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Portugal - Overview

Contents extracted from the comprehensive atlas of international trade by Export Entreprises

Introduction

Capital:: Lisbon
Area:: 92 km2
Total Population:: 10.515
Annual growth rate:: -0.00%
Density:: 115.00/km2
Urban population:: 62%
Population of Lisbon (2.612), Porto (1.210), Vila Nova de Gaia (290), Amadora (170), Matosinhos (170)
Official language: In Portugal, the national language is Portuguese.
Other languages spoken: Spanish, French and English are the foreign languages best known and used in business relations.
Business language: According to the age of your contact: under 40 the Portuguese person will speak English. If your contact is over 40, he will probably speak French.
Spanish is gaining ground.
Ethnic Origins:: A mix of Celtic and Latin peoples, with African and Asian minorities.
Beliefs: Catholics: 95%
Telephone codes:
To make a call from: 0
To make a call to: +351
Internet suffix:: .pt
Type of State::
Official name: the Portuguese Republic.
Portugal is a republic based on a parliamentary democracy. The constitution establishes a "semi-presidential" regime for the country.
Type of economy::
High-income economy, OECD member
High level of deficit and public debt since the economic crisis

Economic overview

Since 2009, Portugal has been suffering from the worst economic crisis since the fall of the dictatorship in 1974. This deep recession was 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 three years of recession, which was further worsened by the government's austerity measures (-1.8% in 2013), by late 2013 the Portuguese economy has been showing signs of recovery and a return to positive growth is expected in 2014 (0.8%).

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.

Main industries

The agricultural sector, with low productivity due to low level of mechanization,  represents a little over 2% of Portugal's GDP and employs 11% of the population. The main crops are cereals, fruits, vegetables and wine. The exports of  Port wine represent 1.4% of total exports and the country is one of the world's 10 largest wine exporters. 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 almost 75% of the GDP and employs 60% of the active population.

Foreign trade overview

Portugal's economy is open to foreign investment, trade represents more than 75% of  the GDP (during the period 2010-2012). 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 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.

FDI

After a decline in foreign direct investments (FDI) in 2009-2010, FDI flows recovered when investors reacted positively to the government's fiscal consolidation efforts.
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.
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