Free Literature Review On Unemployment And Inflation In Portugal

April 13, 2022 by Essay Writer


Portugal became a member of the European Union in 1986 which opened up new opportunities and the economy saw a phase that was completely different from that of the previous 10 years. Money then started pouring in Portugal Economy from EU. Portugal gained membership of Eurozone in 2002. The financial crisis in Portugal then again started in 2007 and after financial crisis of 2007-2008, in 2008-2009 it became clear that two most powerful Portugal banks (Banco Português de Negócios (BPN) and Banco Privado Português (BPP) had been facing the losses for years as many accounting frauds and bad investments have been going on in the bank.

Inflation and Unemployment in Portugal

In 2010, the levels of debt in Portugal were too high and the health of Euro was in a very bad shape. In the first quarter of 2010, the economy recovery rates of Portugal were the best in the EU. But mismanagement of credit, public debt and cohesion funds from last four decades, created problems for the Portuguese economy. Later in the summer of 2010, Portugal’s debt started increasing too much as compared to the gross domestic products. The increasing debt proved out to be very critical for the government’s financial policies that were short lived.
In October 2010, UN Security Council’s non-permanent seat was won by Portugal, the two-year term for that began from 1st January 2011. The austerity budget was passed by parliament in November 2010 to bring down the high debt. Since the new austerity package was rejected by parliament in March 2011, the government decided to resign.
After Ireland and Greece, Portugal then became the third European Union country to apply for assistance from the European Union financial to help it overcome its high debt and deficit budget. The EU and International monetary fund then agreed on a 78bn-euro bailout to Portugal in May 2011. In August 2011, the country’s biggest spending cuts were announced which aimed at reducing public expenditure from 44.2% of GDP to 43.5% by 2015.
In March 2012, a 24-hour strike was held by public sector workers in protest against the austerity measures and the labor law reform due to which GDP of Portugal decreased to 1.2% in the 2nd quarter. The young workers were particularly impacted and the youth unemployment increased to 37.7% in 2012.
Another year was given to Portugal by EU and European central Bank in September 2012 to reduce its deficit below 3% of GDP that was EU’s target. Due to the economic crisis, several senior ministers resigned in July 2013 but the Government still survived. In November 2013 major problem came when the government approved more spending cuts, thereby impacting the wages of public sector employees and pensions of old citizens. In May 2014 Portugal exits international bailout without taking its lenders’ back-up credit. Portugal’s bank 2013 spring forecasted possible growth of 1.1% in 2014, but this was revised down to 0.3% by the summer of 2013, signaling a continuation of the recession.

Limited Government

The income tax rate of the Portugal’s top individual is 48 percent, and the tax rate for a top corporate individual is 23 percent. Value-added tax is also paid by the citizens. 32.5 percent of the domestic production is produced by the total tax revenue. Public expenditure of Portugal equals 48.7 percent of the domestic economy, whereas, public debt equals almost 130 percent of the GDP.

Portugal Employment Rate

The chart below shows the rates of change in GDP and employment quarter wise.
The chart above shows that recession had a huge impact on employment. The employment fell faster than GDP because of the flexibility of the labor market.
The unemployment rate in Portugal averaged 76.1 percent from 1983 until 2015. In the first quarter of 2013, it reached an all-time high of 17.50 percent whereas the lowest was in the second quarter of 2000, amounting to 3.70 percent. In Jan 2015, the unemployment rate was at 13.1 percent. In the third quarter of 2015, the unemployment rate remains unchanged at 11.9 percent which was the lowest since 2010, fourth quarter. Below data shows the unemployment rate statistics reported by the Statistics Portugal.

Portugal Inflation Rate

The inflation rate in Portugal averaged 8.97 percent from 1961 until 2015. In the May of 1977, it reached an all-time high of 53.90 percent. The record low in the inflation rate was in June 2009 which equals -1.60 percent. The inflation rate in December 2015 was the lowest since April 2015. There was a slower rise in the prices of accommodation and leisure activities while food cost remained at the same price and there was a slight decrease in the transport prices. Consumer prices increased by 0.4 percent in December 2015 moving gradually from a 0.6 growth in the last month. Below data shows the Inflation rate statistics reported by the Statistics Portugal.


Anderson, J. M. (2000) The History of Portugal. Connecticut: GreenWood Press. Available at: (2015, April 16) Portugal profile – Timeline. Available at: (2015) ‘Portugal’, 2015 Index of Economic Freedom. Available at:
Pedroso, P. (2014, April) ‘Portugal and the Global crisis’, Friedrich Ebert Stiftung, pp. 2-35. Available at: (2016, Jan) Portugal Inflation Rate . Available at: (2016, Jan) Potugal Unemployment rate. Available at:


Read more