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2019 OECD Economic Surveys: Portugal 2019

image of OECD Economic Surveys: Portugal 2019

Portugal’s economic recovery is now well established, with GDP back to its pre-crisis level. However, legacies of the recent crisis remain. A high public debt burden and ongoing financial sector vulnerabilities make the economy less resilient. The country is also facing a rapidly ageing population. In this context, there should be a continued focus on getting unemployed or marginalised workers back into jobs and promoting productivity growth. The latter will further boost the external competitiveness of the economy. Existing strict regulations in some sectors including professional services and transport harm productivity prospects, as do those that hold back competition in the ports. However, the institutions implementing regulations also matter. Improving judicial efficiency is particularly important in this regard. Recent reforms have lowered the time to resolve a court case, but it remains long. The information system that registers court proceedings should thus be better utilised and the courts should be granted stronger autonomy in managing their resources.

SPECIAL FEATURES: FURTHER RAISING EXPORT PERFORMANCE; ENHANCING JUDICIAL EFFICIENCY

 

 

 

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Public policy reforms to further improve export performance

Portugal’s export performance over the past decade has been impressive, helping to reduce external imbalances. This partly owed to a sequence of structural reforms that benefited the productivity of the export sector and led to an increase in its size. Nonetheless, exports as a share of GDP and the stock of foreign direct investment remain below that of other comparable small European economies. Further shifting the orientation of the economy to the external sector is vital for Portugal given the strong link between trade openness and GDP per capita. To do this, policymakers must ensure that policy settings incentivise exporting firms to expand and improve their competitiveness, both through lower price and improved quality. For example, regulatory barriers that reduce competition in professional services should be lowered to improve the price and quality of intermediate inputs. Increasing the efficiency of domestic infrastructure is also key, especially through competition-enhancing reforms to the port sector. To further differentiate and improve Portuguese export products, skills in the business sector need to be enhanced through better-targeted lifelong learning opportunities. At the same time, there is a need to focus innovation policies on raising the participation of small and medium enterprises in innovative activities.

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