Photo: @antoniocostapm

German chancellor hails Portugal’s economic success

Portugal is “right destination” for international investment, agrees PM

Germany’s chancellor, Olaf Scholz, has hailed Portugal as “an impressive economic success story“, despite European Commission forecasts pointing to decreasing growth in 2023.

Mr Scholz’s praise came at the opening of the Hannover Messe International Industrial Fair 2022, last night, partnered this year by Portugal.

“In recent years, Portugal has written an impressive economic success story,” declared Scholz at opening ceremony. “What a recovery after the difficult years of economic and financial crisis!”

With prime minister, António Costa, in the audience, the German chancellor stressed that Portugal “has made great progress in technology, digitalisation and energy transition.

Lisbon has become one of the European epicentres for startups and for digital nomads around the world (…) ‘Smartphones and surfboards‘: it’s a combination that works.”

Addressing Mr Costa directly, Scholz said executives led by the Portuguese prime minister had “invested massively in Portugal’s innovative capacity, with leading research institutes such as the Fraunhofer Institute becoming attracted to the country.

“Over the past few years, numerous new business-to-business cooperations have emerged: more than six hundred German companies are already active in Portugal (…) These are not only large international companies, such as Volkswagen, Bosch, Siemens and Continental, but also small and medium-sized enterprises. This is due to the good climate they find in Portugal, both to invest and to spend holidays.”

Chancellor Scholz also referred to Portugal’s 15th- and 16th-century maritime ‘Discoveries’ – noting that these marked “the beginning of the modern era, the moment when the world became spherical, global.”

For that reason “it is not surprising” that Portugal has been chosen as the partner country of this year’s Hannover fair: “Cosmopolitanism and trade are as much part of Portugal’s DNA as discoveries and innovations, and Hannover is the trade fair for discoverers and inventors.

“So the ‘slogan’ you have chosen for your presence here, António, is very pertinent: ‘Portugal makes sense’.”

Speaking before the German chancellor, Mr Costa stressed that the choice of Portugal as a partner country for the Hannover fair “is certainly recognition of the value of the relations that already exist between Portuguese and German industries, but above all it shows confidence in the potential” to strengthen “these ties even further.”

Like Scholz, he proposed a “trip back in time” – recalling the air crossing of the South Atlantic made 100 years ago by pioneer aviators Gago Coutinho and Sacadura Cabral to address the creation of the artificial horizon sextant, which “allowed them to astronavigate the plane and which was a great innovation at that time.

“The story doesn’t end there: that innovation was then commercialised by a very well-known German company, which still continues to operate from Hamburg … and was used in 1929 on the first round-the-world trip aboard a German-made dirigible: a Zeppelin. This means that already in those times, a hundred years ago, commercial ties and the transfer of knowledge between our countries were well present and mutually beneficial.”

With the slogan ‘Portugal makes sense’, the Hannover fair – considered the world’s largest – begins in earnest today and ends on Thursday.

Over 100 Portuguese companies focusing on  “activities in the areas of engineering solutions, energy solutions and digital ecosystems” are taking part.

Portugal’s economic growth is decelerating, irrespective of gains in tourism

Away from the super positive soundbites in Hannover, the truth nonetheless is that forecasters see Portugal’s stellar economic growth decelerating as 2023 approaches.

For 2022, Portugal is the European success story: the country has grown the most in terms of other members of the bloc, “powered by tourism”, writes Lusa.

GDP grew by 2.6% (and by 11.9% in terms of the same period last year), but it is expected to start falling backwards again in the coming quarters.

Pedro Brinca, economist and lecturer at Nova SBE, one of the country’s leading business schools, concedes: “It is a fact that Portugal has grown more in the first three months than any analyst expected. The fact that inflation is more moderate shows that we are winning competitively abroad” – and the fact that tourism is in strong recovery, and this country is not energetically compromised by the effects of the war in Ukraine, has all worked in Portugal’s favour.

But it is what is coming ‘round the corner’ that has tempered European Commission positivity.

ISEG (business school’s) António da Ascenção Costa explains: “Right now, the distance between Portugal and the theatre of war in Europe – and the reduced direct links in economies involved – has seen lesser negative impacts in Portugal than in other European countries.

Growth registered in the first three months will decline substantially in the coming quarters to levels only slightly positive as the economy returns to pre-pandemic activity levels. Then it becomes more difficult to grow, because, like the rest of the European Union, we should start to be affected by the indirect effects of the war, in terms of inflation and external demand”.

This bears out warnings by financial/ political pundits, including television commentator José Gomes Ferreira.

Nonetheless, experts do seem to be in unison over tourism – and how it remains the driving force of the Portuguese economy.

This summer is showing all signs of being the year tourism ‘recovers’ completely from the ravages of the last two years, and the property market too has shown remarkable resilience, although economists warn wobbles could come as “the environment of interest rates is changing very rapidly”.

natasha.donn@portugalresident.com