"Within one month our revenues had jumped over 50%."

Doing Business in Portugal

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Portugal is a developed country with an advanced and high-income economy, with a very high Human Development Index. It has the world’s 19th-highest quality-of-life, one of the top health care systems, and it’s also one of the world’s most globalized and peaceful nations, according to the Institute of Economics and Peace. A member of the European Union and the United Nations, it is as well a founding member of the Latin Union, the Organization of Ibero-American States, OECD, NATO, Community of Portuguese Language Countries, the Eurozone and the Schengen Agreement.The Global Competitiveness Report for 2005, published by the World Economic Forum, placed Portugal’s competitiveness in the 22nd position, but the 2008–2009 edition placed Portugal in the 43rd position out of 134 countries and territories. Research about quality of life by theEconomist Intelligence Unit’s quality of life survey placed Portugal as the country with the 19th-best quality of life in the world for 2005, ahead of other economically and technologically advanced countries like France, Germany, the United Kingdom and South Korea, but 9 places behind its only neighbour, Spain. This is despite the fact that Portugal remains the country with the lowest per capita GDP in Western Europe, with a nominal GDP per capita $21,558 as estimated by the IMF in 2010. Portugal is among the 20 most visited countries in the world, receiving an average of 13 million foreign tourists each year, according to the World Tourism Organization. Tourism is playing an increasingly important role in Portugal’s economy, contributing to about 5% of its GDP. However, the financial crises and the euro crises has had a serious impact on the Portuguese economy.The Financial Crisis of 2008 is still affecting the Portuguese economy severely, causing a wide range of domestic problems specifically related to the levels of public deficit in the economy, as well as the excessive debt levels. Nonetheless, the government faces tough choices in its attempts to stimulate the economy, while attempting to maintain its public deficit around the EU average. In April 2011, Portugal confirmed it will have a financial bail-out from the European Union worth €80bn ($115bn, £70bn), following Greece and the Republic of Ireland. It has been predicted that the Portuguese economy will not significantly recover until 2012, according to Macauhub. In July 2011, ratings agency Moody’s downgraded its long-term credit assessment of Portugal after warning of deteriorating risk of default in March 2011. Corruption has become an issue of major political and economic significance for the country. Some cases are well known and were widely reported in the media, such as the affairs in several municipalities involving local town hall officials and businessmen, as well as a number of politicians with wider responsibilities and power, according to the EU Observer. Nevertheless the Transparency International report for 2010 places Portugal in 31st position in terms of perceived corruption, just below Israel and Spain, and 34 positions above Italy. But there has been an economic toll on Portugal, due to the various crises.

Overall, Portugal is a mixed bag in terms of investing in or doing trade in. The euro crises looks like it is going to continue to hamper Portugal’s growth, with the Portuguese economy growing only by 1.4% in 2010. The size of the Portuguese market is also a limitation, with a 2011 census by the Portuguese government putting the population at 10,561,614. With a stagnant population and little economic growth compounded by crises, it might just be a matter of time till Portugal really begins to suffer from the many crises it faces. While Portugal’s financial system is sound, well managed, competitive, with shorter-term risks and vulnerabilities quite well contained, and with the system buttressed by a strong financial policy framework, it faces a big problem. The Euro crises is far from resolved and with indicators pointing to the worst, it might just be a matter of time until the euro crises really starts to hurt the Portuguese economy.

 

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Author:Globial International Business Team

The Globial International Business Team researches, analyzes, and reports on all things related to global trade and business.

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