Portugal’s economy is fully integrated into the European Union (EU). Fellow EU member states are Portugal’s primary trading partners and investors. Portugal complies with EU law for equal treatment of foreign and domestic investors. Beyond Europe, Portugal maintains significant links with former colonies including Brazil, Angola, and Mozambique. Portugal is one of 19 Eurozone members; the European Central Bank (ECB) acts as central bank for the euro (EUR) and determines monetary policy.
The services sector in general, and Portugal’s tourism industry in particular, has been an engine of economic recovery, while traditional sectors like textiles, footwear, and agriculture have moved up the value chain and become more export-oriented. The auto sector, together with heavy industry, the tech sector, construction and energy also remain influential clusters.
Portugal’s economic recovery and pro-business policies continue to make it an attractive market for investment. In 2018, Portugal attracted EUR 118.6 billion in FDI inflows, including USD 2.1 billion from the United States. In 2018, the economy continued its upward trajectory and completed its EUR 78 billon EU-IMF-ECB bailout program. Unemployment dropped below 7 percent and GDP growth was 2.1 percent, falling from 2.7 percent in 2017. Despite slowing growth, Portugal has continued to reduce its public debt, slashing it to 121.5 percent of GDP in 2018, compared to 124.8 percent the year before. Nonetheless, the country’s high debt-to-GDP ratio remains a weak point.
Portugal’s banking sector has faced challenges in recent years, including the costly central bank-led resolution of Banco Espirito Santo (succeeded by Novo Banco) in 2014 and Banif in 2015. Even so, the sector’s biggest private banks have regained momentum while continuing to undergo restructuring and recapitalizations to address the lingering stock of non-performing loans.
Table 1: Key Metrics and Rankings
|TI Corruption Perceptions Index||2018||30 of 180||http://www.transparency.org/research/cpi/overview|
|World Bank’s Doing Business Report||2019||34 of 190||http://www.doingbusiness.org/en/rankings|
|Global Innovation Index||2018||32 of 126||https://www.globalinnovationindex.org/analysis-indicator|
|U.S. FDI in partner country ($M USD, stock positions)||2017||$2,060||http://www.bea.gov/international/factsheet/|
|World Bank GNI per capita||2017||$19,820||http://data.worldbank.org/indicator/NY.GNP.PCAP.CD|