tourists in Olhos d'Água, Albufeira

Portugal basks in economic good news – but can it last?

Revenue from first quarter tourism powers Portugal to fourth place in EU growth this year

The beginning of the week was spangled with the fairy dust of ‘good news’ from Brussels: the European Commission’s spring projections have more than doubled growth estimates for Portugal this year, powering the country into fourth place in terms of economic best performance among the 27 member states – thanks largely to first quarter results in tourism.

As Expresso outlined: “After having achieved the third highest growth rate among the 27 countries of the European Union (EU) last year, the Portuguese economy is once again among the fastest growing in the EU this year (fourth place).”

Another highlight is that Brussels believes the deficit will stay at 0.1% of Gross Domestic Product (GDP) this year – the third best record in the single currency area (and the fourth in the whole EU). “This is a better performance than the ‘hard-line’ countries such as Germany or the Netherlands,” stressed reports on Monday.

PS Socialists, who have been fighting off political controversy since winning an absolute majority last year, made the most of the moment – with parliamentary spokesman Eurico Brilhante Dias going so far as to say the forecasts were “the mirror of a well-governed country, on the right track”.

The prime minister was also full of smiles, warning nonetheless that “when we have good news in the economy, this should not make us rest. On the contrary, it should make us realise the following: just like with bicycles, either we keep pedalling and the economy continues to grow, or if we stop then the bicycle does not move and may even collapse…”

If a brass band had been playing in the background, this was the moment when the music would have come to a juddering halt. Who has ever seen a bicycle collapse when its rider stops pedalling? The bicycle should, in theory, remain intact. The metaphor, however, may have been prophetic – this year’s growth is not expected to continue into next year.

In fact – according again to Brussels – next year Portugal is scheduled to fall 14 slots from its fourth place on the growth podium, landing once again “at the tail end of Europe” that critics so often allude to.

One can live in hope – the hope that Brussels’ forecasts for 2024 are not correct, but then that detracts from the razzmatazz milked from the predictions for this year.

Another big issue in the parade of statistics is that, in the end, they are just that – statistics.

“People cannot eat statistics”

Thus, while media sources plugged the government’s self-congratulation, the largest party in opposition (PSD) was reflecting that “people cannot eat statistics”.

According to PSD parliamentary spokesman Duarte Pacheco, “there is a growing gap between the country that Portuguese people feel and the country of statistics (…) The country that people feel is experiencing difficulties in health, education, justice and agriculture (…) People don’t learn with statistics (referring to the hours of education lost this year through teachers’ strikes); police use cars, not statistics, to get about, and police cars are off the road because they need to be repaired. We are increasingly two different countries: the one of statistics and the one of reality”.

Mr Pacheco referred to that bicycle of the prime minister that could collapse if its user stops pedalling, suggesting it is an exercise bicycle, going nowhere. People may expend a lot of energy pedalling; they could end up slimmer and more attractive, he added, “but it won’t help with the day-to-day problems”.

Popular tabloid Correio da Manhã ran with this angle in a cartoon in its Wednesday edition depicting a beaming prime minister, larger than life, with his arms around much smaller compatriots, saying: “Food is more expensive, pensions are low … but I bring you effusive news: the country is going to grow 2.4%!!! Aren’t you all so lucky!!”

President Marcelo also tempered the political euphoria somewhat, suggesting: “I think we could grow even more because if the first quarter, which is the most complicated one, had a growth of 2.4%, tourism continues to rise, exports continue to rise, foreign investment is holding up well, and we are now entering the peak period for tourism which is the summer, there is no reason to expect that there cannot be a result at the end of the year higher than that” predicted by Brussels.

But “big numbers are one thing, another is to reach people’s lives”, he stressed, returning to his long-held concern: execution of the recovery and resilience plan (the Brussels’ bazooka of post-pandemic funding). This, when it “arrives on the ground, distributes more money in works, therefore in salaries, etc”. So far €1.8 billion has “reached the ground (…) but €5 billion has already been contracted. So it is a question of hoping that in the coming months that money, that power to the economy will arrive on the ground”.

“Let’s see if this also contributes to injecting money into the lives of families, so that families have the notion that they are seeing light at the end of the tunnel, that is, that the good results that are in the macro numbers reach micro pockets,” he said.

Inflation to remain above 5%; unemployment to rise above EU average

This is where the projections also lose a little sparkle. Inflation is expected to remain above 5% to the end of this year, while unemployment is set to continue increasing, to above the EU average. And when GDP per capita in terms of purchasing power is considered, Portugal still comes out at “almost the bottom of the table”, says Expresso, falling from 21st slot to 22nd, being overtaken by Romania.

When finance minister Fernando Medina was asked whether Brussels’ economic fillip would translate into further support being made available for struggling families – hundreds of whom have reportedly had to hand homes back to the banks due to their inability to keep up with rising mortgage rates – he also backpedalled slightly (no pun intended).

In the words of SIC Notícias, Medina “warned that Portugal has to be prepared for adverse situations”.

“If the current projections for the Portuguese economy come true, this will allow us to look at the entire budgetary year 2024 and beyond in a more solid manner, but we should bear in mind that we have to take steps that are compatible with the length of our legs,” he said.

By Natasha Donn
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