Portuguese GDP per capita, adjusted for purchasing power in each country, has been lagging behind the European average for more than two decades. The years 2022 and 2023, still under António Costa, saw a recovery, but even so, the indicator was below the peaks of the past: 2010 and 1999/2000. Economists are pessimistic about the coming years The standard of living of the Portuguese has improved in the last two years, when compared to European partners, but not only is it still far from the European average, but it has been consistently below the peak reached in 1999/2000, when António Guterres ruled the country. The evolution over the last 20 years of the Gross Domestic Product (GDP) per capita indicator, in purchasing power parities, and already discounting inflation, expresses the difficulties in converging the national economy with many of the European partners. Looking at the evolution of Portugal's Gross Domestic Product (GDP) per capita compared to the EU average of 27 countries, considering purchasing power parities, and discounting the effect of inflation (i.e. in real terms), it can be seen that the years 2022 and 2023 were years of recovery. Portugal even managed to climb a few places in the European table. However, this key indicator, which gives us a measure of a country's wealth creation and standard of living, is still below that recorded in 2010, the last year in which it was above 80%, and even further away from the peak of 85% recorded in 1999/2000. In those years, José Sócrates and António Guterres were at the helm of government. Despite the recovery seen in the last two years under António Costa's government, economists interviewed by Expresso are pessimistic about the future. Portugal converges with EU average GDP per capita expressed in purchasing power parity, with EU27=100 (in %) After the positive trajectory in the second half of the 1990s (the Eurostat data series begins in 1995), more than two decades followed to mark time in the national convergence process. Falling after the turn of the millennium and sinking in the dark years of the sovereign debt crisis and the troika consulate, as well as during the time of the covid-19 pandemic, although with some fluctuations, Portugal was overtaken in this indicator by several European countries, particularly from the former Eastern bloc, leaving it very poorly placed in the European picture. The weight of successive crises Luís Aguiar-Conraria, a professor at the School of Economics and Management at the University of Minho, begins by pointing out that "between 2000 and 2013 were very difficult years for Portugal. We had our own crisis, Durão Barroso's "tanga" crisis. We had the financial crisis, which hit everyone, but then we had a very long crisis that only affected a few countries (the sovereign debt crisis)." In addition, "the academic qualifications of the Portuguese population were much lower," recalls the professor from the University of Minho. As a result, "it's normal for us to have diverged", he stresses. "There are several factors that have overlapped over time," notes Miguel St. Aubyn, a professor at ISEG and a member of the Portuguese Public Finance Council (CFP). To begin with, "before 2000 we were further away" from the European average. "When we're closer, convergence is more difficult." The ISEG professor also highlights other aspects, such as the difficulties of Portuguese industry, particularly textiles, with increased Asian competition since the beginning of this century; the difficulties in attracting structuring foreign investment, due to our structural incapacities and the alternatives that exist elsewhere, for example in the EU economies of Central and Eastern Europe. In addition, "the global economic and financial crisis, and the sovereign debt crisis, which, as we know, has hit us hard," says Miguel St. Aubyn, who also highlights "the persistence of an economic structure which, despite some evolution, remains uncompetitive, bureaucratic, and based on generally low qualifications and economic and social inequalities, to which we have become accustomed and which we accept as natural." "From 2000 to 2013 were very difficult years for Portugal. We had our own crisis, Durão Barroso's "tanga" crisis. We had the financial crisis, which hit everyone, but then we had a very long crisis that only affected a few countries (the sovereign debt crisis)" Luís Aguiar-Conraria "We need to take into account "the persistence of an economic structure which, despite some evolution, remains uncompetitive, bureaucratic and based on generally low qualifications and economic and social inequalities, to which we have become accustomed and which we accept as natural" Underlines Miguel St. Aubyn Recovery may not last In spite of everything, after the strong fall associated with the covid-19 pandemic, when the Portuguese economy was one of the most affected due to the high weight of tourism, the years 2022 and 2023 saw a recovery in Portuguese GDP per capita (considering purchasing power parity, in relation to the EU average) reaching 81% of that average. Portugal even managed to climb a few places in the European ranking, namely ahead of several countries from the former Eastern bloc, which had overtaken us or were close to doing so. However, it remained at the bottom of the table of 27. In 2023, Portugal ranked 15th out of the 20 countries in the eurozone and 18th in the European Union, compared to 16th and 20th respectively in 2022. This in a table led by Luxembourg, with 237% of the EU average in 2023. Standard of living in Portugal recovers position in 2023, but remains poorly placed in the European Union GDP per capita in 2023 expressed in purchasing power parity, with EU27=100 (in %) This recent evolution was helped by "the reduction in excessive debt and the increase in the qualifications of the working population", says Luís Aguiar-Conraria, considering that "the conditions were in place for us to resume convergence". Not least because "the main shock in recent years, the price of energy, hit Portugal and Spain less hard", he adds. However, Portugal's GDP per capita, considering purchasing power parity, was still 81% below the European average in 2023, i.e. below the figure recorded in 2010, when José Sócrates' PS governed the country. In that year, this indicator reached 82% of the EU average (again in real terms, and with EU27=100). This was before the crash of the following years, when Sócrates had to ask for international help in the face of the impact of the sovereign debt crisis on Portugal, leading to the arrival of the Troika and dark years of austerity. Socrates ended up resigning, leading to early elections and the coming to power of the PSD/CDS-PP coalition led by Pedro Passos Coelho. In addition, Miguel St. Aubyn points out that "unfortunately, it wasn't the extraordinary performance of the Portuguese economy that largely explains" this recent convergence in living standards compared to the average of the 27. The economist points out that "in 2023 the largest economy in the European Union, Germany, had negative growth, and France had a mediocre performance". In other words, "it was this average that was greatly reduced in growth, pulled down by larger and richer economies that are struggling with structural adjustment issues, namely related to the impacts of the war in Ukraine, the energy and environmental transition, and the necessary changes in the industrial fabric and its orientation," points out Miguel St. Aubyn, noting that "the Portuguese economy, for the time being, has not been so directly affected" by these factors. "Unfortunately, it wasn't the extraordinary performance of the Portuguese economy that explained" this recent convergence in living standards compared to the European average. "In 2023, the European Union's largest economy, Germany, had negative growth, and France had a mediocre performance" recalls Miguel St. Aubyn The crisis of education and foreign markets That's why "I'm not optimistic", reveals Miguel St. Aubyn. And he stresses: "I don't foresee any significant convergence over the next few years". And for this economist, education is at the heart of the country's problems, despite the improvements in Portuguese qualifications in recent decades, especially among the younger generations. "Unfortunately, the average ranking of Portuguese adults in a recent OECD study on qualifications is anything but encouraging. We are at the bottom in literacy, numeracy and problem-solving. Our students' ranking in TIMMS, another international comparison, was poor, worse than in 2019. Our education system is failing, teachers and motivation are lacking," says Miguel St. Aubyn. In addition, "the difficulties of the German or French economy can only hurt us in the long term. Combined with the low levels of investment and the difficulties in attracting and retaining capital, I don't see any deeper reasons for sustained growth," argues Miguel St. Aubyn. That's why "I won't be surprised at all" if Portugal is overtaken in this indicator by more EU countries, he says. This opinion is shared by Pedro Brinca, a professor at Nova SBE. The economist notes that "the main driver of economic growth in 2023 was export growth", while "inflation was below the average for the eurozone and the European Union". These factors helped accelerate Portugal's convergence with the EU average. So, although he "believes" that this convergence process will "continue", Pedro Brinca warns that "the pace is clearly unsatisfactory". And he points out that the Bank of Portugal and Eurostat's longer-term forecasts (2026 and 2027) for the national economy are significantly below the 2% "and only marginally above the growth forecast for the eurozone and the EU as a whole". Thus, "despite being a much more favorable picture than that observed during the first two decades of this millennium, where we diverged rather than converged, Portugal stands out negatively when compared to other countries in the same income bracket," warns Pedro Brinca. That said, "the fact that we have public accounts and external accounts close to balance is a stability factor that gives some guarantee that at least this dynamic, of growth marginally above the eurozone average and consequently some convergence, will be maintained," says Pedro Brinca. Nevertheless, "it's worth remembering that two of the eurozone's main economies, Germany and France, are in a more negative phase of the cycle, so their recovery in the near future could change this scenario," he points out. Pedro Brinca adds: "In its income bracket, with the exception of Estonia, which is in crisis but whose forecasts point to substantially stronger growth than ours as early as 2025, Portugal is at the tail end of Europe in terms of long-term growth." "Although the country has managed to balance its public and external accounts, it is far from having carried out the other structural reforms it needs," argues Pedro Brinca, considering that "we have an economy with an excessively fragmented productive structure, with huge problems in the economic environment, which remain unresolved." All in all, "if the projections of the main institutions, such as the Bank of Portugal or Eurostat, are to be believed, being overtaken by more EU countries will be the most likely scenario" for Portugal in this GDP per capita indicator considering purchasing power parity, and expressed in terms of the EU 27 average, concludes Pedro Brinca. Portugal closer to the European average in consumption, but diverges in 2023 In addition to GDP per capita, Eurostat and INE calculate another indicator, individual consumption expenditure per capita, also considering purchasing power parity, and expressed in terms of the European Union average (EU27=100 throughout the series, which begins in 1995). An indicator which, according to INE, "is a more appropriate indicator to reflect the well-being of families". However, in this indicator there is a smaller range of differences between EU countries and Portugal is even closer to the EU average, standing at 85% in 2023, in a list once again led by Luxembourg with 136% of the EU27 average. Portugal closer to the European average in terms of consumption Individual Consumption Expenditure per capita expressed in purchasing power parity, with EU27=100 (in %) The problem is that Portugal, instead of converging with the European average in 2023, has diverged slightly in this indicator, according to INE and Eurostat data. The 85.% of the EU average in 2023 "was 0.3 percentage points lower than the previous year", INE reveals What's more, Portugal has dropped down the ranking of the 27 in this indicator. Portugal worsens its position in the EU in 2023 in terms of consumption Individual Consumption Expenditure per capita in 2023 expressed in purchasing power parity, with EU27=100 (in %) The data shows that Portugal will rank 151st in the eurozone in 2023, compared to 14th in 2022. And, as a whole of the 27, it ranked 18th, compared to 17th in 2022. The next few years will tell whether economists' fears are confirmed. GDP per capita PPP - what is this indicator?But why is GDP per capita, considering purchasing power parity and expressed in relation to the European average, so important? This indicator measures the wealth created by a country or region, weighted by the size of its population, so it gives us a measure of its standard of living. It also considers purchasing power parity, which allows us to make comparisons between countries and regions with very different costs of living. For example, between Portugal and Sweden. This makes it a key indicator for comparing countries and regions. In addition, measured as a percentage of the European Union average, always considering the current composition of 27 member states (EU 27=100), it allows us to analyze the trajectory of countries not only in relation to the average, but also among themselves. In other words, we can make a ranking and observe the changes over time. And the data shows how difficult Portuguese convergence has been within the EU for more than two decades. Sónia M. Lourenço Journalist Sónia M. Lourenço