Contrary to what the President of the Government of the Azores claims, there are troubling signs in the Azorean economy, which has been slowing for more than a year.
It is no coincidence that every political party, including those in the governing coalition, has warned the President of the Regional Government to address the rising cost of living in the forthcoming Plan and Budget, due for approval in November. They sense a storm approaching.
It is true that the economy has grown for 61 consecutive months. Yet growth stood at 3.6 percent in January 2023; by July of this year, it had dwindled to a paltry 0.4 percent, even with investment from the Recovery and Resilience Plan.
Three consecutive months of negative figures this winter would be enough to take us into recession.
The blunders committed in transportation and tourism are now making themselves felt throughout the economy, reaching every activity dependent on those sectors.
The cooperatives on São Jorge acknowledge that declining tourism is driving sales downward, leaving warehouses filled with cheese. The same is happening at the wine cooperative on Pico.
The pattern extends to meat and milk, as it does to other productive sectors.
One need only ask restaurant owners to learn that revenues, particularly this summer, were disastrous.
Here is a contemporary regional riddle: when was the last time overnight stays in the Azores declined in both July and August?
There is little memory of such a decline further back, but it occurred in 2011–2012, when the country faced a profound economic crisis, marked by a severe recession that led to a financial bailout. One need only consult the reliable statistics published by the Azores Regional Statistics Service.
Fifteen years later, we are repeating that decline in the two most important months for tourism, even without a national financial crisis. An unprecedented reversal!
The austerity and sweeping fiscal adjustment of those years continued to damage Azorean tourism in 2013–2014, when overnight stays fell only in July before returning to growth in August.
The approaching low season could prove devastating for the sector, with consequences throughout the regional economy. The new SATA/TAP oligopoly on routes from outside the archipelago—another retreat to the 1990s—is part of this picture. Suspicions of coordinated pricing hang over it, to the detriment of the entire Azorean economy, with the silent assent of governments both here and on the mainland. It is troubling that so many of this administration’s bungled decisions originate in the same Regional Secretariat, which wreaks havoc on everything it touches—as the latest fiasco involving public bus transportation on São Miguel has once again shown.
Added to this gathering “perfect storm,” which will deepen the crisis next year, is the anticipated rise in fuel prices in the coming months. It is already driving electricity prices upward from October 1—another display of insensitivity from a regulator slumbering in the comfortable offices of Lisbon.
Another blunder was the Socialist Party’s proposal, subsequently approved, to abolish the €600 ceiling on reimbursement under the social mobility subsidy. The airlines are grateful: they are inflating fares to stratospheric heights.
We all know that rising fuel and electricity prices set off a domino effect that runs through the price of everything, from transportation and food to services.
In an archipelago as vulnerable as ours, governments and regulators should exercise greater care. Instead, they prefer to fatten the oil companies and leave consumers to bear the consequences.
This has already been happening in recent months, with food inflation galloping ahead at rates between 3 and 6 percent, worsening the cost of living while benefiting the major retail chains.
The other unwelcome news is the rise in interest rates for mortgage borrowers, further feeding an already overfed banking cartel.
A study by the European Central Bank confirms that, in Portugal, rising mortgage costs translate into reduced household consumption, owing to the way Portuguese families take on debt to buy a home: they have no alternative.
Today, the share of income required to buy a home in Ponta Delgada stands at 38 percent, above what a CasaDirecta study considers “reasonable,” and on a par with major mainland municipalities such as Viana do Castelo, Leiria, Santarém, Beja, Viseu, and Vila Real.
It is hardly surprising, then, that five thousand applications were submitted for roughly one hundred homes offered by the Ponta Delgada City Council. That amounts to a line of fifty families knocking at the door of every house!
Faced with this prospect, what the Azores need now is that much-vaunted “robust economy,” capable of responding to the rising cost of living and the approaching crisis.
The national government and the Government of Madeira have already announced extraordinary measures to assist families and businesses. Here, meanwhile, we remain preoccupied with official festivities detached from the population, and with rising expenditure at the regional parliament, now reaching €19 million. Each member will cost €300,000!
It would be welcome if the government’s self-proclaimed “reforming drive” translated into greater, urgent attention to the Azorean economy.
Instead, we watch a region with empty coffers awaiting further external transfers and borrowing, while interest payments on its debt also soar.
Even revenues will plummet next year as the economy cools. Added to this will be the already announced loss of €53 million under the absurd rule allocating VAT revenue on a per capita basis, devised by the national political class and accepted by its submissive regional counterpart.
This sorrowful episode will enter the history of our fifty years of Autonomy: apart from the financial crisis of 2011 and the pandemic, we have never experienced a decline in summer tourism like this year’s.
Yet another dismal record for this coalition’s collection of failures.
Osvaldo Cabral is an emeritus journalist with over 40 years of experience covering the Azores. He was the director of RTP-A (the public television station) and the Diário dos Açores newspaper. He is a regular columnist for many newspapers throughout the Azpres and the Diaspora.
NOVIDADES will feature occasional opinion pieces from various leading thinkers and writers in the Azores, providing the diaspora and those interested in the current state of the Azores with insight into the diverse opinions on some of the archipelago’s key issues.