The famous No28 tram, winding its way through the narrow streets of the Portuguese capital, is packed.

Foreign tourists are flocking to Lisbon, as well as the southern coastal Algarve region - and that's just the shot in the arm that the crisis-hit country needs.

"In the past few months tourism in Portugal has seen its biggest growth in recent years," said Economy Minister Antonio Pires de Lima of the nearly 10 per cent increase.

In the first half of the year alone, the income foreign tourists generated grew 8.2 per cent to 3.7 billion ($6 billion). There were 3.8 per cent fewer visitors from neighbouring Spain, which has also been hard-hit by the economic crisis.


More than making up for that, however, was the growing number of Americans, Germans and French visitors (up 16.8, 14 and 10.8 per cent respectively).

Tourism, accounting for 9.2 per cent of GDP, "is the sector that has most contributed to getting Portugal out of the crisis", said Adolfo Mesquita Nunes, a junior conomics minister in charge of tourism.

After two-and-a-half years of recession that has wiped about 5 per cent off GDP, Portugal moved back into growth in the second quarter with an expansion of 1.1 per cent. In all, 3.6 million foreign tourists visited Portugal in the first half of the year, an increase of 8.1 per cent.

The country had been the beneficiary of unrest in previously popular tourist destinations such as Egypt and Tunisia, said Frederico Costa, president of Turismo de Portugal.

"Security has played an important role," said Costa. "We have picked up tourists who abandoned these destinations."