Insights

By Stefano Fermani, Managing Director Italy & Group Chief Financial Officer
& Fabien Guerin, Managing Director Asia & Group Chief Commercial Officer

In our fourth instalment in Beaumont Group’s series focused on the economies of the PIGS countries we take a look at the impact of EU investment on growth, leadership and executive recruitment in Portugal.

Over the past decade, Portugal has undergone a remarkable economic transformation. After facing a severe financial crisis in the early 2010s, the country has bounced back with a steady surge in economic growth, thanks to a combination of strategic reforms, European Union (EU) investment, and an influx of innovation. Today, Portugal is considered one of the rising stars in Europe’s economic landscape.

Economic Revitalisation Through EU Investment

Portugal’s economic struggles in the wake of the 2008 global financial crisis were well-documented. A period of austerity measures followed, with the country receiving a bailout from the EU and the International Monetary Fund (IMF) in 2011. However, Portugal implemented structural reforms that laid the foundation for a more sustainable recovery.

EU investment has played a critical role in driving Portugal’s economic recovery. EU structural funds and recovery mechanisms have infused capital into crucial sectors in the country such as technology, infrastructure, green energy, and education. For instance, the Recovery and Resilience Plan (RRP) has allocated around €16.6 billion to Portugal, focusing on stimulating economic growth and accelerating digital and environmental growth businesses.

EU funding has spurred the growth of Portugal’s startup ecosystem, particularly in the tech sector. Cities like Lisbon and Porto are now recognized as innovation hubs, attracting international talent and investors. In addition, EU investment has fuelled modernisation of infrastructure, including the transport and energy sectors.

These advancements have contributed to stronger economic performance, reduced unemployment, and increased competitiveness in international markets. However, this transformation also necessitates new approaches to leadership, as businesses face more complex challenges on the global stage.

Sectors Driving Growth

Portugal’s economy is increasingly diverse, with several sectors standing out as key contributors to its growth.

• Tourism: Portugal’s tourism industry has seen exponential growth over the last decade, attracting millions of visitors annually. Popular destinations like Lisbon, Porto, and the Algarve region have helped boost the economy, with tourism now accounting for around 15% of GDP.
• Technology and Innovation: Portugal is becoming a tech haven, with numerous startups and multinational companies setting up operations in the country. The rise of tech incubators, accelerators, and innovation hubs has cemented Portugal’s reputation as a leading tech centre in Europe.
• Renewable Energy: As one of Europe’s leaders in renewable energy, Portugal has been making strides in wind, solar, and hydroelectric power. Approximately 60% of Portugal’s electricity comes from renewable sources, and the country is working to become carbon-neutral by 2050.
• Agriculture and Wine: Portugal’s rich agricultural landscape and world-renowned wine industry remain critical to its export economy. The country is a leading exporter of cork, olive oil, and high-quality wines.

These sectors have fueled Portugal’s resurgence, creating jobs and attracting foreign investment. And this growth has created a wealth of opportunities for businesses and investors. Among the country’s competitive advantages are its strategic location. Situated at the crossroads of Europe, Africa, and the Americas, Portugal is an ideal location for businesses seeking to expand their global reach.

Additionally, Portugal boasts a highly educated and multilingual workforce, particularly in industries such as technology, finance, and engineering. Combined with a business-friendly environment as a result of incentives initiated by the government that focuses on attracting foreign direct investment (FDI).

And lastly, but perhaps most important in attracting top talent, Portugal boasts a high quality of life. Portugal consistently ranks high for its quality of life, safety, healthcare, and cost of living, making it an attractive destination for expatriates, entrepreneurs, and digital nomads.

Rising Demand for “New” Leaders

As the economy grows and diversifies, Portugal’s business environment has become increasingly competitive, leading to a significant shift in the type of leadership required.

Rapid changes in technology, sustainability practices, and global market integration call for a new breed of executives equipped with specialized skills.

These new leaders must navigate a fast-paced and rapidly evolving market. They must be forward-thinking, capable of driving innovation, and open to adopting new technologies and practices. As sustainability initiatives become a cornerstone of European businesses as a result of EU funding objectives, executives must lead with a strong understanding of green practices and renewable energy solutions.

In addition, with increased foreign investment and trade, Portuguese companies are operating on a more international scale. Leaders must have experience with cross-border operations, international markets, and managing diverse teams. The ability to lead in a more digitized, sustainable, and global economy has become the new standard for executive leadership in Portugal.

Looking Ahead

Portugal’s prospects remain bright, particularly if the country continues to leverage its strengths in innovation, sustainability, and international collaboration. The government’s focus on digitalization, green energy, and fostering a business-friendly climate positions Portugal as an attractive destination for growth.

Yet, while Portugal’s economic outlook is positive, there are still challenges that could impact future growth. As a small, open economy, Portugal is vulnerable to external shocks such as global recessions, trade disruptions, and changes in tourism trends.

Similar to the challenges faced by many European countries, an aging population could strain public finances and the labour market in the long term. Additionally, despite recent improvements, Portugal’s public debt remains high, which could limit the government’s fiscal flexibility in the event of another economic downturn.

To address the challenges of an aging population and in line with Portugal’s efforts to foster a resilient and innovative economy, the government recently introduced a groundbreaking tax reform policy aimed at attracting and retaining young talent across all sectors of the economy. This initiative offers progressive tax exemptions for young professionals under 35, with income tax reductions extending up to ten years.

The goal is to provide financial relief and incentivize both local and foreign young professionals to build their careers in Portugal, fostering a more dynamic workforce. This reform also includes housing incentives, with state-backed guarantees on property loans to ease home ownership for young buyers. By reducing tax burdens and addressing housing affordability, Portugal not only supports its local talent but also positions itself as an attractive destination for foreign investors and professionals looking to establish long-term roots. These reforms are expected to further stimulate the country’s economic growth and drive interest in sectors such as technology and renewable energy, contributing to Portugal’s standing as an innovation hub in Europe.

Portugal’s economic surge is a testament to the country’s resilience, adaptability, and strategic use of EU investment. The nation has transformed itself into a dynamic economy that is not only recovering from past challenges but also embracing a future defined by innovation and sustainability. As businesses and investors look to capitalize on this growth, Portugal’s economic resurgence is set to continue, solidifying its place on the global economic stage.