2013 Index of Economic Freedom

Portugal

overall score63.1
world rank67
Rule of Law

Property Rights70.0

Freedom From Corruption61.0

Limited Government

Government Spending28.3

Fiscal Freedom61.6

Regulatory Efficiency

Business Freedom82.8

Labor Freedom31.0

Monetary Freedom79.4

Open Markets

Trade Freedom86.8

Investment Freedom70.0

Financial Freedom60.0

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Quick Facts
  • Population:
    • 10.7 million
  • GDP (PPP):
    • $249.0 billion
    • -1.5% growth
    • -0.1% 5-year compound annual growth
    • $23,361 per capita
  • Unemployment:
    • 15.9%
  • Inflation (CPI):
    • 3.6%
  • FDI Inflow:
    • $10.3 billion
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Portugal’s economic freedom score is 63.1, making its economy the 67th freest in the 2013 Index. Its score is essentially the same as last year, with gains in the control of government spending and freedom from corruption largely offset by declines in monetary freedom and labor freedom. Portugal is ranked 31st out of 43 countries in the Europe region, and its overall score is above the world average.

In a challenging economic and political environment, Portugal has been undergoing necessary structural adjustments. Ongoing efforts have focused on reducing the inefficient and oversized government sector, better managing public finance, and reforming loss-making state-owned enterprises. Significant labor market reforms have also been adopted, including comprehensive revisions to improve working time flexibility and reduce severance pay.

With the economy mired in recession for the third consecutive year, the Portuguese government faces significant obstacles in following through on key reform measures. Weak growth prospects have led to a loss of market confidence that, exacerbated by lingering uncertainty in the eurozone, has eroded monetary freedom.

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Background

Portugal joined the European Union in 1986 and the eurozone in 2002. By 2011, however, a sovereign debt crisis threatened to sink the economy. The center-right Social Democrats led by Pedro Passos Coelho defeated Prime Minister Jose Socrates’ Socialist Party in the 2011 general elections. In May 2011, Portugal accepted a €78 billion joint European Union–International Monetary Fund bailout plan. Despite strict austerity measures, cuts in state spending, progress with privatization, and increased taxes, Portugal is still in a deep recession. The economy is based primarily on services and industry. Some state enterprises have been privatized, but Portugal continues to suffer from a lack of private-sector liberty. Because of Portugal’s increasingly high unemployment rate and contracting economy, a second bailout has not been ruled out.

Rule of LawView Methodology

Property Rights 70.0 Create a Graph using this measurement

Freedom From Corruption 61.0 Create a Graph using this measurement

The judicial system is relatively independent but lacks efficiency. The court system is slow, and the number of years that it takes to resolve cases is well above the EU average. Corruption remains a cause for concern, although laws against bribery and abuse of official position have been strengthened. The government has committed to creating a specialized intellectual property court.

Limited GovernmentView Methodology

The top income tax rate is 46.5 percent, and the top corporate tax rate is 26.5 percent (a flat 25 percent plus a maximum 1.5 percent surtax). Other taxes include a value-added tax (VAT). The overall tax burden equals 31.3 percent of total domestic income. Government spending is equivalent to 48.9 percent of GDP, and public debt exceeds 100 percent of GDP. The sovereign credit rating has been cut to junk status.

Regulatory EfficiencyView Methodology

Starting a company now takes only five days, with no minimum capital required. However, completing licensing requirements continues to be burdensome, costing three times the level of average annual income. A number of revisions in Portugal’s labor regulations, which had been among the most inflexible in the European Union, have been implemented recently. Monetary stability has generally been well maintained.

Open MarketsView Methodology

Trade policy is the same as that of other members of the European Union, with the common

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

Regional Ranking

rank country overall change
1Switzerland81-0.1
2Denmark76.1-0.1
3Ireland75.7-1.2
4Estonia75.32.1
5United Kingdom74.80.7
6Luxembourg74.2-0.3
7Finland741.7
8The Netherlands73.50.2
9Sweden72.91.2
10Germany72.81.8
11Georgia72.22.8
12Lithuania72.10.6
13Iceland72.11.2
14Austria71.81.5
15Czech Republic70.91.0
16Norway70.51.7
17Armenia69.40.6
18Belgium69.20.2
19Cyprus69-2.8
20Slovakia68.71.7
21Macedonia68.2-0.3
22Spain68-1.1
23Malta67.50.5
24Hungary 67.30.2
25Latvia66.51.3
26Poland661.8
27Albania65.20.1
28Romania65.10.7
29Bulgaria650.3
30France64.10.9
31Portugal63.10.1
32Turkey62.90.4
33Montenegro62.60.1
34Slovenia61.7-1.2
35Croatia61.30.4
36Italy60.61.8
37Serbia 58.60.6
38Bosnia and Herzegovina57.30.0
39Moldova55.51.1
40Greece55.40.0
41Russia51.10.6
42Belarus48-1.0
43Ukraine46.30.2
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