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.
Portugal recently passed its latest bailout review, the sixth to take place. This reviewed its performance and made the country eligible for the next €2.5 billion loan in spite of concerns over continued economic risks within Portugal.
The week-long review found the country to be generally on the right path towards financing itself in debt markets by next year. The economy is still expected to contract by 1% in 2013, and by 3% this year, a prediction that remained unchanged from the previous review in September. Growth is expected to return in 2014, although it will be very modest at just 0.8%.
The next payment means Portugal will have received 87% out of a total of €78 billion bailout, and confidence in the country’s prospects is increasing. However there are concerns that Portugal could be affected by the recession in Spain as this is its largest export market.
Portugal is currently looking at cutting corporate taxes to make it more attractive to foreign investment, and planned spending cuts of €4 billion for 2013 into 2014 will be discussed at its next review.
In 2013 Portugal is due to implement a large increase in taxes as this is necessary for it to meet budget goals, but economists think this could result in the economy contracting much more than expected due to a decline in consumer confidence.
Portugal is also suffering from record unemployment, as levels have reached a high of 15.8%. Unemployment is expected to increase to reach 16.4% by next year, but the EU and IMF considered the reforms as being necessary for sustainable growth and job creation.
Portugal’s finance minister thinks it will take years to produce the country’s budget deficit. The World Bank and IMF are currently evaluating whether further spending cuts are necessary. Next year will see the implementation of additional spending cuts of €4 billion which are on top of next year’s budget. These cuts include the largest tax hikes in Portugal’s recent history.
These spending cuts weren’t part of the country’s original €78 billion bailout from the IMF and the European Union, but have been presented by the government as a way of guaranteeing the long-term sustainability of its austerity plan.
Vitor Gaspar, Portugal’s finance minister thinks it could take several decades to reduce Portugal’s debt to GDP ratio to below 60% and that there are still considerable risks to be overcome. The debt ratio level is expected to peak next year at 124%.
Portugal is currently facing its third year of recession, and although the public initially accepted the need for austerity measures during the first year of its bailout, protests have been increasing against the latest measures.
At the moment the government is anticipating a 3% decline in GDP this year, and a 1% decline next year, but many economists think this prediction is too optimistic. Lisbon has asked the World Bank and the IMF to help identify places where spending cuts can be made as they often give technical assistance to help countries reform their public finances.
It’s expected spending cuts will be identified during the current review of the economy which is due to begin at the end of November. These spending cuts could lead to more opposition as they might include the cuts to benefits including health and welfare.
Buyers looking to purchase holiday homes or homes to rent out in Portugal have traditionally chosen to purchase property in popular resorts along the coast. It’s easy to see why as Portugal has miles of beautiful sandy beaches, and the longest coastal National Park in Europe. However the country has much more to offer than sun and sand, and more buyers are choosing to look for properties away from the major resorts.
The scenery in Portugal can be absolutely beautiful, and it can offer rolling hills, enticing vineyards and Roman ruins, all of which are easily accessible. Property here presents excellent value, and compares very well with popular areas in other countries such as Provence or Tuscany. Many travellers are becoming more sophisticated over their demands for holiday destinations, and are constantly on the lookout for something offering something a little different combined with the familiarity of holidaying in Europe.
The number of overseas visitors is increasing, as in 2011, 14.1 million people visited Portugal, an increase of 3.8% compared to the year before as the country enjoyed record levels of tourism. Some 1.2 million were British, and this figure had increased by 12%. All in all, British tourists spent 6.3 million nights in Portugal, an increase of 14%.
This is just as well as the Portuguese economy receives around 10% of its revenue through tourism. A recent report in Reuters showed hotel revenues increased by 1.5% in July compared to a year earlier, and 915,000 foreigners visited the country, spending more nights in Portugal on average compared to a year ago.