With the end of World War Two in 1945, Europe entered a period of accelerated economic activity focused on reconstruction. There were high GDP growth rates and the unemployment rate remained at historically low levels for several years. This context led to high demand for raw materials in the late 1940s and early 1950s.

It was also a period of accelerated integration of several national economies and a reduction in barriers to international trade. The OEEC - Organisation for European Economic Co-operation, forerunner of the OECD - was established in 1948 to help administer the Marshall Plan. The General Agreement on Tariffs and Trade (GATT) was established in 1949 to minimise barriers to international trade and the European Coal and Steel Community - forerunner of the current European Union - set up a common market for resources that were scarce given the intensive reconstruction underway in Europe.

Portugal, which went into the post-war era as an economic structure based on agriculture, began a process of opening up an economy that had hitherto been very closed.

But international trade slowed down between 1952 and 1953, as a result of restrictive fiscal and monetary policies in several countries, put in place in order to combat external imbalances in the balance of payments and due to the release of raw material stocks built up during the Korean war (1950 to 1953).

This external slowdown accentuated a recession that once again in Portugal originated in agricultural cycles and the poor development of the crops important to the economy. In fact, this was to be the last recession originating in a structure that was overly dependent on the primary sector. From then on, industry and services gained weight in an economy increasingly open to the outside.

Aggregate real GDP according to two series

Still a lot of agriculture and little industry

Sector breakdown of GDP (main sectors in 1951)

Breakdown of the variation in the manufacturing industry output

Wine and olive oil were still two of the main harvests in the national economy. Wine production suffered a historic harvest slump in 1952, falling to half of the values for the previous year, putting it on a par with 1940. At the same time, it was a bad harvest year for olives, with a fall of 60% compared to 1951, the year the best harvest ever was recorded in Portugal.

These two harvests alone were not enough to justify a bad agricultural year. But the poor harvests from other crops, caused by adverse weather conditions, only added to this. Even the 1953 agricultural year, which registered record olive oil production in the last quarter and some recovery in wine production, had been marked in the three preceding quarters by a relatively hot, dry spring and autumn, which affected the crops.

At the time, agriculture accounted for around a third of the GDP. The estimate for the agriculture sector output showed a fall of around 20% in 1952, which was not compensated by any relevant increases in other sectors, where there was stagnation or poor growth. The combination of these events made the recession inevitable.

This situation had a direct impact on the living standards of the rural population. With half of the working population employed in farm labour, there was a fall in consumption consistent with the reduction in their income.

Without any reliable figures available for employment or unemployment, the deterioration of the social fabric can be assessed through emigration data. There was a significant increase in emigration in 1952, the highest in the 1945-1960 period. This increase is consistent with less demand for workers in labour intensive jobs in the farming sector at the time, such as the olive and grape harvests and fruit picking.

Wine Cycle

The drop in wine production was particularly felt in 1952. In an economy heavily dependent on agriculture, this fact contributed to the recession.

Emigration

The deterioration in the standard of living of rural populations led to a sharp increase in emigration, especially until 1952.

But it was not just the internal situation that brought this recession about. The international component, as seen in the foreign trade data, was also a source of the adverse economic crisis.

National exports were coming from a decade which had seen a good pace of growth, with particular emphasis on cork, textiles and food.

In 1953, some of the main international markets for Portugal, such as the United States and England, were in a recession. Portuguese industrial production and particularly the cork and chemicals industries - which were geared more towards exports - were affected by the poor external demand, which showed a significant decline.

Following a steep fall the previous year, there were even difficulties in selling the high olive oil and wine production on international markets in 1953, with exports of both products declining in comparison to 1952, according to reports at the time.

Investment, on the contrary, increased during the recession, reflecting the increasing industrialisation of the country.

Exports (quantity) by type of goods

Composition of exports by destination (in nominal value, 1951)