Economy / Portugal
The challenges of Portugal’s economic growth
Portugal found its way out of the crisis by focusing on exports, tourism and tax attractiveness. Growth is at the rendezvous, but is it sustainable?
To foreign journalists who point to the quality of public services, the Portuguese Prime Minister António Costa explains: “We are still paying the price of austerity.” Now we have to catch up and reduce the deficit. What we have managed to do is reconcile these different requirements.
Portugal exited the excessive deficit procedure of the European Union in 2017 and at the end of 2018 Parliament approved a 2019 budget that provides for the virtual elimination of the deficit – at 0.2% of gross domestic product – during an election year.
Costa had said that the strength of the economy – 2.7% growth in 2017 and 2.3% estimated in 2018 – would allow Portugal to have fully repaid the balance of 4.6 billion euros, the remaining amount of debt to the International Monetary Fund (IMF) before the end of 2018. It is now done.
“Last year we reached our century-old record growth rate and 2019 and 2020 will be above the European average,” he said. “Every year, our primary balance is positive, which allows us to reduce the debt.” EU officials welcome Portugal’s progress, while warning of the “risks” of an increase 3.4% of primary expenditures. Pierre Moscovici, commissioner for economic affairs, repeated that the cuts “could go a step further” during a visit to Lisbon.
“In the past, Portugal has proven that we were wrong, so let’s see,” he told the Lusa news agency, saying he had only seen “good news”, such as a low unemployment rate.
Foreign investors take note. Altice, BNP Paribas and Vinci are among those developing here, and the giant of the web, Google, is one of the multinationals that rely on an inexpensive pool of engineers. Mercedes has recently opened a digital hub in the trendy neighborhood of Beato in Lisbon. Tax incentives for European and non-European investors have been helpful. However, the debate is raging on a strong dependence on Chinese investment and the impact of tourism.
The congress of the Portuguese Association of Travel and Tourism Agencies (APAVT) was dedicated this year to the “challenges of growth”. Its president, Pedro Costa Ferreira, has diagnosed an “end-of-the-cycle” atmosphere, with Lisbon airport capacities “exhausted”, the end of the rapid growth of low-cost and low-cost airlines, short-term rentals, as well as the re-appearance of competitors such as Tunisia, Egypt and Turkey, even as Brexit undermines demand.
Secretary of State Ana Mendes Godinho has been more optimistic, citing figures showing that Portugal has the lowest seasonality in the whole Mediterranean and tourism that is spreading more and more throughout the country.
Nevertheless, in the cities, this represents an additional burden on already saturated infrastructure, and can increase housing prices, which have already impacted 30% in the center of Lisbon in two years.
The Association of Real Estate Agents (APEMIP) criticized the 2019 budget for the lack of incentives to promote long-term affordable rents, given the situation of many Portuguese who can not but, nor rent. “If the government puts on the market to meet the needs of citizens, it is wrong,” said its president, Luís Lima. “In a year, the problems will be even more serious.” The Ministry of Finance executives welcome them. The urban renewal that has taken place in Portuguese cities in a few years since the crisis could have taken place between the ages of 30 and 40 is therefore a bonus. Others point out that the economy has become very diversified since the crisis.
“A reasonable number of sectors in industry and services are driving growth: for example, service centers and the research and development areas of multinational companies,” said Nuno Amado, president. BCP, the largest private bank in Portugal. “It’s a guarantee of sustainability”.
