Readers Question: Can you tell what Portugal has done to reduce the Current Account GDP deficit so steeply?
The reduction in the Portuguese deficit is quite striking. In researching the answer to this question, I came up with a different post – The Portuguese Economic crisis
From what I can gather, essentially, the rapid reduction in the current account is due to a sharp fall in consumer spending on imports, combined with some growth in exports – helped by improvements in unit labour costs. However, bear in mind, I may have missed out a few other reasons due to lack of data.
Likely Reasons for Reduction in Current account deficit
1. Fall in consumer spending on imports.
Portuguese economic growth compared to Germany
As mentioned in The Portuguese Economic crisis Portugal has seen the biggest fall in real GDP (apart from Greece) in the Eurozone. Portuguese consumers have seen a rapid fall in disposable income due to a combination of tax rises and public spending cuts. With lower income, Portugal is simply buying less imports – this improves the current account.