Portugal Hotels and Resorts

ECONOMY

Portugal was traditionally an agrarian economy but since joining the EU in 1986, the industrial and especially the service sectors of the economy have grown considerably by comparison. Agriculture still employs 12 per cent of the workforce – unusually high by Western European standards – and contributes 3 per cent of GDP, producing wheat, maize, tomatoes, potatoes and grapes. Production has undergone a relative decline so that Portugal now imports a sizeable proportion of its foodstuffs after having long been self-sufficient. The manufacturing sector is dominated by the textile and footwear industries and automobiles, which now account for 15 per cent of total exports. Other important products are paper, cork and other wood products, electrical appliances, chemicals and ceramics. Both foreign and internal investment have been high, attracted by Portugal’s relatively low labor costs and the recent modernization of much of the country’s infrastructure. Many former state-owned industries have been sold off under a gradual privatization program which began in 1989. During the last five years, unemployment has hovered around 5 per cent while inflation has not risen above 4 per cent; the current figures are 4.4 and 4.1 per cent respectively. Portugal joined the Eurozone upon its inauguration in 1999. Unfortunately since then, the economy has stagnated – growth fell to below 1 per cent in 2001/2 – before contracting by 1 per cent in 2003. The main reasons have been a reduction in domestic demand and government spending cuts – demanded under the terms of Eurozone membership – to tackle the country’s large budget deficit. Although Britain has historically been Portugal’s main trading partner, the growth of Anglo-Portuguese trade has failed to keep pace with that of Portugal’s other trading partners, particularly Germany, France, Spain and Italy. The Portugal Investment Agency can supply further information (website: www.investinportugal.pt).