Ireland and Portugal – standing shoulder to shoulder in times of crisis
Irish Ambassador to Portugal, Ralph Victory says that despite the inevitable downturn, Covid-19 could bring business opportunities for the two countries in the online, medical, manufacturing and hospitality sectors and services during a webinar with the Ireland-Portugal Business Network (IPBN)
By Chris Graeme
Until March this year Ireland and Portugal had both been in a strong economic position. Portugal’s GDP was up 2.2% by the end of 2019 while Ireland enjoyed growth of 1.8% to December that year.
Portugal exports from Ireland stood at US$419 million (€376 million) in 2019 according to the United Nations Comtrade database on International trade while Ireland exports from Portugal were already worth €1Bn including tourism by last year according to Portugal’s external trade agency AICEP.
The main products were pharmaceutical, iron and steel, vehicles, electrical and electronic equipment, plastics, wood products, organic chemicals footwear and paper-based articles but tourism and hospitality sector products and services are also hugely important as Ireland is an important source of tourists.
Then came Covid-19 and despite almost total paralysis, both the governments and health authorities of Ireland and Portugal have reacted well to bringing an ongoing and challenging public health situation under control.
“I’ve been struck by how the Ireland-Portugal Business Network (IPBN) has continued to grow and develop, as well as the exchanges on how the network would have to change, develop and adapt further over the next year and beyond,” said Ireland’s Ambassador to Portugal Ralph Victory.
In Ireland negotiations are underway following a general election in February with the current government publishing a roadmap for reopening society and business to ease Covid-19 restrictions for Ireland’s economy and society in a five-phase approach to increase economic and social activity.
The ambassador said that in economic terms the challenges involved are “stark”. As outlined in the stability programme update published by the Irish Finance Minister Paschal Donohoe on 21 April, Ireland’s GDP is projected to fall 10.5% in 2020. Portugal’s economy is expected to contract between 9% and 15%.
Unemployment in Ireland is expected to reach 22%, while the government deficit is projected to be €23Bn or 7.4% of GDP. Ireland’s recovery in the second half of 2020 will hinge on successful containment of the virus.
The target for 2021 is to achieve 6% GDP and for unemployment to fall below 10% with economic activity reaching its pre-crisis level in 2022. “The journey will be difficult but Ireland faces it from a position of strength,” said Ambassador Victory.
“Our economy had been performing well throughout 2019 and the early months of 2020, both in terms of domestic economy and exports and all of this strengthens the Irish position in terms of the current challenges,” he added.
Maintaining this economic resilience is essential for the Irish economy and steps have been taken towards this including a €250 million restart fund, with up to €10,000 each for micro and small businesses and a three month waver for local taxation and a €2Bn Covid-19 stabilisation and recovery fund for medium and large enterprises.
There is also a further €2Bn credit guarantee scheme to support lending to SMEs repayable from three months to six years at below market interest rates. In addition, business tax has been warehoused for a period of 12 months in which time no debt enforcement actions will be taken by the Irish authorities and no interest charged.
Despite the differences between the two economies, there have been some similarities in the Covid area with Portugal being ahead regarding its timings plan for reopening. “The Portuguese economy, like Ireland’s, had been performing well before the pandemic with a range of measures adopted to support businesses and workers alike,” said Victory.
And continued, “Portugal has deservedly won international praise for its handling of the Covid-19 crisis, and we wish the Portuguese every success as they undertake their own reopening measures now that they have begun”.
Ralph Victory says that the two countries’ membership of the EU will be another key element in their economic recovery; measures which include a €540Bn package and instruments allowing EU governments to spend up to 2% of their GDP on emergency economic and healthcare measures which amounts to some €240Bn.
Another EU instrument allows for €200Bn of finance for companies, particularly SMEs, and a €100Bn employment insurance scheme.
The European Central Bank too has launched a temporary massive purchase plan for private and public sector securities with an overall budget of €750Bn.
The European Commission has put forward its proposal for a recovery fund which will have a combined investment of €1.85Tn to 2027 and is designed to kickstart Member State economies by sharing priorities and bolstering solidarity.
The EU’s importance as a trading bloc will be another vital ingredient to both countries’ recovery and future, and this has implications for Brexit. There are negotiations on a future partnership and the implantation of a protocol — both EU-UK and a UK-Ireland protocol on the future of Northern Ireland.
“Its fair to say that these negotiations haven’t achieved as much as Ireland and our EU partners would have wished” said Ralph Victory.
“Significant gaps remain between the two sides and further progress needs to be made by June when the two sides take stock. But the difficulties can be surmounted if there is the political will, realism and mutual respect,” added the ambassador.
He added that Ireland would continue to work with Portugal and EU partners to ensure that: “Our collective approach to these negotiations reflects our shared values and interests”.
Ireland-Portugal economic relationship
What will the Ireland-Portugal economic relationship look like? On the Irish side and through Enterprise Ireland, the embassy and partners are working hard to retain the existing export connections and prospects, while also looking to develop new ones. On the Portuguese side, the Portuguese export and overseas trade and investment bureau AICEP’s colleagues are doing likewise.
“Clearly we can expect that the overall economic downturn and public health related restrictions will effect consumer confidence for some time to come, particularly in the tourism and air transport sectors, with knock-on effects for supporting services.”
“At the same time, there may be new opportunities arising in areas such as medical research and devices and even online services and e-learning, manufacturing, hospitality and tourism as these sectors open,” he added.
Are these the opportunities that we can engage in together? If so, what are the best ways to go about doing that? How can we overcome the hurdles and challenges that lie in our way, while at the same time protecting the hard-won progress achieved so far?
“Clearly we want to see economic activity resuming as fully and as soon as possible, and as part of that air connectivity and transport connections are very important. It has to be done as the public health situation allows” said the ambassador.
In the case of Ireland, the reopening of the country is conditional on no new Covid-19 cases being imported but the plan is to reopen in a coordinated way as soon as public health considerations allow. “Unfortunately, we are looking at months rather than weeks”.
Embassy’s role in travel arrangements
“Our global advice is still to avoid all essential travel and it calls upon all of us to exercise judgement and responsibility. If a trip is absolutely necessary, that is understandable but people have to take all the necessary precautions and the requirements for 14-day self-isolate are in still place and the exceptions are very limited” says the ambassador.
Regarding the support to the Irish-Portugal Business Network from the Irish Department of Foreign Affairs, the Irish Ambassador to Portugal said it was unlikely that the Government would be expanding its budget for supporting business networks, but would aim to preserve as much funding as possible.