Economy of Portugal

By | April 29, 2022

According to cheeroutdoor, Portugal is an industrial-agrarian country, one of the relatively underdeveloped economically in Western Europe. In 1974–75 the economy underwent profound transformations. The largest industrial and financial companies were nationalized. After joining the EU in 1986, the economy became more diversified with the predominant development of the service sector. The process of re-privatization of the public sector, modernization and liberalization of the economy, its adaptation to EU requirements has accelerated. The share of the state in the economy decreased from 40% of GDP in 1975 to 7-8% of GDP in 2001, the share of wages in the public sector amounted to 15% of GDP. In 1986-99, Portugal received EU assistance in the amount of 29.7 billion euros for the restructuring and modernization of its economy.

In 1996-2000, the annual GDP growth of Portugal was one of the highest in the EU – 3.4%, but already in 2001 – 1.7%, and in 2002 – 0.7%. GDP (at current prices, billion euros): in 1998 – 101.0; in 2001 – 123.0; in the III quarter of 2002 – 128.9. Despite the rather high GDP growth rates compared to the European average, GDP per capita in Portugal is still 74% of the average level in the EU (in 2001 – 12.2 thousand dollars). The share of Portugal in the world GDP of the OECD countries is 0.7%, in the GDP of the EU – 2%, in industrial production – 0.8 and 2.3%, respectively (1995).

Unemployment is 4.7% – one of the lowest rates in the EU, inflation – 3.7% (2002). Agriculture accounts for 3.8% of GDP, industry 30.5%, services 65.7% (beginning 2002). 10% of the labor force is employed in agriculture, 30% in industry, and 60% in services (2001). The role of the extractive industry is small. It is represented by enterprises for the extraction of ores of non-ferrous metals, copper, tin, zinc, lead, uranium, etc. In the production of copper concentrate, Portugal is in first place in the EU. The extractive industry employs only 0.3% of the economically active population. The main part of the products of this industry is supplied to Europe. The energy industry operates mainly on imported energy sources – oil and gas. Electricity production 43.242 billion kWh with consumption of 41.146 billion kWh; 70, 3% of electricity production comes from oil, gas and coal, 25.9% from hydropower resources, 4.06% from others. The oil refining industry works on imported raw materials and is located in coastal cities. 2/3 of the products of the chemical industry are petrochemicals, artificial fertilizers and pharmaceutical products. The main enterprises of the industry are concentrated in the Lisbon agglomeration and in the region of Porto.

Traditional manufacturing industries: textile, clothing, footwear, food, forestry and woodworking (cork, pulp and paper production), ceramics and ship repair. Automotive industry, production of resins, plastics, some types of electrical and electronic equipment, machine building for light and food industries stand out among the new industries. The manufacturing industry produces 25.8% of GDP, employs 23.3% of the labor force, and increases production by 2.0% (2002).

The production of textiles and clothing plays an important role in the Portuguese economy (7% of GDP and 33% of exports, 2000). The textile industry is concentrated in the northeast of the country (cotton fabrics) and in the southeast (woolen fabrics). Clothing enterprises are mainly located in densely populated areas near major centers (Lisbon, Porto, Braga). In the food industry, the production of canned fish, wine and olive oil is of the greatest importance. The catch of fish and other seafood is 215 thousand tons (2000). The main fish canning factories are located near the main fishing ports – Porto, Setubal, Portimão, etc. In terms of wine production (8 million hectare), Portugal ranks 6th in the world. Wines such as Port and Madeira are exported to many countries. The average annual production of olive oil is 0.2 million tons (2000). Forestry occupies an important place in the industrial structure of Portugal. The main export product of this industry is oak cork, the annual production is 130-200 thousand tons. Portugal accounts for approx. 60% of world exports of this product.

Automotive has achieved the greatest success among the new industries. In 1991, sales in this industry amounted to 250 million dollars, in 2001 – 3.2 billion dollars, of which 2.5 billion were intended for export. In 1995, the largest car factory “Autoeuropa” was built near Lisbon. Its products account for 11% of exports and 2.2% of GDP (2001).

