Portugal should base its economic growth on the ability to export goods and services with high added value, recommends a report published recently by the European Commission.
The Commission’s annual European Competitiveness Report, which measures member states’ industrial competitiveness performance, and the EU as a whole, places Portugal in the “moderate cluster’ of countries – those States that perform well in some competitiveness areas but that face difficulties and deterioration in others. The other countries in this group are Cyprus, Greece, Italy, Malta and Slovenia.
The report notes that Portugal’s exports performance in 2012 “was significant and maintains an ascending tendency over previous years” and that “exports became more diversified, with more target markets identified”.
However, despite the progress made and the growth of its “quota” of EU exports, the report believes the country has “considerable potential” to take a more productive role in international commerce.
Highlighting that “Portugal’s major challenge is to restore competitiveness of its economy after a decade of low growth productivity and increasing indebtedness”, the report stresses that “Portugal’s future economic growth should be based on the ability to export goods and services at a higher added value, as well as on the capability to attract foreign investment”.
According to the Commission, the Portuguese government is rebalancing the economy towards export-led growth by putting exporting companies at the core of its policy initiatives, particularly in sectors such as innovation, transport and financial credit.
On this last point, the report warns that difficult credit conditions remain a major factor constraining the operations and growth of small and medium enterprises (SMEs).
But the government is trying to ease these credit constraints by strengthening its existing instruments, for example state-guaranteed lines of credit, and fostering the use of alternative financing mechanisms.
Portugal has also streamlined its business environment, in particular in the area of licensing, and enhancing competition in services. As a result, starting up a business and obtaining the necessary licences is easier than in most Member States.
Lastly, the report concludes, the government has also adopted several measures to raise the quality of research and knowledge creation.However, there is still a significant gap between knowledge creation, knowledge transfer and its translation into economic value through innovation, which partially results from the low share of research-intensive sectors in the economy.
In more general terms, the report stresses that while EU industrial performance has stabilised, preliminary data suggests that the contribution of manufacturing to EU GDP has fallen further from 15.5% one year ago to 15.1% as of summer 2013.
But member states have made progress in improving the business environment, exports and sustainability, it adds. However, many problems still remain.
The convergence between the industrially most competitive countries and the moderate performers is at a standstill. Furthermore, the cost of energy is increasing in almost all member states, contributing to the de-industrialisation of Europe. Other hurdles are access to finance and a drop in investment.
The revival of European industry also depends on improved public administration performance, and closer links between the teaching world and the business sphere.
