Fernando Medina has reason to smile. “The end of the year without a recession, without a decline in the economy means that we will have more possibilities to be able to achieve the goals for the year 2023,” said the Finance Minister, after the INE figures were released, revealing that the GDP of 2022 had the highest growth in the last 35 years, one of the twelve known euro countries to have the highest growth (after Ireland). And the reasons to make Medina happy aren’t limited to the confirmation of 6.7% growth last year – in December, the government revised upwards the 6.5 forecast in the State Budget (SO), showing a price one point above the one you end the year with. The prospects of our main business partners also dispel the worst estimates. Even with European Union GDP stagnating, Eurostat revealed yesterday, the Eurozone still made progress of 0.1% in the fourth quarter, shrugging off a looming recession and bringing particularly good news for Portugal, with Madrid growing at the same pace that Lisbon and Berlin managed to avoid recession (the German economy was surprised to be able to grow by 1.9% in 2022), despite falling by 0.2% in the final stretch of the year.
With two of the engines of our economy working, Portugal can enjoy a certain relief, which exceeds historical growth and a reduction in inflation for the third month in a row: in a country highly dependent on foreign countries and in need from strengthening exports, The health of European partners is a guarantee of improvement in this new year. Especially if we add to the picture Medina’s debt and deficit reduction trajectory, the correct accounts that already deserved praise from Moody’s, as DN/Dinheiro Vivo wrote a few days ago, and renewed confidence in implementation of the economy.
“The stability of the Republic’s interest rate is very important,” economist and former governor Carlos Lobo admits to DN/Dinheiro Vivo. It means that the ECB’s European policy is working and that the markets believe in the country and the fiscal effort being made.” There is also inflation, which for the third month in a row has eased to 8.3% in January, which could ease portfolios, but mostly corporate coffers, as energy prices begin to slow. Slowing inflation and growth recorded in 2022 count more, says the former finance minister, with this “control of the public accounts acting as a hedge against future turbulence”.
Seeing the forest, then, the news is good. Something that brings moderate optimism to the dialogue between economists and entrepreneurs in the new year. “It is the portrait of a country that holds, proving the trajectory of the Portuguese economy in recent years,” reflects the tax official, pointing to tourism as a key support of this development. “Being regional and distant from the war in Ukraine, we get more benefits,” explains the former foreign minister, recalling that this treaty has also helped industrial activity.
João Duque argues the weight of tourism on the economy, in the last year, and adds the global panorama to the equation that allowed the good Portuguese result – between Germany resisting the crisis, thanks to energy savings and strengthening inventories, but also with new calm brought by the investment of billions by the United States in the energy transition. “On the other hand, Europe has not entered recession – more good news – and China has revised its Covid policies, unlocking consumption and orders.” All this also helps ease inflation and builds confidence, which helps Portugal. “And tourism may perform better than expected, pushing us harder in 2023,” Duque concludes
“In the fourth quarter, the country grew 3.1% year-on-year (down from 4.9% in the third quarter) and 0.2% sequentially (0.4% in the previous quarter). with GDP at 6.7%, the highest in 35 years.”
“I was already more pessimistic about 2023,” António Saraiva also confesses to DN/Dinheiro Vivo, identifying “signs that the worst fears will not come true.” The president of the CIP is justified by “signs of improvement in Europe and renewed dynamism of engines such as Spain and Germany”. And even the unemployment rate, which rose slightly -6.7% in the INE’s quick estimate, also known yesterday, an increase of 0.2 points compared to November -, sees nothing more than the effects of some seasonality. “What the entrepreneurs have pointed out is probably the lack of human resources.” A problem pointed out by both an economist and a tax official, which is justified by low wages but also by the demographic issue and the inefficiency in promoting immigration policies adapted to the needs of the country.
The right accounts are worth a lot, investment is urgent
The flourishing country, however, loses brightness as we approach the trees. “The good year of 2022 is confirmed,” admits João Duque, separating, however, the “spectacular performance” of the economy in the first quarter of the visible slowdown that followed. “Since March, quarter by quarter, the economy has tended to stabilize, with the variation compared to the previous period becoming smaller and smaller. We are landing,” emphasizes the economist, pointing out the lack of investment and the successive delay in major infrastructures. – with Lisbon airport and the railway at the forefront – as the main reasons for concern.
“Spain has four gigafactories contract (battery factory for electric vehicles, including Volkswagen and Envision); Portugal will not have, because no one will bet here without having the infrastructure to sell the final product to the world,” he summarizes.
The same vigilance is left by António Saraiva, who recalls the urgent need for the government to start investing on the ground, that is, what is still left of the PT 2020, the cake of the new multiannual program and the recovery and resilience plan, whose the horizon The implementation is already 2026. “There has been a blurring of these goals with the internal turmoil we have seen in the government and with the procedures that are very delayed in the public structures. And the result is visible in the very low execution of the PRR”. , the representative of the entrepreneurs expresses his regret, underlining that only 160 million, out of 1.6 billion, have so far reached the economy. “It’s urgent to get these programs on the ground and give companies that faster path.”
Carlos Lobo agrees: it is necessary to promote an investment-friendly climate. And he adds. “We could have a much better performance of the economy if we were quicker to decide and had much less bureaucratic ties to economic activity.” It is the eternally debated and never resolved cost of the framework that drives investors and their projects away. But also the professionals. “We are releasing our best asset, the people,” laments João Duque, pointing above all to a skilled workforce with added value, which seeks working conditions that the national economy cannot provide. “Either they immigrate or stay physically, but they leave only the VAT here, because they give up having their tax and work headquarters here.”
The salary issue: The Portuguese do not feel improvements
This escape from the pink country is justified: the majority of Portuguese people do not want to live in the wonderland depicted by historical development and correct reports. Inflation has exacerbated an old problem “and the government cannot go to everything”, summarizes Carlos Lobo, reminding that the increase in prices that steals purchasing power has external factors, about which Portugal can do nothing, and effects that go beyond supermarket prices.
“It is the portrait of a country that is holding on, proving the trajectory of the last years”, reacts Carlos Lobo. “It’s been a good year, but we’re landing,” warns Joao Duque.
“We have problems in the NSS, in Education, in Justice. And we can only apply palliative measures and signal with help to the most vulnerable,” the former government official enumerates, recalling the sectoral social strife we’ve seen and recommending a stronger remedy. “We need to act at the level of efficiency, simplification of processes, we need a Simplex 3.0. To improve people’s lives, it is important to put aside occasional measures and start providing answers tailored to the end result, finding structural solutions for the problems of our economy”, defends Carlos Lobo.
The solutions are those that have long been suggested: attract investment, retain talent, cut red tape, increase capital gains and labor productivity to allow wages to rise to European levels, and finally the effects of growth to reach people. What our economy, even with occasional flashes, is still not able to do: “create added value”, sums up João Duque. Without overcoming this hurdle, increasing family income will remain a deferred goal in an increasingly tight labor market. “Companies that work in specialized positions that allow them to raise prices, or that have an international presence that can compensate for what they cannot recover here, will be able to pay better wages, at the European level; the rest, those who cannot keep up . they’re going to run out of people to work,” says the economist, pointing to skills and productivity as a way for families to regain the purchasing power they’ve lost over the years – and with particular force in a 2022 of galloping inflation.
Otherwise, the loss of purchasing power will continue to widen the inequality gap between the living conditions of the Portuguese and the rest of Europe. And to those looking from within and always below, the forest will never cease to look bleak.