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Portugal Changing Structure of the Economy
The Portuguese economy had changed significantly by
1973,
compared with its position in 1961. Total output (GDP at
factor
cost) grew by 120 percent in real terms. The industrial
sector
was three times greater, and the size of the services
sector
doubled; but agriculture, forestry, and fishing advanced
by only
16 percent. Manufacturing, the major component of the
secondary
sector, was three times as large at the end of the period.
Industrial expansion was concentrated in large-scale
enterprises
using modern technology.
The composition of GDP also changed markedly from 1961
to
1973. The share of the primary sector (agriculture,
forestry, and
fishing) in GDP shrank from 23 percent in 1961 to 16.8
percent in
1973, and the contribution of the secondary (or
industrial)
sector (manufacturing, construction, mining, and
electricity, gas
and water) increased from 37 percent to 44 percent during
the
period. The services sector's share in GDP remained
constant at
39.4 percent between 1961 and 1973. Within the industrial
sector,
the contribution of manufacturing advanced from 30 percent
to 35
percent and that of construction from 4.6 percent to 6.4
percent.
The progressive "opening" of Portugal to the world
economy
was reflected in the growing shares of exports and imports
(both
visible and invisible) in national output and income.
Further,
the composition of Portugal's balance of international
payments
altered substantially. From 1960 to 1973, the merchandise
trade
deficit widened, but owing to a growing surplus on
invisibles--including tourist receipts and emigrant worker
remittances--the deficit in the current account gave way
to a
surplus from 1965 onward. Beginning with that year, the
long-term
capital account typically registered a deficit, the
counterpart
of the current account surplus. Even though the nation
attracted
a rising level of capital from abroad (both direct
investments
and loans), official and private Portuguese investments in
the
"overseas territories" were greater still--hence the net
outflow
on the long-term capital account.
The growth rate of Portuguese merchandise exports
during the
period 1959 to 1973 was 11 percent per annum. In 1960 the
bulk of
exports was accounted for by a few products--canned fish,
raw and
manufactured cork, cotton textiles, and wine. By contrast,
in the
early 1970s, Portugal's export list reflected significant
product
diversification, including both consumer and capital
goods.
Several branches of Portuguese industry became
export-oriented,
and in 1973 over one-fifth of Portuguese manufactured
output was
exported.
The radical nationalization-expropriation measures in
the
mid-1970s were initially accompanied by a policy-induced
redistribution of national income from property owners,
entrepreneurs, and private managers and professionals to
industrial and agricultural workers. This wage explosion
favoring
workers with a high propensity to consume had a dramatic
impact
on the nation's economic growth and pattern of
expenditures.
Private and public consumption combined rose from 81
percent of
domestic expenditure in 1973 to nearly 102 percent in
1975. The
counterpart of overconsumption in the face of declining
national
output was a contraction in both savings and fixed capital
formation, depletion of stocks, and a huge
balance-of-payments
deficit. The rapid increase in production costs associated
with
the surge in unit labor costs between 1973 and 1975
contributed
significantly to the decline in Portugal's ability to
compete in
foreign markets. Real exports fell between 1973 and 1976,
and
their share in total expenditures declined from nearly 26
percent
to 16.5 percent.
The economic dislocations of metropolitan Portugal
associated
with the income leveling and nationalization-expropriation
measures were exacerbated by the sudden loss of the
nation's
African colonies in 1974 and 1975 and the reabsorption of
overseas settlers (the so-called retornados), the
global
recession, and, as well, the international energy crisis.
Over the longer period, 1973-90, the composition of
Portugal's GDP at factor cost changed significantly. The
contribution of agriculture, forestry, and fishing as a
share of
total production continued its inexorable decline, to 6.1
percent
in 1990 from 12.2 percent in 1973. In contrast to the
prerevolutionary period, 1961-73, when the industrial
sector grew
by 9 percent annually and its contribution to GDP
expanded,
industry's share narrowed to 38.4 percent of GDP in 1990
from 44
percent in 1973. Manufacturing, the major component of the
industrial sector, contributed relatively less to GDP in
1990 (28
percent) than in 1973 (35 percent). Most striking was the
16-
percentage-point increase in the participation of the
services
sector from 39 percent of GDP in 1973 to 55.5 percent in
1990.
Most of this growth reflected the proliferation of civil
service
employment and the associated cost of public
administration,
together with the dynamic contribution of tourism services
during
the 1980s.
Data as of January 1993
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