Economy of Portugal
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{{Economy of Portugal table}}
The '''Economy of Portugal''' is a [[market economy|market]] [[economy]]. The [[Global Competitiveness Report]] for [[2005]], published by the [[World Economic Forum]], places [[Portugal]] on the 22nd position, ahead of countries and territories like [[Spain]], [[Republic of Ireland|Ireland]], [[France]], [[Belgium]], [[Hong Kong]] and Turkey. On the Technology index, Portugal was ranked 20th and on the Public Institutions index Portugal is the 15th best.
The major industries include: oil, [[petrochemistry]], [[cement]] production, [[automotive]] and [[shipbuilding|ship industries]], [[electrical]] and [[electronics]] industries, [[machinery]], [[pulp and paper industry]], [[injection moulding]], [[textile]], [[footwear]], [[leather]], [[furniture]], [[Ceramic|ceramics]], [[beverages]] and [[food industry]] and [[cork (material)|cork]] (world's largest producer). Manufacturing accounts for 33% of exports. Portugal is the world's fifth-largest producer of [[tungsten]], and the world's eighth-largest producer of [[wine]].
The [[tertiary sector]] has grown, producing 66% of the [[GDP]] and providing jobs for 52% of the working population. The most significant growth rates are found in the [[trade]] sector, due to the introduction of modern means of distribution, transport and telecommunications. [[Financial]] tertiary have benefited from [[privatisation]], also gaining in terms of efficiency. [[Tourism]] has developed significantly and generates approximately 5% of the wealth produced in Portugal.
Most imports come from the [[European Union]] countries of [[Spain]], [[Germany]], [[France]], [[Italy]], and the [[United Kingdom]]. Most exports also go to other European Union member states.
Although being very high by world's average standards, Portugal's [[GDP per capita]] is among the lowest in [[Western Europe]]. However, research about [[standard of living]] by the [[Economist Intelligence Unit]]'s (EIU) [http://www.economist.com/media/pdf/QUALITY_OF_LIFE.pdf Quality-of-life Survey] places Portugal as the country with the [[Quality-of-life index|19th-best quality of life]] in the world, ahead of other economically and technologically advanced countries like [[France]], [[Germany]], the [[United Kingdom]] and [[South Korea]].
==History==
{{main|Economic history of Portugal}}
===Portuguese Colonial Empire===
During the [[Portuguese Empire]] period, started in the [[15th century]], until the [[Carnation Revolution]] of [[1974]], the economy of Portugal was centered in [[trade]] and [[raw material]]s related activities within its vast [[Colonialism|colonial]] possessions, mainly in [[Asia]] ([[spice]]s, [[silk]], [[dye]]s, [[porcelain]] and [[gem]]s), [[Africa]] ([[ivory]], [[timber]], [[oil]] and [[diamonds]]) and [[South America]] ([[sugar cane]], [[dye]]s, [[wood]]s and [[gold]]). The country, with a transcontinental empire with plenty of natural resources and vast unexploited areas, was among the most powerful nations in the world. In 1822, the Portuguese colony of [[Brazil]] became an independent country, however, until 1974, Portugal managed to preserve its colonies in Africa, which included [[Angola]] and [[Mozambique]], territories that would experience high rates of economic growth and unmatched levels of development until the departure of the Portuguese in 1975.
After a long period of economic divergence before 1914, the Portuguese economy recovered slightly until 1950, entering thereafter on a path of strong economic convergence. Portuguese economic growth in the period 1950-1973 created an opportunity for real integration with the developed economies of Western Europe. Through emigration, trade, tourism and foreign investment, individuals and firms changed their patterns of production and consumption, bringing about a structural transformation. Simultaneously, the increasing complexity of a growing economy raised new technical and organizational challenges, stimulating the formation of modern professional and management teams.<ref>[http://ideas.repec.org/p/ave/wpaper/382006.html], Joaquim da Costa Leite ([[Aveiro University]]) - Instituições, Gestão e Crescimento Económico: Portugal, 1950-1973</ref>
===The military coup of 1974===
The post [[Carnation Revolution]] period was characterized by chaos and negative economic growth as industries were nationalised and the negative effects of the decoupling of Portugal from its former territories were felt. Heavy industry came to an abrubt halt. All sectors of the economy from manufacturing, mining, chemical, defence, finance, agriculture and fishing went into free fall. Portugal found itself overnight going from the country in [[Western Europe]] with the highest growth rate to the lowest - in fact it experienced several years of negative growth. This was amplified by the mass emigration of skilled workers and enterpreneurs due to political intimidation, and the costs of accommodating in Portugal thousands of refugees from the former overseas provinces in Africa - the ''retornados''.
