Portugal Economy

The Portuguese economy is roughly 75% services, 22% industry and 3% resources (fishing, agriculture, mining). Portugal has no fossil fuel resources (oil or gas) and has decided against nuclear power, but is doing a good job with renewable energy which provides about 50% of energy needs. The country was particularly vulnerable to globalisation e.g. 30 years ago had the types of businesses (textiles, simple manufacturing...) that have now gone permanently to lower-wage economies.

In the 40 years 1960-2000 (including joining the EU in 1986) PT saw good economic growth and average national income rose from 40% of EU average to 70% of EU average. But from 2000, things took a turn for the worse. PT badly mismanaged the global recessions – the dotcom bust 2000-2003 and financial crisis 2007-2009. It continued to pile on the national debt and run a bloated public sector. In 2011-2014, PT required bailouts from the IMF and EU (as did both Greece and Ireland). In that EU crisis, Greece was a political and economic mess that required debt forgiveness, while Italy was/is always “too big to fail”. The message from the richer EU countries to PT is “We will not tolerate Portugal becoming another Greece. And you are nowhere as large as Italy so not really strategic. Portugal must take strong medicine to sort out its own economic problems.” It will take Portugal until about 2030 to get back on track. The current economic numbers are not good.

Portugal by the numbers

Portugal - poor numbers: national debt, unemployment rate, government bureaucracy, public pensions liability, emigration, bank bailouts, tax evasion, education system failings.
Portugal - good numbers: days of sunshine per annum.

Portugal

OECD/EU

Notes

Real GDP per capita

€17,500

€27,700

About 60% of wealthier EU countries, 70% of EU average, 80% of Spain.

National Debt

120%

80%

National debt as percentage of GDP. Greece: 180%, Italy 135%, Portugal 120%, Germany 60%, EU average 80%.

Public pensions

14%

14% of GDP goes on public pensions, compared to 8% OECD average. Pension burden in PT increased dramatically from the year 2000 and is projected to continue rising through 2040. Only Greece, Italy and France in the EU have worse pension numbers.

Unemployment

Unemployment at 7% is above OECD average of 5%. But youth unemployment rate is very bad - 24% is double OECD average of 12%.

Higher Education

45%

80%

45% of Portuguese youngsters have upper secondary education (roughly age 16-18) compared to about 80% average for the OECD. This limits young people moving on to tertiary education (colleges, universities).

Emigration: Portugal has the highest emigration rate as a proportion of population in the European Union. More than two million Portuguese people (20% of the population) live outside the country. Without emigration, Portugal would have the highest unemployment rate in the EU.

Tax Evasion: Tax evasion in Portugal is a huge issue. Tax for very low-earners is not bad, but high tax rates (income tax, social security benefits tax, IVA Value-Added Tax etc.) kick in hard once income reaches national average. Cash-only business - evading all taxes - is rampant.