Economy of Portugal

Economy - overview: Portugal is an upcoming capitalist economy with a per capita gross domestic product two-thirds that of the four big West European economies. In 1999, it continued to enjoy sturdy economic growth, falling interest rates, and low unemployment. The country qualified for the European Monetary Union (EMU) in 1998 and joined with 10 other European countries in launching the euro on 1 January 1999. Portugal's inflation rate for 1999, 2.4%, was comfortably low. The country continues to run a trade deficit and a balance of payments[?] deficit. The government is working to modernize capital plant and increase the country's competitiveness in the increasingly integrated world markets. Growth is expected to remain stable in 2000 as the economic integration of Europe proceeds. Improvement in the education sector is critical to the catch-up process.

Membership in the European Union (EU) contributed to stable economic growth, largely through increased trade ties and an inflow of funds to improve the country's infrastructure. After a recession in 1993, the economy grew at an average annual rate of 3.3%, well above EU averages. In order to qualify for the European Monetary Union (EMU), Portugal agreed to cut its fiscal deficit and undertake structural reforms. The EMU brought to Portugal exchange rate stability, falling inflation, and falling interest rates. Falling interest rates, in turn, lowered the cost of public debt and helped the country achieve its fiscal targets.

Household debt has expanded rapidly. The European Commission, OECD, and others have advised the Portuguese Government to exercise more fiscal restraint. Portugal's public debt exceeded 3 % of GNP in 2001, the EU's self-imposed limit, and left the country open to either EU sanctions or tighter financial supervision. The overall rate of growth slowed in late 2001 and into 2002, making fiscal austerity that much more painful to implement. Portugal will be forced into greater self-sufficiency when EU funds are likely to be discontinued in 2006. In addition, EU expansion into eastern Europe also will erase Portugal's key competitive advantage, low labor costs.

Portugal's economy is based on traditional industries such as textiles, clothing, footwear, cork and wood products, beverages (wine), porcelain and earthenware, and glass and glassware. In addition, the country has increased its role in Europe's automotive sector. Services, particularly tourism, are playing an increasingly important role in the economy.

Portugal has made significant progress in raising its standard of living to that of its EU partners. GDP per capita on a purchasing power parity basis rose from 51% of the EU average in 1985 to 78% in early 2002. Unemployment stood at 4.1% at the end of 2001, which is low compared to the EU average. Real wages are flexible, but high social costs and severance packages raise fixed labor costs and make new job creation difficult.

GDP: purchasing power parity - $151.4 billion (1999 est.)

GDP - real growth rate: 3.2% (1999 est.)

GDP - per capita: purchasing power parity - $15,300 (1999 est.)

GDP - composition by sector:
agriculture: 4%
industry: 36%
services: 60% (1999 est.)

Population below poverty line: NA%

Household income or consumption by percentage share:
lowest 10%: NA%
highest 10%: NA%

Inflation rate (consumer prices): 2.4% (1999 est.)

Labor force: 4.75 million (1998 est.)

Labor force - by occupation: services 60%, industry 30%, agriculture 10% (1999 est.)

Unemployment rate: 4.6% (1999 est.)

Budget:
revenues: $48 billion
expenditures: $52 billion, including capital expenditures of $7.4 billion (1996 est.)

Industries: textiles and footwear; wood pulp, paper, and cork; metalworking[?]; oil refining[?]; chemicals; fish canning[?]; wine; tourism

Industrial production growth rate: 2.9% (1999 est.)

Electricity - production: 38.581 billion kWh (1998)

Electricity - production by source:
fossil fuel: 63.14%
hydro: 33.46%
nuclear: 0%
other: 3.4% (1998)

Electricity - consumption: 36.18 billion kWh (1998)

Electricity - exports: 3.7 billion kWh (1998)

Electricity - imports: 4 billion kWh (1998)

Agriculture - products: grain, potatoes, olives, grapes; sheep, cattle, goats, poultry, beef, dairy products

Exports: $25 billion (f.o.b., 1998)

Exports - commodities: clothing and footwear, machinery, chemicals, cork and paper products, hides[?]

Exports - partners: EU 82% (Germany 20%, Spain 16%, France 14%, UK 12% Netherlands 5%, Benelux 5%, Italy), US 5% (1998)

Imports: $34.9 billion (f.o.b., 1998)

Imports - commodities: machinery and transport equipment, chemicals, petroleum, textiles, agricultural products

Imports - partners: EU 77% (Spain 24%, Germany 15%, France 11%, Italy 8%, UK 7%, Netherlands 5%), US, Japan (1998)

Debt - external: $13.1 billion (1997 est.)

Economic aid - donor: ODA, $271 million (1995)

Currency: 1 Portuguese escudo[?] (Esc) = 100 centavos
Note: This information is outdated; since January 1, 2002, Portugal is using the Euro.

Exchange rates: euros per US$1 - 0.9867 (January 2000), 0.9386 (1999); Portuguese escudos (Esc) per US$1 - 172.78 (January 1999), 180.10 (1998), 175.31 (1997), 154.24 (1996), 151.11 (1995)
note: on 1 January 1999, the EU introduced a common currency that is now being used by financial institutions in some member countries at a fixed rate of 200.482 escudos per euro; the euro will replace the local currency in consenting countries for all transactions in 2002

Fiscal year: calendar year

See also:

• Portugal