Portugal's banking and financial system is sound, competitive and well managed. Despite being not as large as other EU nations, the banking system in Portugal can be compared with other EU nations in terms of profitability, efficiency and solvency. The challenges for the banking system of Portugal lie on the growth side of the economy.
In the recent years, the Portuguese economy has not been able to grow as fast as its European contemporaries. In the last two years, the Portuguese economy has also witnessed excessive public expenditure and hence large levels of national debt. All of these threats pose serious challenges to the overall health of the Portuguese economy and hence corrective measures are needed to correct the flaws in the system and to make it more competitive and self-sustaining.
The assessment of banking system shows that the procedure for borrowing money from banks is easier than other EU countries. As a result, the household debt is as large as 120% of the income. Unemployment trend in the Portuguese economy is also very alarming. It is growing exponentially and poses serious threats to the policy makers to devise strategies to curb this trend. Unemployment can be dangerous for any economy and Portuguese economy is no exception.
[...] Unemployment trend in the Portuguese economy is also very alarming. It is growing exponentially and poses serious threats to the policy makers to devise strategies to curb this trend. Unemployment can be dangerous for any economy and Portuguese economy is no exception. Unemployment reduces the production potential of a country and results in less output being produced than what can be produced. This hampers the economic growth of an economy and leads government into paying unemployment benefits funds for which the government has to indulge in debt financing. [...]
[...] In simple words, Portugal has imported more than it has exported. In 2010, the balance of payment deficit amounted to $21.95 billion. This deficit is around 20% of the total trade activity. Around 56-60 percent of all trade activity conducted by Portugal is Intra-EU. Rest of the trade is conducted with the US and other Asian and African countries. (US Dept. of State, 2011). In the end, it can be conclude that Portugal is a small European country with big potential. [...]
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