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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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Maximising the gains from integration in the world economy

The Portuguese economy is open to the rest of the world, with low formal barriers to trade and FDI, and this helped its growth performance in the past. However, export performance has been disappointing over the past decade, trade integration in the global economy could be higher, and there is potential for more foreign direct investment (FDI). The economy is in the process of adjusting to accelerated changes in world trade and there is significant potential for it to benefit more from globalisation. There are encouraging signs about the economy’s capacity to seize this opportunity, including growing product and market diversification, a shift towards higher technology exports, some correction of the earlier increase in relative unit labour costs and recent large FDI inflows. The outlook is brighter than in earlier years. The government has already made significant progress in enhancing the business environment, through a wide range of reforms, including the SIMPLEX programme. However, further action should be taken to facilitate the adjustment of the economy and reap more benefits from openness. Non-tariff barriers, such as the cost of custom processes, should be reduced, and an easing of product market regulations would contribute to making the economy more efficient. Portugal also needs to strengthen competition and improve regulations in key infrastructure sectors, such as telecommunications, electricity and transportation, to enhance the quality, efficiency and quantity of the services they provide. This would have a direct effect on the costcompetitiveness of firms in Portugal, facilitate trade flows, domestically and internationally, and make Portugal a more attractive destination for FDI.

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