Economic Stabilization and Growth in Portugal

Occasional Papers, April 15, 1981

Source details

Paper reviews economic stabilization and growth in Portugal during the 1970s.
Following a decade of rapid growth with external equilibrium, the Portuguese economy in the early 1970s suffered a series of major shocks.
Highlights that the problem of managing economic growth with a balance-of-payments constraint was new to Portugal.
Reviews the issues that had to be resolved to develop an effective program.
The economic outturn is critically examined.

Growth history: decade of rapid growth with external equilibrium prior to early 1970s shocks.
New constraint: managing economic growth under a balance-of-payments constraint was a novel policy problem for Portugal.
Shock transmission: a series of major shocks in the early 1970s altered previous equilibrium dynamics.
Program design: the paper reviews the set of issues that had to be resolved to develop an effective stabilization and growth program.
Outcome analysis: the economic outturn following the shocks and program implementation is critically examined.

Identification of the balance-of-payments constraint as central to policy formulation.
Need to reconcile rapid growth objectives with external equilibrium requirements.
Consideration of monetary and credit developments in the context of external pressures.
Implications for exchange rates, exports, import bill, and public sector policy.
Labor market and real wages considerations in stabilization and adjustment.

The paper provides a critical assessment of how policies and programs performed in restoring stability and supporting growth after the early 1970s shocks.
Emphasis on evaluating whether the resolved issues and implemented measures produced the intended external and domestic outcomes.

Subjects: Credit, Economic sectors, Exchange rates, Exports, International trade, Labor, Monetary expansion, Monetary policy, Money, Public sector, Real wages
Keywords: Africa, balance of payments constraint, Credit, deficit, deficit equivalent, Europe, Exports, import bill, Monetary expansion, OP, Portuguese balance of payments, Public sector, Real wages, section III, Western Europe, whatever rigidity, world petroleum price