In the current context of fiscal consolidation and EU enlargement, Portugal is increasingly challenged to develop a new growth strategy to regain a lost competitive edge. Portugal has launched an ambitious agenda of reforms geared towards competitiveness, but it faces a narrow window of opportunity to implement it. Regional policy stands as a key tool in doing so.
The challenge of modernizing the economy while continuing to curb the fiscal deficit highlights the importance of seeking the most efficient allocation of public spending. The example of Portugal offers a compelling case study of how a new type of regional policy could contribute to national development in a relatively small yet diverse country, with weak growth and limited public spending capacity, and marked by a long tradition of centralized governance and no elected regional level.
The encouraging return of growth in Portugal contrasts with the persistence of deep-rooted structural challenges. The competitive edge lost in low-cost labour must be earned back in knowledge and innovation. As in other OECD countries, such assets for competitiveness are regionally localised, meaning a limited group of leading regions have turned their assets into drivers of national growth while many others, struck with specific disadvantages, have fallen behind, at the risk of underrating their own endogenous growth potential. This first chapter discusses to what extent regional assets and challenges can determine national growth prospects.
Section 1.1 presents briefly Portugal’s current macroeconomic conditions. Section 1.2 assesses regional disparities and assets for growth. Section 1.3 highlights Portugal’s regional opportunities and policy challenges and considerations.
Portugal faces an unprecedented opportunity to invest in long-term assets for competitiveness. Public funding to so, however, remains limited in the present period of fiscal deficit reduction. In this context, regional policy stands out as a major tool to implement the competitiveness agenda in Portugal. As such, the Portuguese government’s recent initiatives to better territorialise structural policies under the impulse of EU Cohesion Policy need to be further developed and to be coupled with appropriate mechanisms to capitalize on locally concentrated knowledge. This chapter explores to what extent regional policy can help translate a broad competitiveness roadmap into an effective network of growth in Portugal.
Section 2.1 examines the progress made by Portugal on the path towards regional policy. Section 2.2 turns to the role of regional policy as a tool to support an endogenous dynamics of innovation. Section 2.3 looks at regional policy as a tool to ensure sustainable development.
Portuguese public authorities are increasingly required to differentiate their intervention according to the specific assets of each region and to capitalize on the knowledge distributed across a wider range of actors. At the same time, there has been growing awareness that Portugal’s traditionally centralized framework needs reforming. The government’s strong commitment to generate structural change has motivated recent initiatives which are heading in a promising direction. Governance reforms now need to be fully implemented and to go further in order to deliver the expected outcome. This chapter analyses how the current Portuguese framework has addressed the new governance needs induced by new regional policy and discusses suggestions for further headway.
Section 3.1 analyses how the current Portuguese framework has addressed new governance needs. Section 3.2 offers insight on recommended avenues for action.
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For further information on this review, please contact Ms. Soo-Jin Kim.