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OECD Territorial Reviews: Portugal 2008

image of OECD Territorial Reviews: Portugal 2008

In order to curb rising unemployment and to upgrade low value-added activities, the competitive edge lost in low-cost labour must be earned back through education and innovation. Regional policy stands as a key tool to achieve this shift in a relatively small yet diverse country with moderate economic growth and limited public spending capacity. This report analyses how a paradigm shift in regional policy, building on the knowledge of both public and private stakeholders in specific regions (ranging from dynamic urban areas on the coast to lagging inland areas), could help Portugal fully exploit its potential for sustainable development.

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Why a Regional Policy in Portugal? National Growth, Regional Assets and Challenges

The encouraging return of growth in Portugal contrasts with the persistence of deep-rooted structural challenges. While the recent recovery of the euro area perked Portuguese exports, sustainable growth depends on the rapid modernisation of the economy vis-à-vis new EU members and other emerging players. The competitive edge lost in low-cost labour must be earned back in knowledge and innovation.1 Such assets for competitiveness are regionally localised in Portugal as in other OECD countries.2 A limited group of leading regions (mostly on the coast) have turned their assets into drivers of national growth, with further scope to gain international aura. Many other regions struck with specific disadvantages (mostly in the interior) have fallen behind, at the risk of underrating their own endogenous growth potential. This chapter provides a brief overview of Portugal’s macroeconomic conditions, and discusses to what extent regional assets and challenges can determine national growth prospects.

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