State of the Nation: Brussels’ good student remains problematic

The Government will enter its first State of the Nation debate as the helmsman of an economy that, for now, is being praised. The International Monetary Fund, which has already had the capacity to intervene directly in the country’s direction, already highlighted, in July, the “remarkable recovery in the face of the successive shocks that have affected global economies since the pandemic”. The European Commission, which continues to oversee the economic future of Europe’s westernmost country from Brussels, highlighted the country’s “remarkable economic performance” while removing Portugal from the list of countries with macroeconomic imbalances, which it had been on since 2014.

In the post-pandemic period, and after a notable decline, the Portuguese economy grew above the European average, driven by the dynamism of exports (particularly tourism). More recently, private consumption has gained momentum and the Portuguese are spending more. After the strong impact of inflation, with a particular impact on energy and food, some purchasing power has recovered, on average. Employment is at an all-time high. Economic activity, albeit to a lesser extent, remains dynamic.

However, there are still many weaknesses that are difficult to overcome in an increasingly difficult international context. The economy continues to grow below its potential, that is, below what it could grow if available resources were being used. Public investment has dwindled in recent years, with an impact on public services and infrastructure; and the implementation of European funds from the Recovery and Resilience Plan (RRP), seen as a remedy for this state of affairs, continues to be a difficult task. Wages continue to be among the lowest in the European Union. Inflation, despite slowing down, remains above the desired level, with a clear impact on prices. Housing prices, in turn, continue to rise, almost indifferent to “squeezing” interest rates, and make life impossible for many. The cost of living continues to rise in Portugal.