Portugal's Government and Economy

Government and Politics

Portugal is a democratic republic with an established system of government, both presidential and parliamentary. The Government is one of the four sovereignty bodies of the Portuguese Republic, together with the President, the Assembly and the courts. The role of the Government includes political, legislative and administrative functions, as well as the power to negotiate with other countries or international organizations, submitting bills to the Assembly and issuing decrees.

Portugal has made remarkable political progress after 1974. It replaced the authoritarian-corporatist regime of Salazar, and as of the beginning of the 1990s, the country appeared to have successfully made the transition to democracy.

Each president is elected to a five-year term with a maximum of two consecutive terms. The current President of Portugal is Aníbal Cavaco Silva who was elected in March 2006 and is a member of PSD – Portugal’s Social Democratic Party.

Apart from the President, The Prime Minister also holds an important role in Portugal. The present Prime Minister is Pedro Passos Coelho, who took office on 21 June 2011 as the 12th Prime Minister of Portugal and leader of the Social Democratic Party (PSD). As chief executive, the Prime Minister coordinates the action of ministers, representing the Government of Portugal from the other bodies of state, is accountable to Parliament and keeps the President informed.

Since 1975 the party system is dominated by the social democratic Socialist Party and the liberal conservative Social Democratic Party. Both parties are very pro-European and have similar political views with a strong focus on market economy.



Portugal’s central bank is called Banco de Portugal and the two largest banks are Banco Comercial Português and the state-owned Caixa Geral de Depositos. The national currency is now the Euro which replaced Escudos on 1 January 1999 and was removed from circulation on 28 February 2002.

In general, Portugal’s financial system is well managed, competitive and healthy and since its membership of the European Union in 1986. According to the Global Competitiveness Report for 2013-2014, published by the World Economic Forum, Portugal was placed 51st on the economic index.

However the financial crisis of 2008 does continue to affect the Portuguese economy and cause a wide range of domestic problems that are specifically related to the levels of public deficit as well as the excessive debt levels. Nonetheless, the government faces tough choices in regard to its attempts to stimulate the economy while it also seeks to maintain its public deficit around the EU average.

The Minister of Economy, António Pires de Lima displayed his proactive attitude by stating that Portugal has technically emerged from recession, but they must continue to be very persistent so this recovery can be consolidated.  He also added that the Portuguese economy is experiencing a turning point, and the data confirms that.

Portugal continues to grow and expand mainly due to their improved international trade contacts.  It is also home to a number of notable leading companies with worldwide reputations, such as Grupo Portucel Soporcel, a major world player in the international paper market; Sonae Indústria, the largest producer of wood-based panels in the world; Corticeira Amorim, the world leader in cork production; and Conservas Ramirez, the oldest operational canned fish producer.

Other main industries contributing to the economy, include oil refineries, cement production, plastic products, textiles, construction, steel, footwear, leather, wine production and of course tourism. The tourism industry is becoming increasing important to the Portuguese economy especially in the Algarve. A large part of the national income is generated by tourism which is also a valuable source of foreign currency.

Although a substantial amount of Portugal is dedicated to agriculture, exports in farming do not make up the majority of the economy as they once did. The country has now become more focused on commerce and the service sector, which includes public service, wholesale and retail trade, real estate, banking and finance.

The Portuguese government has put a lot of effort into raising the standard of living and according to the 2014 index of Numbeo, the world’s largest database of countries worldwide, Portugal was placed in the top 25 in terms of quality of life ahead of countries like Spain, Italy, Hong Kong and China.