Discover how Portugal has made an inspiring economic turnaround and why the country is poised for economic growth.
The year was 2008 when the European debt crisis swept Portugal, Italy, Ireland, Greece, and Spain. As the eurozone economic crisis unfolded, these countries grew record-high levels of public and private debt and came to be known collectively by the acronym PIIGS.
Center-stage among PIIGS was Portugal, burdened with a crumbling economy and tumbling wages.
In 2011, Lisbon was forced to take a €78 billion Euro ($86 billion USD as of September 25, 2019) international bailout from the European Union and the International Monetary Fund (IMF), leading to three years of harsh austerity and unpopular fiscal reforms imposed by creditors. By 2012,
Portugal’s economy had contracted as much as 3.2 percent, and unemployment hit record highs.
But at the height of its financial crisis, Portugal made a bold move. In 2015, the country abandoned the painful austerity measures and freed itself from international assistance.
In the face of objections from creditors, the government removed cuts to salaries, raised the minimum wage and pensions, and restored the minimum number of vacation days. To stimulate business, the government introduced incentives like development subsidies, tax credits, and funding for small to mid-sized companies.
Portugal’s defiance of austerity and the government’s decision to spend had a tremendous impact virtually everywhere across the country.
Unemployment has been cut in half. Tourism has skyrocketed, leading to the sprouting up of crops of hotels, restaurants, and shops.
Foreign investors have flooded Lisbon, and investment is at a record high in sectors like aerospace, tourism and construction. Meanwhile, traditional exports like textiles and paper mills are thriving.
The booming economy has had a palpable effect on the national spirit. Business confidence has been restored, and the pessimism that pervaded the country after years of severe belt-tightening has evaporated.
“What happened in Portugal shows that too much austerity deepens a recession and creates a vicious circle,” Prime Minister António Costa told The New York Times in an interview. “We devised an alternative to austerity, focusing on higher growth, and more and better jobs.”
Signs Portugal Is Prepared for Sustained Growth
In the wake of an economic recession, Portugal managed to recover and prepare for sustained growth by adapting and making itself more efficient through improvements to its infrastructure.
The country’s preparation for sustained growth and foreign investment is evidenced by its:
Road infrastructure. This year the annual Transport Scoreboard ranked Portugal as having the second-best roads in the European Union, behind the Netherlands and ahead of France. Portugal’s roads have been rated the fourth-best in the world and the sixth in terms of highway network density.
Railway infrastructure. Operated by Cambois de Portugal, a complex network of railways connects most of the country’s major cities. In addition, the recently instituted Atlantic Corridor railway lines link Portugal with Spain, France, and Germany.
Maritime infrastructure. Portugal has also been fortified by the country’s investment in maritime structure. Portugal is home to five key ports, including Lisbon and Sines in the south and Leixões near Porto. The deepwater Port of Sines has the capacity for New Panamax or container ships and other specialized vessels and has witnessed record activity in recent years.
Air transport infrastructure. Similarly, Portugal offers a strong air transport infrastructure, with international airports in Lisbon, Porto, Faro, and Madeira. The strategic location of the country’s airports means travelers can reach any point in the country via road in less than three hours.
Communications. Boasting one of the strongest communication networks in Europe, Portugal offers full mobile service across the country. Portugal enjoys affordable, fast WiFi access around the country.
Looking ahead: What’s next for Portugal?
With its economic resurgence and improved infrastructure, Portugal achieved its highest economic growth in nearly a quarter of a century—a growth that is expected to continue.
The Organization for Economic Cooperation and Development has forecasted Portugal’s economy to grow two percent between 2018 and 2020, positioning the nation to hit a surplus by 2020.
This summer, the government praised the country’s growth as “the most sustainable since 1995,” citing a record-high increase in investment and booming exports underpinned by skyrocketing tourism rates.
According to a statement from the Ministry of Finance, Portugal’s gross domestic product grew 0.5 percent in the first quarter of 2019, which was a 1.8 percentage point increase on the growth seen in the first quarter of last year. The ministry also noted that the country’s employment rate is the highest it has been since 2010.
Even Portugal’s critics are coming around and admitting that government leaders in Lisbon got it right.
European officials recently named Portugal’s finance minister, Mário Centeno, as the president of Eurogroup in recognition of his leadership and strategic response to the crisis.
Centeno succeeds Jeroen Dijsselbloem, a Dutch politician who advocated for imposing strict austerity policies on Greece and other debt-burned European countries.
With Portugal standing out as a shining example, the whole Eurozone has made a significant recovery.
After a decade of financial turmoil, every country in the eurozone bloc is improving, and discussions of the Euro disintegrating have ended. Led by Mr. Centeno, the Eurogroup will take steps to protect itself from such crises in the future.
Fortified by a flourishing economy, strong infrastructure, and the European Central Bank policies designed to stimulate the environment, Portugal is poised for continued success.
Profit from Portugal’s resurgence
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