On the whole, industry is very unevenly distributed. The main part of all capacities is concentrated in the seaside strip between Lisbon and Porto. The contribution of the Lisbon agglomeration to GDP is 36%; 1.1 million economically active population of the country is located on its territory.

Agriculture, compared to the general background of Western European countries, has lower technical and economic (1 tractor per 4 farms) and social indicators. It does not satisfy the country’s needs for a number of agricultural products. Up to 60% of food and feed are imported from abroad. Cereals, citrus fruits, vegetables, olives, grapes and other crops are grown. The main industry is crop production. OK. Three-fifths of the cultivated area is occupied by the main grain crops – wheat and corn. The most important types of agricultural products in Portugal are grapes and olives (respectively 1,041 thousand and 327 thousand tons). Apples, pears, plums are grown in the north of the country, citrus fruits, figs, pomegranates, and almonds are grown in the south. Animal husbandry is poorly developed, the country does not provide itself with meat. The main direction is sheep breeding.

The transport system in Portugal is underdeveloped. The total length of railways is 35,820 km, of which 873.2 km are electrified (2001). Rail transport is dominated by passenger traffic. The length of motor roads is 68,732 km, of which 59,110 km are paved, and 797 km are express roads. There are 4.932 million cars and 1.540 million trucks in the country (1999). Inland water transport does not play a big role. Most of the rivers are used only by small boats. There are 67 airports in Portugal, 3 main ones are in Lisbon, Faro and Porto (2001). Pipeline transport: 22 km for transportation of crude oil, 58 km for oil products, 700 km for gas pipeline. Maritime transport is of great importance, carrying out the main connections between the mainland and the islands, as well as cabotage. Marine tonnage 1, 164 million tons, the merchant fleet has 360 ships, of which 140 with a carrying capacity of 1000 tons and more, approx. 65% of foreign trade cargo (2000).

In Portugal, there are 5.3 million telephone lines and 3.07 million mobile phones (1999), the number of Internet users is 2 million people. (2001).

GDP growth in the service sector in 1997-99 was 3.5%. The leading industry is retail trade and tourism. In terms of the scale of development of retail trade, Portugal occupies one of the first places in the EU. In 2002, 12.2 million people visited Portugal, mainly tourists from the UK, Germany, France, the Netherlands and the Scandinavian countries. In terms of the number of tourists, the country ranks 15th in the world and is among the ten most visited countries in the EU. Tourism revenue $5 billion (2000). This industry employs 8% of the economically active population. The most visited area is located in the south of the country in Faro district – 52% of tourists, followed by Madeira – 18% and Lisbon – 14%.

The economic policy of Portugal is aimed at achieving the goals of the Maastricht agreements (reducing inflation, budget deficit, public debt, interest rates). Programs of “fast and effective” reprivatization and modernization of production, training of personnel, and since 1998 programs of stabilization and development were successfully implemented. Social policy is aimed at reforming the system of labor relations. New labor legislation has been adopted, providing for a system of collective agreements, the volume of social benefits has slightly decreased.

In the monetary sphere, measures were taken to maintain financial discipline, reorganize and reprivatize banks. Financial policy was used as a tool to influence the economic activity of enterprises and stimulate savings. The banking system of the country includes 39 banks, of which 5 are foreign, 3296 branches. The Central Bank has the right to issue banknotes, controls the activities of all credit and financial institutions and accumulates the country’s gold and foreign exchange reserves. The latter amount to 14.261 billion dollars, of which 5.353 million are gold reserves (2001). 5 large banks control 80% of the country’s financial sector; in terms of bank consolidation, Portugal is in 5th place in Western Europe. Interest rates on loans 5.16%, on deposits – 2.4% (2001). The bond market doesn’t play a big role the bulk of their issues go through private placement channels. The financial market is peripheral, the level of capitalization and liquidity is lower than in other EU countries. The largest stock exchange is located in Lisbon.

Economy of Portugal