Since joining the EU in the 1980s, Portugal has diversified substantially, become an increasingly service-based economy. It was one of the first 12 EU members to begin circulating the Euro in 2002. The country’s economy contracted both in 2009 and then between 2011 and 2013, as the government implemented both spending cuts and tax increases in order to combat the global financial crisis. The cuts – which were made in accordance with the conditions of an EU-IMF financial rescue package – led to record unemployment and a heavy wave of emigration.
Booming levels of exports will likely lead to growth throughout 2014. However, the need to reduce private and public-sector debt could weigh on consumption and investment. The government of Passos Coelho has stated its intention to reduce labour market rigidity, a move that could lead to Portugal becoming steadily more attractive to foreign investors. The government reduced the budget deficit from 10.1% of GDP to 5.1% in 2013, which was lower than the EU-IMF fiscal target of 5.5%
Composition of GDP: