Why Eastern countries are more than Portugal
by Carlos Pereira
Economist and vice-president of the PS parliamentary group
Despite our growth having been made in an extraordinary way in this century, turning four years and having a perspective of GDP growth, above the EU average, already followed this year, the economic agenda has dominated by another fact: Portugal was surpassed by four countries that joined the EU in 2004!
Those who gave the Portuguese success, often the tax burden as a decisive factor for the East to grow more. An analysis of the facts does not fully follow this conclusion. Let’s start by comparing the tax burden. The Eastern countries between 2008 and 2020 had an average tax burden of 33% and Portugal of 36%. The following countries that average tax 8% and Portugal can identify the following average tax burden of the last 33% and 30% and 30% and 34% of the tax burden of the last GDP Hungary and 34% below. Therefore, the first conclusion is that there was no fiscal shock that justifies the higher growth of these countries.
There are, in fact, other more decisive factors. Complementary proposal to tax issues and comparative of three other elements to understand what is at stake. Firstly, as ranked, secondly and finally with attention to public investment the weight of public life in GDP.
Portugal in relation to the higher countries of departure from the East is clarifying: Portugal in 2008 had 9.9% of the population with higher education. The countries Hungary that province, Portugal had, 26% in that province 25.5% respectively Lithuania 20.3% All better prepared than Portugal when it entered the EU which had rates close to 10%. Aware of this importance, the country has chosen education as a central theme and the results have appeared. Since 2016, there have been a lot of results. The resident population rate between 30 and 34 years old rose to 41% in 2021; the employed population with higher education increased by 13% between 2020 and 2021; the number of graduates grew for the fourth consecutive year, reaching an annual maximum of 86 thousand.
Another factor of comparison, and perhaps one of the most decisive for growth, is investment. There are very important in recent years, but very focused on the analysis of IP data since 2008 and comparatively important investment data, noting specifically the countries that paid attention to the Public (or paid attention). The average IP in Portugal between 2008 and 2020 was 2.7% of GDP. In Lithuania it was 3.9%; in Estonia it was 5.4%; in Hungary it was 4.6% and in Poland it was 4.6%. With this difference in investment capacity, it is natural that the GDP of the eastern countries accelerates more than that of Portugal. There are no miracles of public investment. There are countries with the capacity for robust public investment rates and there is Portugal that, with a very large share of debt in GDP, has no room to go further. Portugal has, on average over the last 13 years, a debt burden of 117% of GDP, which compares with an average of 36.4% in Lithuania or 9.1% in Estonia; 75.5% in Hungary or even 51.9% in Poland. In this context, Portugal’s public investment capacity relies heavily on European funds. This fact is enough to clarify the importance of the country having to count with certainty’! It’s not a whim, it’s a structural imperative to achieve higher rates of economic growth.