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Written by Dominique Jackson
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Portugal has attained a remarkable degree of political development and economic growth in the decades since the dictatorship of António Salazar was ended in 1974 by the Carnation Revolution; full democracy was restored two years later. Prime Minister José Sócrates and his Socialist Party (PS) won the general election in February 2005, further ensuring continued stability. Despite introducing some fiscal measures and structural reforms which are not universally popular, the PS retains a healthy degree of public support and is predicted to win a second term in 2009. The government is taking steps to improve competition in both the energy sector and manufactured product markets and is devoting additional resources to education and vocational training.
Economic growth has been slightly sluggish for the last four years but an export-led recovery is now under way and is set to continue, with growth in the entire Euro area in the 2007-12 period expected to be significantly stronger than in the previous 2003-06 period. Household debt remains high but is expected to be curbed by recent interest rate rises. Forecast stronger employment growth should also help enhance economic confidence.
Portugal is a business-friendly country, with a highly successful track record of foreign investment inflow. Recent measures are expected to continue this, among them: reforms to rigid labour laws, continued low corporate tax rates and significant improvements to infrastructure, including in energy provision, sea ports and both road and high speed rail links. Inflation is also forecast to fall to around 2 per cent in 2008-2009.
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