Economic trends
From the beginning of 2009, Portugal has been suffering from deep recession, caused by the collapse of foreign demand and the restrictive financial conditions that have affected all the sectors of the economy, such as exports and investments in particular. After it contracted by 2.7% in 2009, the Portuguese economy again experienced a moderate growth in 2010, which then again became negative in 2011. The GDP growth should again be negative in 2012 (-3% according to the IMF estimate), as a result of the austerity measures and an unfavorable international economic situation.
In May 2011, Portugal signed a 78 billion EUR bailout agreement with the Troika (EU-ECB-IMF), in order to reduce its budget deficit. Under this agreement, the government launched a plan of reforms and structural adjustments, including budget cuts, tax increases, a large privatization program expected to earn the country 7 billion EUR, a bank recapitalization plan, and a reform of the labor market. The second program review conducted in December by the IMF indicates progress in implementing reforms; however, the review concludes that the main danger is external, linked to the ongoing crisis in the eurozone.
With an unemployment rate rising to approximately 10%, an increase in social inequality between the north and the south, and the weakening of purchasing power, social tensions have been more keenly felt.
Main branches of industry
The agricultural sector, with low productivity due to low level of mechanization, represents a little over 2% of Portugal's GDP and employs 11.5% of the population. The main crops are cereals, fruits, vegetables and wine. The exports of Port wine represent 1.4% of total exports. Portugal has many natural resources. The mining sector (copper, tin) represents 6% of the GDP and Portugal is one of the main exporters of marble. The forests provide a large portion of the world's cork supply.
The manufacturing industry is modern and it is made up of small and medium-sized companies. Its main sectors of activity are metallurgy, mechanical engineering, textiles and construction. Moreover, the country has increased its role in the European automobile sector and has a world class mold manufacturing industry.
Services, particularly tourism, play an important role which is increasing rapidly. The tertiary sector contributes to more than 70% of the GDP.
International trade
Portugal's economy is open to foreign investment, trade represents more than 70% of the GDP (during the period 2007-2009). Becoming a member of the European Union changed the structure of the Portuguese imports and exports. The country exports more and more technological equipment instead of the traditional agricultural products or products from the textile and clothing industry.
The European Union is Portugal's main client, followed by the United States. Other commercial partners of Portugal are China, Nigeria and Brazil.
The trade balance of Portugal is structurally in deficit, however it saw an improvement during the crisis, due to the fall of imports and a continued, albeit slower, growth in exports. In 2012, the exports are expected to suffer due to the unfavorable international context.
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Last updates: May 2012
