Economy of Portugal
From Free net encyclopedia
Portugal is a capitalist economy with a per capita gross domestic product two-thirds that of the four big Western 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 of the European Union (EMU) in 1998 and joined with 10 other European countries in launching the euro on January 1, 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 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 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 labour 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 labour costs and make new job creation difficult.
At the 3rd Trimester of 2004, over than 400.000 people were unemployed in Portugal. The unemployement rate in the country was 7,1%.
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Agriculture
More than half (50,8%) of continental Portugal is dedicated to agriculture. The north has a miscellaneous agricultural type (except for the Douro Valley), while the south has developed an extensive monoculture on cereals and Olive trees. Wheat (3,000 km²) and corn (2,680 km²) are produced in vast areas, followed by barley, potato, and rice. Larger plantations are the vineyard with 3,750 km², but the olive trees have the larger area of about 4,000 km², namely in Estremadura and the Algarve, mostly for production of olive oil. Portuguese olive oil is specially appraised by nationals. Portugal also has a significant production of fruits, namely oranges (the Algarve ones are very appreciated), pears ("Pera Rocha" is a notable pear from the Oeste region), apples, almonds and walnuts. Among other productions such has horticulture, floriculture, beet sugar, sunflower oil, and tobacco.
Natural resources
Natural resources, such has copses cover about 34% of the country, namely pine trees (13,500 km²), cork oak (6800 km²), holm oak (5,340 km²), and the eucalyptus (2,430 km²). Cork is a major production, Portugal produces half of the world's cork. Significant mining resources are tungsten, tin, and uranium.
Statistics
GDP: purchasing power parity - $182 billion (G$) (2002 est.)
GDP - real growth rate: 0.5% (2005 est.)
GDP - per capita: purchasing power parity - 18,000 $ (2002 est.)
GDP - composition by sector:
agriculture:
3.6%
industry:
28.7%
services:
67.7% (2002 est.)
Population below poverty line:< 22% (2005)
Household income or consumption by percentage share:
lowest 10%:
3.1%
highest 10%:
28.4%
Inflation rate (consumer prices): 3.7% (2002 est.)
Labour force: 5.1 million (2000 est.)
Labour force - by occupation: services 60%, industry 30%, agriculture 10% (1999 est.)
Unemployment rate: 4.7% (2002 est.)
Budget:
revenues:
45 G$
expenditures:
48 G$, including capital expenditures of NA G$ (2001 est.)
Industries: textiles and footwear; wood pulp, paper, and cork; metalworking; oil refining; chemicals; fish canning; wine; tourism
Industrial production growth rate: 1.5% (2002 est.)
Electricity - production: 44.32 TWh (2001)
Electricity - production by source:
fossil fuel:
64.5%
hydro:
31.3%
nuclear:
0%
other:
4.2% (1998)
Electricity - consumption: 41.48 TWh (2001)
Electricity - exports: 3.479 TWh (2001)
Electricity - imports: 3.743 TWh (2001)
Agriculture - products: grain, potatoes, olives, grapes; sheep, cattle, goats, poultry, beef, dairy products
Exports: 25 G$ (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 G$ (f.o.b., 2001)
Imports - commodities: machinery and transport equipment, chemicals, petroleum, textiles, agricultural products
Imports - partners: EU 74.2% (Spain 26.5%, Germany 13.9%, France 10.3%, Italy 6.7%, UK 5%), US 3.8%, Japan 1.9% (2001)
Debt - external: 13.1 G$(1997 est.)
Economic aid - donor: ODA, 271 M$ (1995)
Currency:
1 euro (Esc) = 100 eurocents (local denomination: cêntimos)
Exchange rates:
euros per US dollar year-end - 0.7962 (2003) 0,9520 (2002), 1.1242 (2001), 1.0608 (2000), 0.9939 (1999), 0,8573 (1998)
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
Endogenous domestic problems
- Forest Fires: Every year a large area of the Portuguese forest is destroyed. This has an important impact in the economy because many people and industries depend on forestry related activities. It is also a very dramatic ecological problem and a security issue for the populations.
- Road Safety: Portugal has one of the highest rates of accidents in Europe. Thousands of lives are lost every year on the roads and highways across the country.
- Portugal's Public Debt: The public debt has been exceeding 60% of GDP. This problem is a threat for the Portuguese economy and for the State's financial sustainability.
- Overdimensioned Public Sector: The public sector of the economy is generally considered very large, expensive and inefficient. There are an excess of public employees and an useless bureaucracy responsible for the lost of millions of euros every year.
- 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 government responsibles are trying to combat corruption before it reaches highest levels. Many abusive lobbies and corruption schemes are related with concessions, unclear aprovals to contractors and economic groups, or job creation and commercial agreements for friends and family members, mainly inside the huge public sector. Some cases are well known and were widely reported in the media, such as the problems in the Felgueiras, Marco de Canaveses and Gondomar municipalities.
- Fiscal Fraud: Portuguese Finance Ministry stated many times that millions of euros are lost every year because a lot of people and companies don't pay their taxes. Government members take measures every year, but the problem remains unsolved.
- Welfare System Bankruptcy: The Portuguese welfare system is on verge of bankruptcy if radical and pragmatic measures won't be taken. Successive governments have emphasized this and are trying to solve the problem.
See also
- OECD's Portugal country Web site and OECD Economic Survey of Portugal
- Economy of Europe
- Portugal
- Economic history of Portugal
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