Immigration Keeps Portugal’s Economy Alive

A new economic study shows that without immigration, Portugal’s tax burden would rise sharply to around 43% of GDP, as the country struggles with the costs of an ageing population. The research, titled The Costs of Building Walls: Immigration and the Fiscal Burden of Aging in Europe, was written by Tiago Bernardino (IIES, Stockholm University), Francesco Franco, and Luís Teles Morais (Nova SBE).

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What the Study Does

The authors build long-term fiscal projections for European economies. They model population changes, tax contributions, and government spending by age, gender, and skill level. They test how different immigration scenarios affect public finances up to the year 2100.

Their main finding is that immigration helps offset the costs of ageing populations. Countries with more working-age immigrants require smaller tax increases to maintain sustainable public accounts.

Portugal: Impact of Zero Immigration

Here are some of the verified consequences, based on the study and Portuguese official statistics, if immigration were drastically reduced:

• The paper estimates that if immigration dropped to zero, Portugal would need a budgetary adjustment of about 7.9 percentage points of GDP above the baseline (baseline meaning current or recent levels of migration) just to keep public finances sustainable. This is in contrast to needing only ~2.9 p.p. of GDP under current migration levels. Essential Business+1
• The tax burden would increase from about 35% of GDP to around 43% if immigration stopped. That means higher taxes, lower public services, or both. Essential Business+1
• Per taxpayer, that means on average €1,700 more per year in taxes & required contributions. Essential Business
• Population effects are dramatic: Portugal’s resident population is currently about 10.7 million. By 2057 it’s projected to fall below 10 million. If there were no immigrants, population could drop to ≈5.99 million by 2100. In very low fertility / no migration scenarios, possibly 5.4 million residents. The Portugal News

What the New Government Moves Are (Anti-Immigration Measures)

The current Portuguese government, under pressure from the far-right party Chega and conservative elements, has begun to adopt stricter immigration and naturalisation laws. Here are verified examples:

• Naturalisation rules have been tightened: the residency requirement for most foreigners to apply for Portuguese citizenship has been raised from 5 to 10 years. For immigrants from Portuguese-speaking countries (like Brazil, Angola, etc.), the requirement is now 7 years. Reuters
• The government repealed a policy that allowed non-EU migrants to move to Portugal without a work contract and later request residence after paying social security for a year. Now many migrants must already have an employment contract before moving. Deutsche Welle
• Plans to expel approximately 18,000 foreigners living in Portugal without legal authorization. AP News
• A law passed on 16 July 2025 restricts family reunification, legal residency, visa issuance and tightens criteria. Le Monde.fr

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How These Moves Could Harm the Economy

Based on the study plus supporting statistics, these government moves could lead to several harmful outcomes for Portugal:

1. Higher Taxes on Those Who Remain
   With fewer immigrant workers paying taxes and contributions, the remaining population must make up the gap. The study quantifies this as ~€1,700/year extra per taxpayer in a zero-immigration scenario.
2. Labor Shortages and Decline of Key Sectors
   Official sources show that immigrants are essential to sectors like tourism, agriculture, hospitality, services. For example, foreign workers are significantly represented in restaurant and hospitality industries. Without them, many businesses will struggle to find staff, or costs will rise sharply. Migration and Home Affairs+2Migration and Home Affairs+2
3. Reduced Social Security Contributions
   Immigrants already contribute heavily to social security: in 2024 foreign workers paid €3,654 million into the system, about 12% of the €29 billion total collected. Migration and Home Affairs Without them, this revenue drops, worsening the fiscal burden of pensions, health care, and elder care.
4. Accelerated Population Decline
   With already low birth rates, emigration, and ageing, reducing immigration further risks a very steep drop in population. Fewer workers also means smaller tax base, fewer taxpayers, less innovation, less economic dynamism.
5. Trade and Economic Ties May Weaken
   Another verified effect: immigration is linked to stronger trade. A study Immigration and Trade in Portugal found that immigrant communities help boost exports and imports, especially with Latin partner countries. Restricting immigration could reduce these trade gains. IDEAS/RePEc
6. Possibly Damaged International Reputation and Talent Attraction
   Stringent immigration and naturalisation policies could dissuade foreign talent, investors, researchers or entrepreneurs from choosing Portugal, reducing growth in high-value sectors.

Verified Quotes Related to These Issues

• From Portugal: Immigration Barometer (FFMS):
  “Immigration is seen positively by those who are more satisfied with democratic processes, value egalitarianism or consider that immigrants pay more into than they receive from the social security system.” Sectors such as construction, agriculture and services are “heavily dependent on the contribution of migrants.” Migration and Home Affairs
• From official social security data:
  “Foreign workers in Portugal paid €3,654 million into the national social security system in 2024, accounting for 12% of the total €29 billion collected by the system that year.” Migration and Home Affairs

Conclusion

Immigration isn’t just a matter of culture or policy: it is economically essential for Portugal. Removing or tightly restricting immigration could lead to much higher taxes, shrinking population, labor shortages, weaker public services, and declining economic performance. The government’s tightening of naturalisation, the requirement for work contracts before arrival, and expulsions of irregular immigrants are moves that if unchecked, based on current data and the recent modelling, threaten to worsen public finances and reduce living standards.

This is not speculative: both the working paper The Costs of Building Walls and official Portuguese statistics make clear that Portugal depends significantly on immigration to keep the economic engine running.

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