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June 27, 2019 | Portugal’s Miracle?

Martin Armstrong

Martin Arthur Armstrong is the former chairman of Princeton Economics International Ltd. He is best known for his economic predictions based on the Economic Confidence Model, which he developed.

The Portuguese economy was bailed out by the European Union eight years ago. It is now booming, also in part for its aggressive attraction of courting foreign investors. If you want to live in Portugal long-term or permanently, you will need to apply for Portuguese citizenship or Portuguese permanent residency. Portuguese permanent residency is available after five years of residence, while Portuguese citizenship is available after six years, or three years if claiming Portuguese citizenship by marriage. Both Portuguese citizenship and permanent residency allows you to remain in Portugal indefinitely and access similar benefits, although there are some differences between the two. While residents can stay in Portugal indefinitely by continually renewing their permanent residency, there are certain added Portuguese citizenship benefits to entice foreigners to take on the Portuguese citizenship application process.

This movement has been a major factor behind Portugal enjoying its highest economic growth in nearly two decades, with the major trend fueled by record tourism, an upswing in the housing market from foreign investors, a growing tech sector, and strong exports. Private investment has returned to 2009 levels, helped by foreign investors including Chinese companies who have focused on Portugal.

But for every glitzy new hotel and fancy restaurant in Lisbon, there is growing concern that the infrastructure is aging. This was illustrated by the locomotive that fell apart in late February, which was rented from Spain as a stopgap measure. There has been a lack of public investment which is beginning to become obvious. Its total debt is close to 120% GDP, which is one of Europe’s highest. The ruling socialists have limited room to finance their dreams under the EU rules and at the current artificially low interest rates maintained by the ECB. The budget deficit of the 2010 era of 11% of GDP has been reduced by attracting foreign capital and cutting spending on public infrastructure. The problem that Portugal faces is that its success of late has been constructed on the immediate results, not long-term.

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June 27th, 2019

Posted In: Armstrong Economics

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