Political wrangles aside, Portugal appears to be on the mend, slowly emerging from one of the toughest economic periods in its history. Despite the lingering threat of further austerity, Portugal nevertheless seems to be getting back on track, experiencing green shoots of recovery in its economy, and the tourism and property sectors recording positive results, particularly in the Algarve. The foreign press is even describing Portugal as a “renewed country”.
Economy minister António Pires de Lima was the latest government official to say “Portugal is growing”, after data from the National Statistics Institute (INE) showed that the country’s gross domestic product (GDP) grew 0.3% from the first to the second quarter of 2014.
The minister boasted that growth was attributed to improvements in “private consumption, exports and investment”, which he believes will help the country consolidate its “process of economic recovery” and keep recession at bay.
He was also keen to report that Portugal is the “only” European country where unemployment has been dropping for 18 consecutive months. “Our unemployment rate stands at 14%. It is still high, but it is very positive that is has been decreasing consistently,” Pires de Lima said.
But recovery has also been felt in the tourism and real estate sectors, and of course the Algarve region comes to the forefront of statistics.
The region is, and has always been, largely responsible for the increasing success of the country’s tourism sector. State television RTP has recently reported that this summer was the best in the Algarve since 2006 and that tourism in the region has contributed €364 million to the state coffers in the first seven months of the year alone.
A better-than-expected 92% occupancy rate at hotels and other accommodation units in the Algarve has also led to enthusiastic remarks from the regional tourism boss Desidério Silva, who proudly said that the Algarve currently represents 38% of the country’s tourism activity.
On a national level, tourism rates are also improving. In June, the number of guests and overnight stays increased 7.2% and 8.6% respectively, compared to the same month last year.
The property sector has always been indicative of the country’s economic panorama and, again here, Portugal is experiencing a boom.
Luís Lima, president of APEMIP (the national real estate professionals’ association), told The Resident that 2014 has been a “very positive year” for the real estate sector.
“There has been an increase in the number of property sales for four consecutive quarters, which means that if the calendar year were from June 1, 2013 to June 30, 2014, this would have been the year of the sector’s recovery,” said Luís Lima.
In the first half of the year, 49,000 properties were sold and hopes are that the number will increase significantly in the second semester, compared to last year when the annual total was 96,000.
Impressively, the number of foreigners buying property in Portugal has increased by 90% between April and June 2014, revealed APEMIP. The Algarve alone accounted for 37% of all foreign property investment in the country. A total of 2,424 homes were purchased by foreigners in the region, with the UK (964), France (504) and China (180) as the top buyers.
“We have gone through a very difficult period these past few years, which led real estate professionals to join forces in order to overcome the crisis,” he said, revealing that 2014’s positive results bring the sector renewed hope.
The foreign press is also looking at Portugal as a “renewed country”. Ten economists queried by Bloomberg news agency have agreed that measures such as tax hikes and public deficit cuts imposed by the Portuguese government throughout the past three years have put Portugal on a “sustainable economic path”.
“No respondent in the poll of 10 economists sees Portugal reverting to large current account and budget deficits, and all of them predict the country’s economic adjustment will persist as the recovery picks up speed,” the news agency reported last month.
“Portuguese households and firms have learned their lessons from the crisis,” José Brandão de Brito, chief economist at Banco Comercial Português SA in Lisbon, told Bloomberg.
“There will be no more credit-fuelled booms in the foreseeable future. International markets are also much more sensitive to any meaningful deviation from the adjustment path and will hike funding costs if Portugal goes astray.”
This positive international attention extended to the UK, where The Sunday Times newspaper featured an article entitled ‘The tide is turning: time to buy a bargain in the Algarve?’
Besides focusing on the recovery of the real estate market in Portugal and the Algarve, author Zoe Hall also refers to the rise in the number of sleepovers and golf rounds in the region, as well as a report by global accountancy firm PwC describing Portugal as “Europe’s best secret” for its Non-Habitual Tax Regime (which allows foreign-source income to be tax exempt for 10 years).
This news of “recovery” is long-awaited after three years of economic and financial struggles.
Portugal hit financial rock bottom in April 2011 when it was forced to request financial assistance from the ‘troika’ – the European Commission (EC), the European Central Bank (ECB) and the International Monetary Fund (IMF).
A €78 billion bailout was agreed upon the following month, but in turn Portugal had to implement a number of austerity measures such as salary cuts and tax hikes to start recovering its economy.
Fast forward to October 2014 – about four months after the end of the troika’s three-year bailout programme – and things seems to be finally looking up for Portugal.
By MICHAEL BRUXO [email protected]
Photo: Luís Lima, president of APEMIP, the national real estate professionals’ association, says 2014 has so far been a “very positive year” for the real estate sector
