The Portuguese president, Anibal Cavaco Silva has highlighted the importance of the tourism industry to the country. He recently met with UNTWO secretary general, Taleb Rifai, and the president and CEO of the World Travel and Tourism Council, David Scowsill. Tourism in Portugal directly accounts for 9% of the country’s GDP, and is responsible for employing around 8% of the workforce.
The meeting served to highlight the importance of this sector, and especially the effects it can have within other sectors of the economy. With this in mind the direct and indirect influence of tourism in Portugal is expected to account for 15% of the country’s GDP, and to directly and indirectly support 18% of the workforce this year.
The Portuguese tourism industry hasn’t been immune to the effects of the euro crisis, as during the first nine months of this year the revenue from this sector dropped by around 2%, even though there was a 3% increase in the number of visitors to the country. More than 6.2 million foreigners visited Portugal during the first nine months of this year, but perhaps not surprisingly there were fewer Portuguese travellers.
However last year saw record numbers of people visit the country and revenue from the hotels increased to reach nearly €2 billion, the highest level since 2008. Even though Portugal is facing something of a crisis at the moment, it is still an extremely popular holiday destination and buy to let property is perennially popular, especially in the coastal resorts that benefit from a temperate climate year-round.
The Portuguese prime minister, Pedro Passos Coelho recently announced a fresh round of austerity measures, as he feels they are necessary to ensure the country is able to meet its targets in return for receiving a €78 billion bailout from the IMF and European Union.
Next year’s budget will include an increase in social security contributions from 11% to 18% for all workers, and this equates to roughly one month salary. Even though the Prime Minister feels the country has made a good start in attacking the problems, he has been at pains to point out they haven’t yet been conquered.
This move is hardly likely to be popular amongst the Portuguese who have already seen across-the-board tax increases combined with spending cuts since the country was forced to seek a bailout last year.
In addition the Prime Minister is cutting the Social Security contribution of companies from 23.75% to 18% in the hope this will boost employment. Portugal will miss its budget deficit goals for this year, and economists think this is due to the government underestimating the depth of the recession that has led to lower tax revenues.
In July a court ruling prohibited a cut in salary benefits for public sector workers, making next year’s budget goals more difficult to meet. The increase in social security contributions is partly to make up for the shortfall due to that decision.
The opposition has urged the government not to adopt any further austerity measures, especially as the economy is expected to contract by more than 3% in 2012. However Portuguese banks’ borrowing from the European Central bank fell by 3.5% in August, and now stands at €54.9 billion.