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Economy of Portugal

From Academic Kids

Portugal is an upcoming 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 (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 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 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%.

Contents

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 (300,000 ha) and corn (268,000 ha) are produced in vast areas, followed by barley, potato, and rice. Larger plantations are the vineyard with 375,000 ha, but the olive trees have the larger area of about 400,000 ha, 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 (1,350,000 ha), cork oak (680,000 ha), holm oak (534,000 ha), and the eucalyptus (243,000 ha). 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: 0.8% (2002 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:< NA%

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: cÍntimos)

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

See Also


 
European Union (EU)
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Flag of the European Union

Austria | Belgium | Cyprus | Czech Republic | Denmark | Estonia | Finland | France | Germany | Greece | Hungary | Ireland | Italy | Latvia | Lithuania | Luxembourg | Malta | Netherlands | Poland | Portugal | Slovakia | Slovenia | Spain | Sweden | United Kingdom


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