The analysis of recent developments in the tourism sector in Portugal is the highlight of the institution’s December economic bulletin, and in which it downgrades its projections for growth in gross domestic product. It now sees GDP swelling 2.1 percent this year and 1.8 percent next year, against government forecasts of 2.3 percent this year and 2.2 percent next– before slowing further to 1.7 percent in 2020 and 1.6 percent in 2021.
According to the bank, Portugal has been outperforming the global economy and that of southern Europe, with instability in rival destinations explaining part of that, but also the “improvement of perceived quality of service offered” by the country.
Thus, the document argues, “there is evidence of structural changes in the sector that should continue to sustain a strong growth of the projection horizon” (2018-20), among them the diversification of the provenance of foreign tourists, the geographic distribution of tourists within Portugal, and signs of lower seasonality.
On the supply side, it highlights the “strong increase in the capacity of tourist accommodation and the presence of low-cost airlines in the Portuguese market”.
Thus, concludes the bank, although there are challenges, international comparison indicates scope “for an increase in tourism exports higher than the activity in the projection horizon, based on comparative advantages in this sector.”
Its projections thus point to continued relatively strong growth of tourism exports in the coming years, higher than projected for total exports of goods and services and for GDP, but lower than that recorded in 2017.
“The prospects for Portuguese tourism exports are anchored in the comparative advantages of the Portuguese economy in this sector and in the existing growth margin,” it states. “These positive perspectives are, however, subject to uncertainty and risk.”
On the other hand, tourism activity is highly sensitive to the global economic cycle, so a slowdown in global growth would impact this sector, and the recovery of activity in rival destinations may also negatively affect Portugal.
There are also, according to the BDP, risks of hostility on the part of the locals to be taken into account, which could lead to the deterioration of the tourist experience and the erosion of the natural, cultural and historical heritage.
“In this context, there remains a need for better distribution of non-resident tourism throughout the year and in regional terms,” it states. “The progress made in these areas should be further developed in order to avoid potential congestion effects in the high season or underutilisation of infrastructure in the low season, as well as the negative impact of seasonality on the labour market, where this contributes to increasing temporary and precarious employment.”
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