The Economy of Portugal is a high income market economy. The Global Competitiveness Report for 2005, published by the World Economic Forum, places Portugal's competitiveness on the 22nd position, ahead of countries and territories like Spain, Ireland, France, Belgium, Hong Kong and Turkey. On the Technology index, Portugal was ranked 20th and on the Public Institutions index Portugal is the 15th best. However, the Global Competitiveness Index 2007-2008 placed Portugal on the 40th position out of 131 countries and territories.
The major industries include: oil, petrochemistry, cement production, automotive and ship industries, electrical and electronics industries, machinery, pulp and paper industry, injection moulding, textile, footwear, leather, furniture, ceramics, beverages and food industry and cork (world's largest producer). Manufacturing accounts for 33% of exports. Portugal is the world's fifth-largest producer of tungsten, and the world's eighth-largest producer of wine.
The tertiary sector has grown, producing 66% of the GDP and providing jobs for 52% of the working population. The most significant growth rates are found in the trade sector, due to the introduction of modern means of distribution, transport and telecommunications. Financial tertiary have benefited from privatisation, also gaining in terms of efficiency. Tourism has developed significantly and generates approximately 5% of the wealth produced in Portugal.
Most imports come from the European Union countries of Spain, Germany, France, Italy, and the United Kingdom. Most exports also go to other European Union member states.
Although being very high by world's average standards, Portugal's GDP per capita is among the lowest in Western Europe. It was the 6th poorest country of the 27 member states of the European Union by purchasing power, for the period 2005-2007, and according to the Eurostat. However, research about quality of life by the Economist Intelligence Unit's (EIU) Quality-of-life Survey placed Portugal as the country with the 19th-best quality of life in the world for 2005, ahead of other economically and technologically advanced countries like France, Germany, the United Kingdom and South Korea, but 9 places behind its only neighbour, Spain.
Membership in the European Union (EU), achieved in 1986, contributed to stable economic growth and development, largely through increased trade ties and an inflow of funds allocated by the European Union to improve the country's infrastructure. After a recession in 1993, the economy grew at an average annual rate of 3.3%, well above EU averages but well behind the growth of the Portuguese economy before the military coup of 1974. In order to qualify for the Economic and Monetary Union (EMU), Portugal agreed to cut its fiscal deficit and undertake structural reforms. The EMU brought to Portugal exchange rate stability, falling inflation, and falling interest rates. Falling interest rates, in turn, lowered the cost of public debt and helped the country achieve its fiscal targets.
In 1999, it continued to enjoy sturdy economic growth, falling interest rates, and low unemployment. The country qualified for the Economic and Monetary Union of the European Union (EMU) in 1998 and joined with 10 other European countries in launching the euro on January 1, 1999. The three different designs chosen for the national side of the Portuguese euro coins were drawn by the artist Vitor Manuel Fernandes dos Santos. The inspiration came from the three seals of the first king, Dom Afonso Henriques. Portugal's inflation rate for 1999, 2.4%, was comfortably low.
Household debt has expanded rapidly. The European Commission, OECD, and others have advised the Portuguese Government to exercise more fiscal restraint. Portugal's public deficit exceeded 3% of GNP in 2001, the EU's self-imposed limit, and left the country open to either EU sanctions or tighter financial supervision. The overall rate of growth slowed in late 2001 and into 2002, making fiscal austerity that much more painful to implement.
Portugal has made significant progress in raising its standard of living to that of its EU partners. GDP per capita on a purchasing power parity basis rose from 51% of the EU average in 1985 to 78% in early 2002. By 2005 this had dropped to 72% (of the average across all of now 25 EU members, including seven with GDP per capita lower than Portugal) as GDP per capita rose in other EU countries. Unemployment stood at 4.1% at the end of 2001, which was low compared to the EU average.
GDP growth in 2006, at 1.3%, was the lowest not just in the European Union but in all of Europe. Since 2000 the Czech Republic, Greece, Malta and Slovenia have all overtaken Portugal in terms of GDP per head. And Portuguese GDP per head has fallen from just over 80% of the EU 25 average in 1999 to just over 70% last year. This poor performance of the Portuguese economy was explored in April 2007 by The Economist which described Portugal as "a new sick man of Europe". From 2002 to 2007, the unemployment rate increased 65% (270,500 unemployed citizens in 2002, 448,600 unemployed citizens in 2007).
However, the Portuguese subsidiaries of large multinational companies, such as Siemens Portugal, Volkswagen Autoeuropa, Qimonda Portugal, IKEA, Nestlé Portugal, Microsoft Portugal, Unilever/Jerónimo Martins and Danone Portugal, are still ranked among its most productive in the world for its continued high productivity records. Many Portuguese companies have grown and expanded internationally since after 1986. Among the most notable Portugal-based global companies are SONAE, Amorim, Sogrape, EFACEC, Portugal Telecom, Jerónimo Martins, Cimpor, Unicer, Millennium bcp, Lactogal, Sumolis, Critical Software, Galp Energia, EDP, Renova, Teixeira Duarte, Soares da Costa, Portucel Soporcel, Simoldes, Iberomoldes and Logoplaste.