Portugal has reformed its immigration laws to attract foreign workers as it faces a labour shortage in tourism and construction.

The new law provides foreigners seeking employment with a temporary 120-day visa that can be extended by 60 days. The reform will come into force in the next few days, after the Portuguese president approved it on Thursday. 

The move is also designed to make it easier for digital nomads -- those who work online without needing a fixed business location -- to work from Portugal.

"Portugal needs immigrants" for "its demography, its economy and its culture", said Minister for Parliamentary Affairs Ana Catarina Mendes.

The Iberian country's tourism sector was hit hard by the coronavirus pandemic and requires around 50,000 extra employees, Tourism Minister Rita Marques said on Tuesday.

The change in the law comes after Portugal signed an agreement with Portuguese-speaking nations including Brazil in July 2021 to make it easier for students and workers to move between countries.

The number of foreigners living in Portugal has risen by 40 per cent over the past decade according to the latest census, carried out in 2011.

That is more than 550,000 of the country's 10.3 million people -- but it has not been enough to reverse the population decline seen over this period.