Portugal’s economy resists war and Covid

Inflation slows; economic growth registers fastest rate since 1987

The last day in January brought good news at last for Portugal’s PS absolute majority government following weeks in which media focus has been on various political scandals: 2022 registered the fastest rate of economic growth in 35 years, and inflation shows clear signs of slowing, with a third consecutive monthly reduction.

Prime minister António Costa welcomed the ‘flash estimates’ delivered by INE statistics institute, saying they were “a good signal” and “positive factors for the country”.

Talking to reporters in Seixal on Tuesday, he said the 6.7% growth in GDP is also a sign that Portugal’s economy “has been able to resist and recover from the effects of the Covid pandemic, the war in Ukraine and inflation”.

In Lisbon, the country’s finance minister Fernando Medina, stressed that to have “closed 2022 without recession, without a fall in the economy, shows that we have the capacity to meet our objectives for 2023”.

Back in October when Mr Medina revealed his objectives for the country’s economy, the IMF wasted no time in pouring cold water on them, forecasting less growth (0.7%, not Medina’s projected 0.9%) and higher inflation (4.2%, not 4%).

Since then, however, the number of specialist sources insisting the IMF “rarely gets it right” have amplified – and data coming through has shown the future, if not totally rosy (in terms of global challenges), is certainly ‘do-able’ in the eyes of the country’s political leadership.

Fernando Medina explained, if one compares Portugal’s growth with other economies in the eurozone, the country closed 2022 with “roughly twice as much”, which means the country has “recovered well from pre-pandemic levels”: a clear 2.6% above 2019’s results.

In Castelo Branco last week, António Costa suggested “all economic indicators” reinforce his conviction that the economy will grow more than Medina’s original 0.9% projection.

2022 “was a year of enormous uncertainty marked by war”, but even in the face of this adverse scenario, “the value of Portuguese exports exceeded 50% of GDP”, he said.

“Of course, most of the component has to do with services and tourism, but a huge component – a growing component – has to do with work in the industry sector”.

Thus, the sense that 2023 can be faced with “a lot more confidence” than political leaders had a few months ago.

Público, however, has brought up the rear claiming “the scenario now is one of quasi-stagnation”. This is the view of economists (and has been for months), but it is not necessarily the view of operators within the tourism sector which are bullish over the future.

Writing this week in Dinheiro Vivo, António Marto, president of the Fórum Turismo and founder of employment exchange Bolsa de Empregabilidade, affirms “there are encouraging forecasts (…) Growth in the sector should continue in the medium term, with the Bank of Portugal forecasting, in its December bulletin, that in 2023 “tourism exports should grow by 8.6%, benefitting from World Youth Day taking place in the third quarter” (see box).

For 2024/25, “it is assumed that this component grows slightly above external demand”.

Marto concedes to the systemic problem of “not enough qualified staff” for the sector, poor wages and the consequent need to recruit from developing countries. But “one trend is certain: tourist demand will continue to grow, along with the return to normality with the softening of the effects of the Covid-19 pandemic”.

He did not hazard a guess as to the ‘softening of the effects of inflation, nor of those in respect of the war in Ukraine’, but inflation at least is showing a promising trajectory.

Accommodation costs skyrocket 600% due to World Youth Day

World Youth Day in Lisbon, and the promise of a visit by the Pope during the event, has seen the cost for accommodation in various areas of Portugal skyrocket.

As many as 1.5 million ‘pilgrims’ are expected to fly into Portugal between August 1-6 (and possibly a few days either side). Their arrival here will almost certainly involve a visit to the Catholic sanctuary of Fátima and, as such, hotels and tourist rentals have already started raking in extraordinary profits.

According to tabloid Correio da Manhã, a three-bedroom apartment in Parque das Nações is already advertising pre-bookings at €2,400-plus per day, while the rental of an apartment in Fátima during the first week of August has climbed to €8,000.

Just the cost for the apartment in Parque das Nações, close to the World Youth Day venue, is an increase of 600%, says the paper, “bearing in mind that the same space today can be rented for €343 per night.

“Speculation has extended to neighbouring boroughs: one of the most expensively priced being Moscavide, Loures, which is still only a short walk from the Parque Tejo-Trancão” where the event will be taking place.

CM adds that other European countries have jumped on the bandwagon, increasing the costs for flights to Lisbon during the World Youth Day week, in some cases doubling regular tariffs for August.

By Natasha Donn
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