Victor Rivera

Wed, Jan 30

Mind the Politics - Portugal: When Growth Meets the Government’s 2030 Strategy


It’s easy to become pessimistic if one only follows the major political news, but as investors, one must see further and look for value, perhaps where governments have mastered their job at becoming pro-business by implementing policies that benefit its country and generates growth to improve the lives of its citizens.

Portugal seems to be mastering its job, after the big impact of its economic stagnation based on two recessions in 2002-2003 and 2008-2009, with the latest one lasting until 2013 after hitting the lowest point of GDP growth -4% in 2012.


2030 Investment Program

The Portuguese government started 2019 with a 2030 investment program strategy to tackle the next decade of structural infrastructure developments in the country in order to support its economic growth with 3 strategic objectives:

1.  Strengthening the connection between its territories, by investing in trains, highways, airports, ports and implementing the Bus Rapid Transit System.

2.  Competitiveness and innovation, by improving the efficiency and busting production.

3. Sustainability by promoting investment in environmental projects in waste, water among others, and acting towards the decarbonisation of the economy and the energy transition towards green energies.

This strategy aims to invest €21,905 million in total amongst 72 projects predominantly focused on transportation and energy, accounting for 81% in just these two objectives alone.

Chart 1 – Portuguese 2030 Strategy total investment and programs by Objectives
Data Source: National Investment Program 2030 – Portuguese Government

However, building and implementing infrastructure will not be the only part of the strategy but also innovation and green energies will take part, for example, mobility and electric public transportation will be developed in cities supporting the long-term trend of low rural population which it has reached 35.98% in 2016.  This will be a big change if we take into account that when Portugal first entered the European Union in 1986, the majority of its population was located in rural areas.

Also railroad developments will take place in order to foster production and lower logistic costs by increasing the capacity of its current infrastructure, as well as its speed, more importantly, liberating and digitizing logistics in terminals.

Among others, the expansion of the total capacity of its airports was something certainly needed due to the increase of tourists in double digits growth and its contribution to 10% of the total GDP of the country.

Finally, green energies is a strong bet, the country will strengthen and expand its current grid, and will promote the investment in renewable energies to increase its production of electricity, among other measures. In this regard closed to €5.000 million are aimed to be invested from private sources, which something to be highlighted is the big bet for Ocean Renewable Energies with a total budget of €1.050 million.


Portugal Based on a Transformational Leadership

Portugal among the EU countries ranks 19th biggest by GDP, 16th by population and the 18th by size or area, when it joined the EU in 1998, it grow in average close to 4% year over year until the year 2003 when a significant economic crisis took place, followed by the global economic crisis in 2010 to 2013, in the meantime, Portugal faced a roller-coaster managing its fiscal deficit and meeting the European guidelines of the stability and growth pact, facing low growth when the guidelines were not achieved (in 2005 GDP was 0.8% and budget deficit 6%) and higher growth when meeting them (in 2007 GDP was 2.4% and budget deficit 2.6%, below the 3% level recommended by the EU).

This roller-coaster ended in 2011 when the government officially request its bailout, followed by an austerity plan, which combined with the global economic downturn produced an increase of the unemployment rate from 9% in 2010 to above 17% in 2013, and finally coming down to 6.7% in the third quarter of 2018.

Chart 2 – Portuguese Unemployment 2010-2017
Data Source: Trading Economics

Portugal seems to have learned its lesson and since 2011, it started to tighten its fiscal budget, and implementing economic policies that will generate growth and potential for growth in the long term, such as developing entrepreneurship, changing its tax structures benefiting the investment in the country by individuals and corporations and developing policies that allow investors to receive residence in its country.

Entrepreneurship started with the establishment of incubators and development its ecosystem allowing companies such as Mercedes Benz to open its first digital hub in Lisbon, followed by allowing individual investors of VC fund to receive a residence permit for 5 years.

Also, Portugal has been successful in changing its tax regimes to benefit investors and companies attracting high wages to the countries, as well as pensioners. It has attracted a total of €67.830 million in foreign direct investment in industries such as Energy, Banking and Insurance, Real Estate, Hospitality, among others. Specifically, foreign direct investment performed by individual investors that have requested a residency has reached €3.895 million by 30th of June 2018. All of this has helped the GDP per capita to change its down trend and achieve €21 thousand less than 10% below the levels reached in 2010-2011.

Chart 3 – Portugal GDP Per capita 2010-2017
Data Source:

The 2030 investment program tackles major infrastructure projects that big corporations and investment funds will be interested to bid for, but with certain projects such as green energies, the government aims to attract not only corporate and institutional investors, but also individuals, by modifying the “Golden Visa” residency program allowing investors of green energy related projects to obtain residency by investing €500.000.



In conclusion, due to a difficult time in 2011, Portugal is facing a transformation from a rural economy when it first joined the EU in 1986, to an industrialized, efficient and urban focused economy that fosters entrepreneurship and environmental initiatives with aim to increase the living standard of its residences.

Starting 2019 with a pro-business agenda, Portugal has launched a €21.905 million strategic investment program for the next decade with aim to attract direct foreign investments into the country.  According to the IMF, major challenges such as continuing fiscal discipline and continuing the reduction of its debt to GDP ratio still lies ahead.