2008 OECD Economic Surveys: Portugal 2008

image of OECD Economic Surveys: Portugal 2008

OECD's periodic review of the Portuguese economy. This 2008 edition focuses on several key challenges including securing fiscal consolidation, maximising the gains from integration into the world economy, and improving the functioning of the labour market.

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Economic performance and key challenges

After a weak growth performance in the first part of the 2000s, more recent economic developments have been encouraging. The recovery that started in the course of 2005 gathered momentum in the following two years, underpinned by exports, and the budget deficit has been reduced to more sustainable levels. Nevertheless the income and productivity gaps with high income countries in the OECD are large and have been widening. GDP growth is not high enough to allow a catch up with standards of living in more affluent OECD countries. Many structural measures have been undertaken in recent years, and the structural reform process should be deepened in order to improve Portugal’s growth performance on a sustained basis. Policies should aim at raising the economy’s capacity to adjust smoothly to the changing international environment and seize new opportunities created by globalisation. This chapter identifies three main challenges that Portugal must face to achieve stronger growth: i) maintaining the momentum of fiscal consolidation to achieve sound public finances, a prerequisite for sustainable economic growth; ii) embracing globalisation and facilitating the adjustment to the changing economic environment; and iii) reforming the labour market and enhancing human capital, to promote job creation and allow a durable decline in unemployment in a period of deep structural transformation.

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