Portugal experienced a strong recovery after the pandemic with a GDP growth of 5.5% in 2021, followed by 6.6% in 2022. In the light of high energy prices and global uncertainty, affecting the whole European Union, the economy is expected to slow down during the first quarter of 2023 as investment appetite will suffer and private consumption will be constrained. According to the views of the European Commission, the Portuguese Central Bank (Banco de Portugal) and the IMF, GDP growth for 2023 is expected to land between 0.7-1.5% and for 2024 between 1.7-2.5%.
The labour market, on the other hand, is experiencing a solid rebound and the first quarter of 2023 is expected to have record high job vacancies, as well as a relatively low unemployment rate (standing at 5.8% according to latest figures from INE, December 2022). The current challenge in the Portuguese labour market is the long-term unemployment rate that can be seen in other parts of Europe including Sweden. The mismatch between educational and/or vocational training required, as well as age, and the increasingly high requirements for advanced skills by the labour market has, according to Banco de Portugal, contributed significantly to this situation. The increased digitalization of the economy has created both immense opportunities for Portugal in becoming an important tech hub in Europe but has at the same time added labour market challenges for the government. As outlined in Portugal’s Recovery and Resilience Plan, €1.3 billion, will be dedicated to boost workers skills and qualifications.
However, Portugal is focusing forward with the mantra of being the hero instead of the victim. Every challenge will bring an opportunity, and in the case for Portugal, this cliché is highly relevant. Global supply chains have suffered immensely and continue to do so due to both the pandemic and global uncertainty. Portugal is already an important hub for regional sourcing within several sectors, such as textile, automotive and life science, and for some of the largest corporations in the world. At Business Sweden we are seeing an increased appetite from global Swedish companies to discuss their global supply chain strategies, as they have come to realize that increased regionalization of their production is extremely important to stay competitive and secure a sustainable business model. Portugal could therefore take advantage of how the wind has turned in the world of global sourcing and position itself as a key location for Swedish manufacturing companies. Positioning itself as a tech hub has been very beneficial and important, but these investments within the digital space are relatively mobile and easy to relocate. Investments into manufacturing would on the other hand create a more long-term boost for the Portuguese economy.
*This text is a part of the article series CLS Quarterly Outlooks. Once every quarter, CLS asks experts within three areas, sustainability, legal, and economy, to comment on main trends and insights within their respective sector. The CLS Quarterly Outlooks highlights the Portuguese market with the aim of giving an overview to the international business community. Do you have suggestions or want to contribute to the CLS Quarterly Outlooks please send an email to .