2016 Index of Economic Freedom

Portugal

overall score65.1
world rank64
Rule of Law

Property Rights70.0

Freedom From Corruption63.0

Limited Government

Government Spending24.8

Fiscal Freedom60.5

Regulatory Efficiency

Business Freedom85.3

Labor Freedom43.5

Monetary Freedom85.7

Open Markets

Trade Freedom88.0

Investment Freedom70.0

Financial Freedom60.0

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Quick Facts
  • Population:
    • 10.4 million
  • GDP (PPP):
    • $280.4 billion
    • 0.9% growth
    • -0.9% 5-year compound annual growth
    • $26,975 per capita
  • Unemployment:
    • 14.2%
  • Inflation (CPI):
    • -0.2%
  • FDI Inflow:
    • $8.8 billion
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Portugal’s economy has benefited from recent structural reforms. Ongoing efforts have focused on reducing the inefficient and oversized government sector, better managing public finance, and reforming loss-making state-owned enterprises. A return to sovereign-bond markets has enabled Portugal to begin repaying its IMF loan ahead of schedule.

Economic Freedom Snapshot

  • 2016 Economic Freedom Score: 65.1 (down 0.2 point)
  • Economic Freedom Status: Moderately Free
  • Global Ranking: 64th
  • Regional Ranking: 30th in Europe
  • Notable Successes: Trade Freedom and Business Freedom
  • Concerns: Management of Public Finance and Labor Freedom
  • Overall Score Change Since 2012: +2.1

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Background

Portugal joined the European Union in 1986 and the eurozone in 2002. A center-right coalition formed a minority government following elections in October 2015. Two weeks later, a left-wing coalition opposed to proposed austerity measures forced the government to resign. In May 2011, Portugal accepted a €78 billion European Union–International Monetary Fund bailout plan that included demands for structural reforms to reduce public debt and increase incentives for private investment. Adherence to strict budgetary discipline has allowed Portugal to move beyond the worst of its economic crisis. The economy is based primarily on services and industrial production. Tax rates are at record highs, and younger Portuguese are moving abroad for work. Overall unemployment is well above pre-crisis levels.

Rule of LawView Methodology

Property Rights 70.0 Create a Graph using this measurement

Freedom From Corruption 63.0 Create a Graph using this measurement

A 2014 European Commission report urged Portugal to establish an anti-corruption strategy to address shortcomings in prosecuting high-level corruption cases, the lack of preventive measures for corruption in party funding and public procurement, and conflicts of interest among local-level politicians. Property rights are well protected, but registration costs are slightly higher than the OECD average at 7.3 percent of a property’s value.

Limited GovernmentView Methodology

The top personal income tax rate is 48 percent, and the top corporate tax rate is 23 percent. Other taxes include a value-added tax. The overall tax burden equals 33.4 percent of total domestic income. Government spending amounts to 50.1 percent of GDP, and public debt still exceeds the size of the economy. Reducing the deficit and debt levels, both public and private, remains a critical task.

Regulatory EfficiencyView Methodology

Starting a company takes less than a week, and no minimum capital is required, but completing licensing requirements remains burdensome. A number of revisions in Portugal’s labor regulations, which had been among the most inflexible in the European Union, have been implemented. Although some state-owned enterprises have been privatized, the remaining SOEs are inefficiently run and require ongoing subsidization.

Open MarketsView Methodology

EU members have a 1 percent average tariff rate. Trade agreements are currently being negotiated with countries that include the United States and Japan. State-owned enterprises operate in several sectors of the economy. Foreign and domestic investors are allowed equal access to investment opportunities, but the uncertain economic climate is a deterrent. Despite some progress, the financial sector remains under considerable strain.

Country's Score Over Time

Bar Graph of Portugal Economic Freedom Scores Over a Time Period

Country Comparisons

Bar Graphs comparing Portugal to other economic country groups Download Charts

Regional Ranking

rank country overall change
1Switzerland810.5
2Ireland77.30.7
3Estonia77.20.4
4United Kingdom76.40.6
5Denmark75.3-1.0
6Lithuania75.20.5
7The Netherlands74.60.9
8Germany74.40.6
9Luxembourg73.90.7
10Iceland73.31.3
11Czech Republic73.20.7
12Georgia72.6-0.4
13Finland72.6-0.8
14Sweden72-0.7
15Austria71.70.5
16Norway70.8-1.0
17Latvia70.40.7
18Poland69.30.7
19Cyprus68.70.8
20Spain68.50.9
21Belgium68.4-0.4
22Macedonia67.50.4
23Armenia67-0.1
24Malta66.70.2
25Slovakia66.6-0.6
26Hungary 66-0.8
27Albania65.90.2
28Bulgaria65.9-0.9
29Romania65.6-1.0
30Portugal65.1-0.2
31Montenegro64.90.2
32France62.3-0.2
33Serbia 62.12.1
34Turkey62.1-1.1
35Kosovo61.4N/A
36Italy61.2-0.5
37Slovenia60.60.3
38Croatia59.1-2.4
39Bosnia and Herzegovina58.6-0.4
40Moldova57.4-0.1
41Greece53.2-0.8
42Russia50.6-1.5
43Belarus48.8-1.0
44Ukraine46.8-0.1
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