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The Portuguese Economy In recent decades Portugal like its
European partners, has developed an increasingly
services-based economy. Currently the services sector
employs 57.7% of the working population, and generates
71.2% of gross value-added (GVA). The primary sector
employs 11.7% of those economically active and
contributes just 3.5% to GVA. Industry, construction,
energy and water provide 30.6% of all jobs and
represents 25.3% of GVA
The traditional manufacturing profile has changed
sharply moving from high dependence on Textiles,
Footwear, Ceramics, Cork, Ship Repairing, Food and Drink
to one where new sectors offer dynamic growth. Motor
Vehicle and Motor Vehicle Components, Electronics and
Pharmaceuticals among others, have now assumed greater
importance in the economy. Services are the most dynamic
sector of the economy. Commerce, transportation and communications, tourism and financial
services all enjoy very positive growth rates.
Recent Economic Policy In the 1990s Portugal’s economic policy was
determined by the convergence requirements of the
European Economic and Monetary Union (EMU), which led to
the country joining the eurozone in January, 1999.
Expansionist policies implemented were out of step with
the real requirements of the economy namely the public
service, so a tighter fiscal policy designed to reduce
public deficit was introduced from 2002. Among measures
taken were an increase in the most widely used VAT rate,
constraints on expenditure, closure and restructuring of
public bodies, an end to rollovers on public sector
temporary employment contracts and several other
measures and reforms particularly in the labour market. In 2006 Portuguese economic growth was
1.3%, an improvement over the position in previous
years. In general the growth profile was impacted by a
very positive export performance for goods and services
with net external demand contributing one percentage
point to overall GDP growth (-1.3 pp and -0.5 pp in 2004
and 2005 respectively). Despite a slight recovery in
terms of current transfers, the balance of trade deficit
widened in 2006 reflecting deterioration in the primary
incomes deficit and to a lesser extent in capital
transfers. At the same time internal demand as a
contribution to GDP was practically zero (0.3 pp) as a
result of moderate private consumption and a decline in
public consumption, reflecting a necessary adjustment to
domestic macroeconomic imbalance. While the decline in
investments had been greater in 2005, the indicator
remained the least favourable in overall economic
trends. In
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Economy
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