How a nation that was practically left for dead is taking a page from its history books to resurrect itself.
Seeing is believing.
If you asked any economist two years ago when Portugal was going to rise from the depths of their debt troubles, the response would’ve likely been an ominous, “I don’t know.”
They most definitely wouldn’t have predicted it would begin just a year later.
But a lot has certainly happened in a short amount of time…and Portugal looks well on its way to making the mother of all comebacks.
They have a long, long ways yet, but the turnaround we’re witnessing so far is astonishing to say the least.
The biggest indicator of their economic recovery lies in the rebound of its exports.
That should come as no surprise – trade and travel pretty well defined the Portuguese Empire for centuries.
The bustling port of historic Sines, 93 miles south of Lisbon, was the second fastest-growing port in all of Europe last year – second only to Poland’s Gdanks port. Poland, in case you were wondering, was the only country in the 27-member European Union to avoid recession during the global debt crisis.
The volume of exports out of Sines jumped 27 percent compared to 2011.
As a percentage of GDP, Portugal’s exports rose to 39% – up from 28% in 2009, according to Eurostat data.
To be sure, Portugal still faces a tough uphill climb, and a boost in exports doesn’t mean they’re out of the woods yet.
At €15,600 last year, GDP per capita still makes it the poorest country in western Europe.
Last month, their constitutional court rejected some of the strict austerity measures that were introduced in the country’s 2013 budget.
And next year, Portugal may need to turn to the financial markets for financing to help pay back the €78 billion in bail-out loans they’ve received from the EU and International Monetary Fund (IMF).
But it’s not all bad news.
The rise in exports gave Portugal a trade surplus in 2012 – the first me in six decades.
The Portuguese are spending less on imports while lower labor costs are helping to boost domestic manufacturing activities. Part of the cost cutting included lowering unemployment benefits and the suspension of four national holidays.
Despite the tough financial position that they are still in, Prime Minister Pedro Passos Coelho remains committed to €5.3 billion in deficit-reduction measures for 2013.
And there’s more…
The government recently announced plans to lower business tax rates to attract more investment in the country.
According to Economic Minister Alvaro Santos Pereira, the proposed tax plan should push the share of exports in its GDP to 50% by 2020.
Minister Pereira also says his government will be strengthening the state-owned bank CGD and create a specialized financial division to assist small and medium enterprises (SMEs).
All this comes on the heels of Portugal’s latest government data which shows that while their economy is expected to contract by 2.3% this year, it is on track for positive growth in 2014.
After last year’s 3.2% slump, the country is clearly moving in the right direction.
And which industries are currently leading the export charge in Portugal?
The country’s two biggest exports right now are the domestically-built Volkswagen Scirocco sport compact vehicle and fuel products refined by Galp Energia SGPS SA.
Other top goods include: raw and finished marble, acrylic fibers, Peugeot Citroen vans, Leica cameras, Ikea plateware, and the country’s trademark wine corks.
As you can see, Portugal offers a wide array of high demand goods for export which should bode well for its ongoing recovery efforts.
Trade provided the Portuguese with prosperity for over five centuries… efforts to return to their roots after the economic meltdown appear to be paying off.
Other struggling EU nations should be taking notes.