During the past decade the trend of economic development in Portugal was strongly affected by a change in economic policy and by the disturbances which started in Angola in 1961. In 1959, fiscal policy began to assume an expansionary character as the implementation of the second development plan was started and economic growth began to accelerate after having been modest in the years 1955-58. The events of 1961 changed the emphasis of economic policy, and economic development slowed down in 1962-63. After falling in real terms in 1962, mostly as a consequence of the events in Angola during 1961, private investment recovered strongly in 1963, suggesting that entrepreneurs have found new confidence. There is also a growing interest in direct investment in Portugal among foreign entrepreneurs who are attracted, inter alia, by the relatively low wages, by the export possibilities offered by Portugal’s membership in the European Free Trade Association (EFTA), and by a more favorable official attitude toward foreign investment. In addition, tourism is generating an increasingly important contribution to the national economy.
Portugal’s economic policy and planning in the coming years will have to face structural problems in both agriculture and industry. Not only is the country’s soil fairly poor, but the present pattern of cultivation is far from efficient. Agriculture is further handicapped by the size of landholdings; for the best land use, holdings are too small in the north of the country and too large in the south. Irrigation programs are under way to improve farming conditions, and a start has been made in rationalizing the size of landholdings.
Industrial development suggests a dichotomy between the traditional industries, which have tended to stagnate, and the new industries, which have accounted for virtually all growth in the industrial sector. The marked rise in the production indices of the modern industries in recent years reflects mainly progress in a number of fairly large projects, many of them government sponsored, such as the nation-wide electrification program and the construction of Portugal’s first steel mill. Portugal’s second six-year development plan came to an end in 1964. The Transitional Investment Plan for 1965-67, now being implemented, aims at an average annual growth rate for the gross domestic product (GDP) of 6.1 per cent. The Government intends to launch a new Social and Economic Development Plan covering the period 1968-73.