Portugal branded an “economic miracle”

According to Expresso newspaper, US economist Paul Krugman, winner of the Nobel Prize in 2008, called Portugal “a kind of economic miracle” in an interview with newspaper Jornal de Negócios.

Expresso newspaper cites that Portugal has remained strong economically in recent years, doing better than most European countries, but this does not mean that problems are over and that it is free from risks.

Paul Krugman when referring to the risks of high interest rates, warned that “Portugal is not free” from the problem but that “it may be something that it can overcome”, as it has been growing well economically.

Stating that “For example, not even the United States is completely risk-free, but with strong economic growth there is a greater possibility of supporting high-interest rates on debt.”

On the other hand, Italy is at greater risk, as unlike Portugal (at the moment), “there is no special reason to think that Italy’s potential growth has increased much.” Therefore given the Portuguese performance in recent years, Krugman characterises the success as an “economic miracle.”

After the debt crisis, “Spain eventually achieved economic recovery but did so through years of high unemployment, internal devaluation and falling costs,” he explained. Portugal, on the other hand, “had a recovery without it.”

Krugman also shared with the newspaper, “I had long conversations with my friend Oliver Blanchard, the former chief economist of the International Monetary Fund, and he says, “I don’t understand how Portugal did so well.

How did they do that?”. His explanation is tourism and the growth of exports, but in general he indicated that “it’s a bit mysterious” how it all happened.

Regarding future problems, Krugman indicated that because Portugal is too connected to Europe it can be hit by it, because “Portugal has been doing very well, but Europe has not”.

In comparison with 2013 – the year in which he said that Portugal was a poor country with structural problems – Krugman indicates that there are “much fewer” problems today. “Portugal had a good period of economic success after the revolution and then a kind of stoppage for a few years, but that stoppage seems to have come to an end”, he stated in the interview.