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The Erosion of Public Capital in Portugal

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  • Miguel Faria-e-Castro

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.

Suggested Citation

  • Miguel Faria-e-Castro, 2026. "The Erosion of Public Capital in Portugal," Working Papers 2026-016, Federal Reserve Bank of St. Louis, revised 17 Aug 2026.
    • Handle: RePEc:fip:fedlwp:103629
    DOI: 10.20955/wp.2026.016
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    References listed on IDEAS

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    4. Pina, Alvaro Manuel & St. Aubyn, Miguel, 2005. "Comparing macroeconomic returns on human and public capital: An empirical analysis of the Portuguese case (1960-2001)," Journal of Policy Modeling, Elsevier, vol. 27(5), pages 585-598, July.
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    6. Christophe Kamps, 2006. "New Estimates of Government Net Capital Stocks for 22 OECD Countries, 1960-2001," IMF Staff Papers, Palgrave Macmillan, vol. 53(1), pages 1-6.
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    Keywords

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    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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