In 2012 Portugal seemed destined for discontent as IMF-engineered austerity took its toll, but the country has experienced a change of fortune over the past four years, showing positive signs of increased autonomy, and has showcased dynamic growth and budgetary health. Portugal now stands out as an example of stability in Europe, and its fiscal turnaround has garnered global recognition. After embarking on deep austerity measures, Portugal was forced to take a three-year 78-billion- euro bailout from the European Union and the International Monetary Fund in 2011 after the country was battered by the Eurozone debt crisis. This, alongside the fallout from the strict austerity policies, ignited its deepest recession since the transition to democracy in the 1970s, and a major wave of emigration followed.
However, fast forward a few years and Portugal had become one of the best performing economies in Western Europe, growing every year since 2015. The country reversed cuts to wages, pensions and social security, while simultaneously encouraging economic growth by offering corporate incentives and backing business. The dark, depressing monetary period of 2012 became a distant memory when, in 2017, Portugal registered a GDP growth rate of 2.7%, the country’s highest since the beginning of the new millennium. Leaving the EU’s “excessive deficit procedure,” which it had been in since 2009, Portugal’s unemployment rate fell from approximately 13% to 6% between the years 2015 – 2019.
Choosing an alternative to austerity, Portugal focused on higher growth and better opportunities, and came out on top. The centre-left politician António Costa and his government took Portugals fiscal deficit to 0.5% of GDP last year – a notable decrease from the country's 11% deficit in 2011. Costa’s determination managed to raise the minimum wage, lower unemployment, almost eliminate the budget deficit and maintain good relations with Brussels. Policies that support modest public spending with high taxes, combined with increased political and financial stability have helped the country become a more attractive destination for foreign direct investment.
However, in spite of the recent increased economic strength and vitality, there is still more work to do as the lack of young talent provides a long-term challenge to the government. A shortage of lucrative professions fail to convince almost two million Portuguese to return, and last year 3.6 billion euros was sent home from citizens living abroad. Costa has been recently re-elected having presided over an economic turnaround that has restored confidence in Portugal. The Socialist government intends to further increase the monthly minimum wage to 635 euros come January 1 st , with the overall goal of a 750 euro minimum wage by 2023. In a proposal released earlier this month, the government stated that a rise in wages was only the first step to achieving greater economic prosperity, stating “this trajectory contributes to the recovery of income and the improvement of social cohesion levels.
The increase has coincided with significant dynamism in the economy and the labour market”. Other promises include ensuring that 10,000 more homes become available at affordable rents and the economy grows above the European average for the next ten years. As a small county, Portugal remains vulnerable to disagreements within the EU or complications that arise internationally regarding trade wars, but amid a backdrop of European chaos, the country emerges as a beacon for foreign investors. Quality of life, social stability and infrastructure fuel Portugal’s appeal, underpinning the country’s resilience to external pressures. If the improvements and headways in the last four years are anything to go by, there is much to hope for in the next four.