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Clouds on the horizon

Portugal’s economy is in great shape, unemployment is low by European standards and government borrowing requirements are steadily falling. That is the good news. Less auspicious is the fact that Portugal is saddled with structural imbalances and competitiveness vis-à-vis other economies with relatively low labour costs is steadily deteriorating.

Lisbon: domestic consumption is
up, FDI is down

The headline figures suggest that Portugal's economy is in great shape. GDP grew by at least 3% last year and is set to continue on track through 2001. Unemployment is low by European standards at 4% across the board.

Government borrowing requirements are steadily falling, and the deficit is expected to end up at around 1.5% of GDP. Moreover, the Portuguese economy should be more resilient than most to the US slowdown. More than 80% of exports go to other EU countries and only 5% to the US.

That is the good news. Less auspicious is the fact that Portugal is saddled with structural imbalances. Most serious in the short to medium term is the external deficit, now around 10% of GDP and expected to worsen to about 11% this year and 12% in 2002.

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