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The turnaround of the Portuguese economy: Two decades of structural changes

Mário Centeno, Miguel Castro Coelho, (2018), “The turnaround of the Portuguese economy: Two decades of structural changes”, VoxEU, 6 Ιουνίου

In the run-up to introduction of the euro in 2002, perceptions about Portugal’s economic prospects and investment risk changed, resulting in a substantial increase in private debt and a mild domestic demand-led boom. The boom gave way, in the 2000s, to a decade of protracted growth, worsening labour market conditions, steady accumulation of external imbalances, and rising debt. Since then, the Global Crisis and the European sovereign debt crisis conspired to push the economy into a severe recession and led the country to embark on an adjustment programme overseen by a troika of creditors.

GDP fell 7.9% from peak to trough, while employment declined 13.4%. Unemployment peaked at 17.5% in 2013 (youth unemployment hit 40%). Fiscal deficits rose to around 10% of GDP. Portuguese sovereign bonds were downgraded to ‘junk’. Nearly 500,000 people emigrated between 2011 and 2014 – the largest emigration the country had experienced in 50 years.

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