Portugal - Overview
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Portugal is a republic based on a parliamentary democracy. The constitution establishes a "semi-presidential" regime for the country.
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. In 2013, after three years of unprecedented austerity measures, the country's stability was shaken. The Minister of European Affairs resigned and the President of the Republic Anibal Cavaco Silva put the policy of austerity publicly in questions and was supported by the Constitutional Court. Debt continued to deepen, reaching more than 125% of the GDP. The 2014 budget, which was amended at the beginning of the year, includes new budget cuts, with the aim of saving 3.9 billion euro. Portugal has made a pledge to its creditors to reduce its public deficit to 4% in 2014. The country has been trying to regain investors' trust in order to fund its heavy debt burden on the financial markets and avoid the need for a second bailout plan.
With an unemployment rate rising to over 16%, which affects 36% of people under 25 years of age, an increase in social inequality between the north and the south, and the weakening of purchasing power, social tensions have been more keenly felt.
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 almost 75% of the GDP and employs 60% of the active population.
Foreign trade overview
The trade balance of Portugal is structurally in deficit, however it saw an improvement during the crisis of 2009, imports falling more quickly than exports. In 2013, the country's trade surplus reached historical levels, with exports growing more quickly than imports.
The FDI is considered a priority by the Portuguese government. The country has recently embarked on the development of renewable energies, specifically solar energy (the country has the second largest solar power station in the world) and wave energy (obtained from wave movements), sectors that could provide new opportunities to foreign investors. Portugal offers a diversified economy and benefits from its membership to the European Union; however, the bureaucratic and legal burdens can be a hindrance to FDI.