After the [[Carnation Revolution]]'s turmoil of [[1974]], the Portuguese economic basis changed deeply. The Portuguese economy had changed significantly by 1973 prior to the leftist military coup, compared with its position in 1961 - total output (GDP at factor cost) had grown by 120 percent in real terms. Clearly, the pre-revolutionary period was characterized by robust annual growth rates for GDP (6.9 percent), industrial production (9 percent), private consumption (6.5 percent), and gross fixed capital formation (7.8 percent). The growth rate of Portuguese merchandise exports during the period 1959 to 1973 was notable - 11 percent per annum. In 1960 the bulk of exports was accounted for by a few products - canned fish, raw and manufactured cork, cotton textiles, and wine. By contrast, in the early 1970s (before the 1974 military coup), Portugal's export list reflected significant product diversification, including both consumer and capital goods. Several branches of Portuguese industry became export-oriented, and in 1973 over one-fifth of Portuguese manufactured output was exported.
There was a 16-percentage-point increase in the participation of the services sector from 39 percent of GDP in 1973 to 55.5 percent in 1990. Most of this growth reflected the exacerbated proliferation of [[civil service]] employment and the associated cost of [[public administration]], together with the contribution of [[tourism]] services during the 1980s to the detriment of more sustainable and reproductive activities like manufacturing, exporting and technology/capital-intensive industries.
===EU membership===
Membership in the [[European Union]] (EU), achieved in [[1986]], contributed to stable [[economic growth]] and [[economic development|development]], largely through increased [[trade]] ties and an inflow of [[Structural Funds and Cohesion Funds|funds]] allocated by the European Union 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 but well behind the growth of the Portuguese economy before the military coup of 1974. 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.
In [[1999]], it continued to enjoy sturdy economic growth, falling [[interest]] rates, and low [[unemployment]]. The country qualified for the [[Economic and Monetary Union of the European Union]] (EMU) in [[1998]] and joined with 10 other European countries in launching the [[euro]] on [[January 1]], 1999. The three different designs chosen for the national side of the Portuguese euro coins were drawn by the artist Vitor Manuel Fernandes dos Santos. The ispiration came from the three seals of the first king, [[Dom Afonso Henriques]]. Portugal's inflation rate for 1999, 2.4%, was comfortably low.
Household debt has expanded rapidly. The [[European Commission]], [[OECD]], and others have advised the Portuguese Government to exercise more fiscal restraint. Portugal's public deficit 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 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. By 2005 this had dropped to 72% (of the average across all of now 25 EU members, including seven with GDP per capita lower than Portugal) as GDP per capita rose in other EU countries. [[Unemployment]] stood at 4.1% at the end of 2001, which was low compared to the EU average.
GDP growth in 2006, at 1.3%, was the lowest not just in the European Union but in all of Europe. Since 2000 the Czech Republic, Greece, Malta and Slovenia have all overtaken Portugal in terms of GDP per head. And Portuguese GDP per head has fallen from just over 80% of the EU 25 average in 1999 to just over 70% last year. This poor performance of the Portuguese economy was explored in April [[2007]] by [[The Economist]] which described [[Portugal]] as "a new [[sick man of Europe]]".<ref name="sick man">"A new sick man of Europe", [[The Economist]], 2007-04-14. http://www.economist.com/world/europe/displaystory.cfm?story_id=9009032</ref> From 2002 to 2007, the unemployment rate increased 65% (270,500 unemployed citizens in 2002, 448,600 unemployed citizens in 2007).<ref>Luis Miguel Mota, [http://www.destak.pt/artigos.php?art=11796 População desempregada aumentou 65% em cinco anos], Destak.pt (6th June 2008)</ref>
==Employment and wages==
Although unemployment is about 8% today, the number of unemployed people is increasing since 2000.
As of [[May 2006]], over 420,000 people were unemployed in Portugal. The [[unemployment]] rate in the country was 7.7%. In [[2007]] the unemployment rate reached 8.4%, the highest unemployment rate in Portugal since [[1987]]. The average European Union unemployment rate decreased to a record low of 7.3% in [[2007]]. In the Portuguese sub-region of [[Ave, Subregion|Vale do Ave]], the unemployment rate has reached 15%, and in the [[Península de Setúbal]] sub-region 12.5%.
===Wages===
The average wage in Portugal is 804.22€ per month, and the [[minimum wage]], which is regulated by law, is 426€ per month.
