Portugal: Stronger expansion
The expansion has become more broadly based in 2007. Following a period of buoyant export growth, investment is picking up. Growth is expected to strengthen further in 2008 and 2009, largely driven by domestic demand. The still large negative output gap should drive inflation down in 2009. Though gradually declining, unemployment remains high and, as a result, wage increases are set to be moderate.
The budget deficit continues to decline. It is important that the government maintains momentum in structural reforms to ensure further consolidation. This will help to underpin growth in the long run. Further progress in enhancing human capital and increasing competition in the domestic market would also help boost productivity and growth over the longer term.
No. 264/265, December 2007-January 2008
• OECD Economic Outlook No. 82, December 2007
• Visit www.oecd.org/portugal
• All OECD Observer articles on Portugal