"While the Portuguese economy has continued to recover for the fourth consecutive year, it remains vulnerable to shocks," the commission said in the statement.
It noted the country's investment conditions "remain challenging and continue to drag on growth," adding that investment is expected to recover in the medium-term with support from EU funds.
According to the European Commission, "uncertainty about investment, the banking sector and the implementation of structural reforms pose some downside risks to the sustainable recovery."
The country's public finances are expected to improve, while the fiscal outlook remains subject to downside risks, according to the report.
"The headline deficit is projected to decrease further to 2.0 percent of GDP in 2017, mainly as a result of the moderate economic recovery and good financing conditions," the European Commission noted.
"However, uncertainty about the macroeconomic outlook, the potential impact on the deficit of banking support measures and possible spending slippages pose risks," it said.
The commission also pointed out that public debt has stabilized at around 130 percent of GDP since 2011.
"The stock of public debt, which is still large, coupled with still relatively high deficit levels and low growth, makes Portugal nevertheless vulnerable to changing economic conditions and rising financing costs," the commission said.
"Overall Portugal has made limited progress on addressing the 2016 country-specific recommendations," it added.
Portugal signed a bailout program in 2011 when it was on the verge of bankruptcy. High debt remains a problem for the country, with the economy not growing as fast as the government hopes. ■
What to read next
More inside POST