===Graduate unemployment===
In 2008, about 8%<ref name = "graduate unemployment">{{pt icon}} [http://diariodigital.sapo.pt/news.asp?id_news=319351 Licenciados desempregados mais do que duplicaram desde 2002], [[Diário Digital]] (19th February 2008)</ref> of the [[graduate unemployment|people with a degree were unemployed]], and a much larger proportion were [[underemployed]]. This directly was correlated with a general lack of [[employability]] and student preparation for the workplace seen among many courses in a number of fields offered by certain higher education institutions or departments. The implementation of the [[Bologna process]] and other educational reforms, such as the compulsory closing of a number of courses, departments, colleges and private universities after 2005 due to a lack of academic rigour and low teaching standards, tried a totally new approach in order to tackle the problem. In 2007 alone, some major private universities were investigated by State agencies and two were immediately closed. In addition, a number of degrees of the public system were also discontinued due to lack of quality, low demand by potential students or scarce interest showed by potential employers in fresh graduates on these fields. [[secondary education|Secondary]] and post-secondary non-higher education (intermediate education - ''ensino médio''), involving technical and vocational education, has been redeveloped since 2007, through the government's policies of the ''XVII Governo Constitucional'' (headed by Prime-Minister [[José Sócrates]]).
Nearly 60,000<ref name = "graduate unemployment"/> people with an academic degree are unemployed in Portugal. This group includes a large proportion of young adults.
==Economy by sector==
[[Image:2006Portuguese exports.PNG|thumb|right|Portuguese exports in 2006]]
Fisheries and agriculture now account for about 4% of the [[GDP]], down from approximately 25% in [[1960]], while still employing 13% of the labour force. On the other hand, the [[tertiary sector]] has grown, producing 66% of the GDP and providing jobs for 52% of the working population. The remaining 30% of the GDP is mainly produced by the building and energy sectors.
===Natural resources===
Natural resources such as forests cover about 34% of the country, namely [[Pinus|pine trees]] (13,500 km²), [[Cork Oak]] (6800 km²), [[Holm Oak]] (5,340 km²), and [[Eucalyptus]] (2,430 km²). [[Cork (material)|Cork]] is a major production, Portugal produces half of the world's cork. Significant mining resources are [[tungsten]], [[tin]], and [[uranium]].
===Agriculture===
A considerable part of continental Portugal is dedicated to agriculture, although it does not represent most of the economy. The south has developed an extensive monoculture of cereals and [[olive tree]]s and the [[Douro|Douro Valley]] in [[vineyard]]s. Olive trees (4,000 km²; 1,545 sq mi), vineyards (3,750 km²; 1,450 sq mi), [[wheat]] (3,000 km²; 1,160 sq mi) and [[maize]] (2,680 km²; 1,035 sq mi) are produced in vast areas. Portuguese [[wine]] and [[olive oil]] are especially praised by nationals for their quality, thus external competition (even at much lower prices) has had little effect on consumer demand. Portugal is a traditional wine grower, and has exported its wines since the dawn of western civilization; [[Port Wine]], ''[[Vinho Verde]]'' and [[Madeira Wine]] are the leading wine exporters. Portugal is also a quality producer of fruits, namely the Algarve [[orange (fruit)|oranges]], and Oeste region's ''[[pêra rocha]]'' (a type of [[pear]]). Other exports include horticulture and floriculture products, beet sugar, sunflower oil, [[cork (material)|cork]], and tobacco.
===Industry===
The major industries include: [[oil refineries]], [[petrochemistry]], [[cement]] production, [[automotive]] and [[shipbuilding|ship industries]], [[electrical]] and [[electronics]] industries, [[machinery]], [[pulp and paper industry]], [[injection moulding]], [[plastic|plastic products]], [[textile]], [[footwear]], [[leather]], [[furniture]], [[Ceramic|ceramics]], [[beverages]] and [[food industry]] and [[cork (material)|cork]] (leader producer). Automotive and other mechanical industries are primarily located in and around [[Setúbal]], [[Porto]], [[Lisbon]], [[Aveiro]], [[Braga]], and [[Santarém]].
===Services===
The [[tertiary sector]] has grown, producing 66% of the [[GDP]] and providing jobs for 52% of the working population. The most significant growth rates are found in the [[trade]] sector, due to the introduction of modern means of distribution, transport and telecommunications. [[Financial]] tertiary have benefited from [[privatisation]], also gaining in terms of efficiency. [[Tourism]] has developed significantly and generates approximately 5% of the wealth produced in Portugal.
==Competitiveness==
===Portugal's competitiveness in the world===
The [[Global Competitiveness Report]] for 2005, published by the [[World Economic Forum]], places Portugal on the 22nd position, ahead of countries like [[Spain]], [[Republic of Ireland|Ireland]], [[France]], [[Belgium]] and [[Hong Kong]]. This table shows that Portugal has stepped two places regarding the 2004 ranking. On the Technology index, Portugal was ranked 20th, on the Public Institutions index Portugal is the 15th best and on the Macroeconomic index, Portugal is placed on the 37th position. [http://www.investinportugal.pt/MCMSAPI/HomePage/NewsRoom/PORTUGAL+IMPROVES+ITS+POSITION+IN+THE+WEF+COMPETITIVENESS+RANKING.htm]
===Competitiveness by city===
A study concerning [[competitiveness]] of the 18 Portuguese district capitals, complying with [[World Economic Forum]] methodology, was made by [[Minho University]] economics researchers. It was published in [[Público]] newspaper on 30th September 2006. The best-ranked cities in the study were [[Évora]], [[Lisbon]] and [[Coimbra]]. [http://jornal.publico.clix.pt/default.asp?a=2006&m=09&d=30&uid={456842A6-9631-4CC3-9C5F-E84A6AEEB13C}&sid=11039], [http://www.publico.clix.pt/shownews.asp?id=1271886&idCanal=63], [http://diariodigital.sapo.pt/dinheiro_digital/news.asp?section_id=2&id_news=72198]
'''Ranking:'''
*1.[[Évora]]: 7,293
*2.[[Lisbon]]: 6,454
*3.[[Coimbra]]: 6,042
*4.[[Beja]]: 5,660
*5.[[Leiria]]: 5,609
*6.[[Castelo Branco]]: 5,608
*7.[[Aveiro]]: 5,452
*8.[[Guarda]]: 5,178
*9.[[Santarém]]: 5,037
*10.[[Portalegre]]: 4,711
*11.[[Viseu]]: 4,628
*12.[[Vila Real]]: 5,514
*13.[[Bragança]]: 4,271
*14.[[Setúbal]]: 4,070
*15.[[Braga]]: 4,055
*16.[[Faro]]: 3,971
*17.[[Viana do Castelo]]: 3,859
*18.[[Porto]]: 3,577
==Domestic problems==
*'''Forest Fires:''' Like in other countries with very hot summers and seasonal drying of soils and vegetation, every year large areas of the Portuguese forest is destroyed. This has an important impact on the economy because many people and industries depend on [[forestry]] related activities. It is also a very dramatic ecological problem and a safety issue for the populations.
*'''Portugal's Public Debt:''' The [[public debt]] exceeds 60% of GDP. This problem is a threat to the Portuguese economy and the State's financial sustainability.
*'''Over-dimensioned Public Sector:''' The public sector has been generally considered a very large, expensive and inefficient part of the economy. An excess of public employees and useless bureaucracy results in the loss of millions of euros every year. Since the ''XVI Governo Constitucional'' government, headed by Prime Minister [[José Durão Barroso]], to the ''XVII Governo Constitucional'' government, headed by Prime Minister [[José Sócrates]] (which created new rules and implemented reforms aiming at better efficiency, rationalized resource allocation, fight civil servant excedentary overcapacity (''excedentários'') and less bureaucracy for both citizens and companies - eg: ''empresa na hora'' [http://www.empresanahora.pt/], ''PRACE - Programa de Reestruturação da Administração Central do Estado'' [http://www.portugal.gov.pt/NR/rdonlyres/0A6DEBBD-BE35-4C4C-91CA-27BCF76E142A/0/Modelo_PRACE.pdf], and SIMPLEX - Programa de Simplificação Administrativa e Legislativa [http://www.ucma.gov.pt/simplex/], among others), the "[[public expenditure]] problem" has been a major concern in Portugal.
*'''Corruption:''' Although being generally considered an honest hard-working people, corruption has become an issue of major political and economic significance for the Portuguese. The responsible authorities are trying to combat corruption before it increases further. Many abusive lobbies and corruption schemes are related to concessions, unclear approvals to contractors and economic groups, or job creation for and commercial agreements with friends and family members, mainly involving the huge public sector and companies. Some cases are well known and were widely reported in the [[News media|media]], such as the affairs in several municipalities involving town hall officials and businesspersons.
==See also==
*[http://www.oecd.org/portugal/ OECD's Portugal country Web site] and [http://www.oecd.org/eco/surveys/portugal/ OECD Economic Survey of Portugal]
* [[Economy of Europe]]
* [[Portugal]]
* [[Economic history of Portugal]]
== References ==
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{{OECD}}
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{{Economy of Europe}}
[[Category:WTO member economies|Portugal]]
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[[Category:European Union member economies]]
[[Category:OECD member economies|Portugal]]
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