Portugal still depends a lot on European funds to grow

Study shows that without European Funds, the poorest regions in Portugal would have been even further away from the richest in the country

A research work conducted by Nova SBE, of which I was a part, evaluated the impact of the European Structural and Investment Funds (ESIF) in the different regions in Portugal and concluded that each euro invested generated an accumulated gross value added (GVA) of 5,8 .XNUMX euros after three years, and that the ESI Funds contributed decisively to the convergence of the regions with each other and in relation to the EU.

That is, our study shows that without the European Funds, the poorest regions in Portugal would have been even further away from the richest in the country and from the EU average in the period 2014-2020.

The European Structural and Investment Funds have contributed positively and significantly to the economic growth of the regions with impacts that last over time and remain in the regions. On average, the support paid allowed the regions to increase their Gross Value Added (GVA) by 3,4% per year.

For every euro paid by the European Union to a municipality, GVA increased in the same year by around 80 cents, growing gradually over time, reaching 2,45 euros after three years.

When comparing GVA originated by the ESIF to the economic growth observed in the regions, we see that the contribution of the ESIF to the growth of the regions between 2014 and 2019 was decisive.

For example, without the ESIFs, the Autonomous Region of the Azores would have seen its annual GDP growth halved, while the North, Center and Alentejo regions would have seen their growth reduced by a quarter.

Therefore, it is evident in the study that Portugal depends heavily on funds to grow and invest, both in the private and public sectors. In fact, Portugal has a public sector with one of the largest dependencies on the ESIF to carry out public investment (over 90% of public investment is financed by the ESIF).

To a large extent, this reflects the framework of austerity in government spending that has been achieved largely through public investment.

I therefore defend the adoption of strategies and reforms that help our country's economy to have sustained growth that is independent of the help of the ESIF, thus ensuring better living conditions in the long term in the Portuguese regions.

Namely, reforming the judiciary in order to speed it up, reducing the tax burden, and perhaps even more importantly increasing fiscal stability. Many businessmen indicate research that worse than the high tax burden, is the uncertainty of the tax burden as it constantly changes in our country. This uncertainty is a disincentive to investment and risk taking.


Author João Bernardo Duarte, researcher at the New University of Lisbon