The Portuguese Economy
The Global Competitiveness Report for 2005, published by the World economic Forum, places Portugal on the 22nd position, ahead of countries like Spain, Ireland, France, Belgium and Hong Kong. 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.
Portugal has become a diversified and increasingly service-based economy since joining the European Community in 1986. Over the past two decades, successive governments have privatized many state-controlled firms and liberalized key areas of the economy, including the financial and telecommunications sectors. Services, particularly tourism and finance, are playing an increasingly important role in the economy. The country qualified for the European Monetary Union (EMU) in 1998 and began circulating the euro on 1 January 2002 along with 11 other EU member economies.
Economic growth had been above the EU average for much of the 1990s, but fell back in 2001-06. GDP per capita stands at roughly 70% of the EU-25 average. A poor educational system, in particular, has been an obstacle to greater productivity and growth. Portugal has been increasingly overshadowed by lower-cost producers in Central Europe and Asia as a target for foreign direct investment. The budget deficit surged to an all-time high of 6% of GDP in 2005 but was reduced to 4.6% in 2006. The government faces tough choices in its attempts to boost Portugal's economic competitiveness while keeping the budget deficit within the eurozone's 3%-of-GDP ceiling.
Portugal's economy is based on traditional industries such as textiles, clothing, footwear, cork and wood products, beverages (including wine), porcelain and earthenware, glass and glassware, and food industries. In addition, the country has increased its role in Europe's automotive sector and injection moulding industries. Portugal is exporting 75 percent of its agricultural and cattle production. The viniculture dominates the agricultural activities to the North of the Douro (where you can find the generous Porto wine) and, annually, about 15 million litres are produced. Portugal is the biggest producer, in Europe, of cork oak and has, equally, a big importance in the olive oil production and exportation of canned food. The fishing industry is also important to the national economy. The construction and steel industries have gradually increased along with the tourist industry, a precious source of foreign currency.