The Portuguese economyIt was only last month that I visited Portugal on the back of business research in Hong Kong. From a wealthy Hong Kong, I wanted to conduct research on an economy that was struggling. Portugal therefore fitted the bill perfectly. Another reason that I chose to go to Portugal was because I was intrigued as to the fact that Portugal never experienced high economic growth in the decade leading to the Eurozone crash. The Euro counties that joined Portugal in getting a bailout from the Troica, the IMF, EU and ECB all experienced high or considerable growth during the period of 2002-2007.
Portugal is a curious case as to its poor financial books over the last decade. If we take a look at GDP figures from tradingeconomics.com we can see the problems that Portugal has had over the last decade from 2002-2013.
The background of the Portuguese economyOver the period given in the Chart the Portuguese economy has barley seen a growth of over 3%. Some economists such as myself would argue that GDP growth rates of over 3.7% are intractable over time which will in turn cause an overheating effect of an economy. For Portugal however, amidst the great prosperity witnessed began life in the Euro in a slump, suffering a recession in 2003. The reasons why this was the case stemmed from the weak links that existed at the formation of the Euro currency. The policy mistakes in the developing stages of the Eurozone is a topic that will be discussed at a later point and will be linked heavily with this post on Portugal.
Interestingly the mean of GDP growth rates for Portugal of 2002-2013 amounts to -0.1%. For the period 2002-2008 this mean growth rate is a meagre 0.9%. These figures outline the fact that economically Portugal is not functioning. A more shocking figure of all outlined so far is the fact that GDP growth rate between 1988-2013 has averaged at only 0.4%. Current stricken countries such as Egypt has a higher GDP growth rate over the same time period.
Those Eurozone countries who have suffered dramatically as a result of the economic down turn, Greece are infamous with regard to the condition of their financial books. Portugal is not far from becoming the new thorn in the side of the other Eurozone members. A consistent crippling debt and an unsettling high rate of unemployment the future is not looking too bright for Portugal.