Economy of PortugalPortugal 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 Economic and 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 Economic and 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 - $182 billion (2002 est.)
GDP - real growth rate: 0.8% (2002 est.)
GDP - per capita: purchasing power parity - $18,000 (2002 est.)
GDP - composition by sector:
services: 67.7% (2002 est.)
Population below poverty line: NA%
Household income or consumption by percentage share:
lowest 10%: 3.1%
highest 10%: 28.4%
Inflation rate (consumer prices): 3.7% (2002 est.)
Labor force: 5.1 million (2000 est.)
Labor force - by occupation: services 60%, industry 30%, agriculture 10% (1999 est.)
Unemployment rate: 4.7% (2002 est.)
revenues: $45 billion
expenditures: $48 billion, including capital expenditures of $NA billion (2001 est.)
Industrial production growth rate: 1.5% (2002 est.)
Electricity - production: 44.32 billion kWh (2001)
Electricity - production by source:
fossil fuel: 64.5%
other: 4.2% (1998)
Electricity - consumption: 41.48 billion kWh (2001)
Electricity - exports: 3.479 billion kWh (2001)
Electricity - imports: 3.743 billion kWh (2001)
Exports: $25 billion (f.o.b., 1998)
Exports - commodities: clothing and footwear, machinery, chemicals, cork and paper products, hides
Exports - partners: EU 79.7% (Germany 19.2%, Spain 18.6%, France 12.6%, UK 10.3% Benelux 5.4%, Italy), US 5.8% (2001)
Imports: $39 billion (f.o.b., 2001)
Imports - commodities: machinery and transport equipment, chemicals, petroleum, textiles, agricultural products
Debt - external: $13.1 billion (1997 est.)
Economic aid - donor: ODA, $271 million (1995)
1 euro (Esc) = 100 eurocents (local denomination: cêntimos)
euros per US dollar - 1.0626 (2002), 1.1175 (2001), 1.0854 (2000), 0.9386 (1999)
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