Portugal - Poverty and wealth

After long decades of relative poverty for the rural and urban masses during the dictatorship, Portugal's living standards have been on the rise since the mid-1970s. Conditions particularly improved after the country joined the EU and aligned its social policies with the Union's regulations. Poverty and social exclusion, characteristic of the country earlier in the 20th century, are presently almost non-existent. Many remote, depopulated rural areas benefit vastly from EU programs on regional development. After the democratic revolution in 1974, the government implemented, under socialist and communist influence, a number of measures for more equitable distribution of income and land ownership.

One measure of economic inequality, the Gini index , gives Portugal a ranking of 35.6, lower than that of the United States (40.8) or the UK (36.1), though it is still much higher than those of Nordic EU members such as Denmark, Sweden or Finland. Yet Portugal's per capita GDP is still comparatively low by European standards, and the bank indebtedness of ordinary households is remarkably high.

Portugal's rate of inflation rose through much of 2000, exceeding the ECB price stability limit of 2 percent and the Portuguese government's original inflation target of 2 percent for the year (later revised to 2.7 percent). The actual inflation rate for 2000 was double the euro-zone average. The inflation rise reflected rising food prices, the effect of the euro's weakness against the U.S. dollar on 2000 import prices, and the impact of higher energy bills. Despite the government's decision to freeze the prices of retail oil products in April 2000, both producer and consumer prices continued to increase. The extremely tight labor market and rising inflation notwithstanding, average wage growth (based on collective pay agreements for non-public-sector workers) showed very

GDP per Capita (US$)
Country 1975 1980 1985 1990 1998
Portugal 6,024 7,193 7,334 9,696 11,672
United States 19,364 21,529 23,200 25,363 29,683
Spain 10,040 10,512 10,943 13,481 15,644
Greece 8,302 9,645 10,005 10,735 12,069
SOURCE: United Nations. Human Development Report 2000; Trends in human development and per capita income.

Distribution of Income or Consumption by Percentage Share: Portugal
Lowest 10% 3.1
Lowest 20% 7.3
Second 20% 11.6
Third 20% 15.9
Fourth 20% 21.8
Highest 20% 43.4
Highest 10% 28.4
Survey year: 1994-95
Note: This information refers to income shares by percentiles of the population and is ranked by per capita income.
SOURCE: 2000 World Development Indicators [CD-ROM].

little increase in 2000. Real wages were likely to decline by the end of 2000. As a result of this, ordinary Portuguese felt rather pessimistic about their current economic prospects.

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