As tourism flourishes and the economy shows signs of strong recovery, we speak to António Saraiva, President of the Confederation of Portuguese Business (CIP), about what brought Portugal to this point and what the future holds for this sea-bound nation.
What is behind the economic growth of the Portuguese economy in recent years?
Portugal was in excessive deficit and although it still faces challenges, with a high public debt, things have changed since 2015. After the last elections, with the rise of a leftist government, Portugal found an imaginative solution for its dire economic problems, by deploying an anti-austerity program. It was a bit frightening at first, from a business point of view, but what is true is that two and a half years later, all macroeconomic indicators look favourable. We also benefit from a fast growth in the tourism sector which greatly contributed to the economic growth we have seen in recent years. We have grown by 2.7% in 2017, slightly above the European average, we have left the excessive deficit and unemployment has been dropping in a spectacular way. In a way, the stars aligned to produce positive economic results. The problem is, is this sustainable?
Has the country made structural reforms to keep these indicators?
It did not, and the growth of 2.7% from last year will not hold in 2018. Forecasts already put it at 2.3%. If we continue like this than this tendency reversal will be short-lived. The two main engines of the Portuguese economy are investment and exports, and both of them show signs of slowing down, and to complicate the equation, imports are increasing. A lot needs to be done to sustain growth.
Can technological entrepreneurship be a solution for the country’s economic sustainability?
I don’t believe so. Events like the Web Summit for instance, have put Portugal under the radar of tech entrepreneurs. This helped to promote the creation of new businesses. However, these type of companies tend to be start-ups with very small teams. They are not a solution to develop the country in terms of its economic structure or of significant job creation. Not all of them will grow to be like Microsoft or Google. The real economic impact happens when a company like Mercedes opens a technological and engineering center here, bringing productive investment. Aeronautics and other sectors that can sustain economic growth, both in terms of employment prospects and the added value that this type of investment can bring, will also be fundamental for the country’s economic success. It is very sexy to have the Web Summit here and bring young entrepreneurs to Portugal to work in tech, but they are seeds that will bear fruit in the medium and long term, and we have to eat every day.
How do Portuguese labour laws compare with the country’s business promotion needs?
In comparison with other countries in the European Union, the Portuguese labour legislation compares fairly well. The one aspect in which Portugal compares poorly is in individual layoffs, which are almost completely forbidden by article 53 of the Constitution. On the other hand, collective layoffs are relatively facilitated. Individual layoffs aside, Portuguese labor laws are not an impediment to the development of economic activities. When asked about what restrains business growth, Portuguese businessmen will point at taxation, bureaucracy, costs of energy and telecommunications, and only then, some of them will mention labor laws. What really curbs business is taxation. That is the field in which we are continuously widening the gap between us and the European average, and in which revision is most needed.
What is necessary for the Portuguese entrepreneurs to thrive and contribute to lift the economy?
97% of Portuguese companies are micro and small companies that, due to their state of development, need partnerships, they need help, both in terms of capital and in tapping in to the global market. We need capital to develop our products and services, capital that is lacking in Portugal. We need joint ventures, financial partners and to put our products and services in more markets. Portugal has strategic advantages in Portuguese-speaking countries, particularly with African nations, and can position itself as an important gateway into Europe. Foreign companies here today have an opportunity, within the Portuguese business fabric, to close great deals.