After the revolution, the Portuguese economy experienced a rapid, and often uncontrollable, expansion of public expenditures--both in the general government and in public enterprises. The lag in public sector receipts resulted in large public enterprise and general government deficits. In 1982 the borrowing requirement of the consolidated public sector reached 24 percent of GDP, its peak level it was subsequently reduced to 9 percent of GDP in 1990.

To rein in domestic demand growth, the Portuguese government was obliged to pursue IMF-monitored stabilization programs in 1977-78 and 1983-85. The large negative savings of the public sector (including the state-owned enterprises) became a structural feature of Portugal's political economy after the revolution. Other official impediments to rapid economic growth after 1974 included all-pervasive price regulation, as well as heavy-handed intervention in factor markets and the distribution of income.

In 1989 Prime Minister Aníbal Cavaco Silva succeeded in mobilizing the required two-thirds vote in the National Assembly to amend the constitution, thereby permitting the denationalization of the state-owned banks and other public enterprises. Privatization, economic deregulation, and tax reform became the salient concerns of public policy as Portugal prepared itself for the challenges and opportunities of membership in the EC's single market in the 1990s.

Data as of January 1993