• Housing market cooling – A stabilisation in rents and mortgage rates could amplify real income gains.

Government forecasts assume a further drop in inflation to 2 % and GDP growth near 1.5 %. If those numbers stick, analysts at Santander Totta think Portugal could inch up to 83.5 % of the EU average in purchasing power next year. That would still leave the country far behind Spain (94 %) but ahead of Greece (77 %).

Key insights to remember

• Portugal made its largest single-year stride toward EU living standards since 2017.

• The headline improvement masks deep regional disparities, with interior districts lagging coastal metros.

• Lower inflation and higher wages supplied the bulk of 2024’s boost, but structural issues—productivity and housing costs—remain in the way of further convergence.

• 2025 will test whether the country can convert one-off tailwinds into lasting progress.