A More Resilient and Robust Algarve Economy

An overlook at the 2021 and 2022 provisional Regional Accounts

The National Institute of Statistics (INE) released updated information on December 18, 2023, regarding Regional Accounts, providing definitive data for 2021 and provisional data for 2022. The “Números em Destaque” published by CCDR-Algarve this January offers a synthetic analysis of the regional economic performance based on key macroeconomic indicators from the Regional Accounts.

It must be emphasized that these numbers, including GDP per capita and real GDP growth rate, do not fully represent the socio-economic conditions of the territory and its population. A more accurate understanding requires cross-referencing with other indicators.

The Algarve’s economy showed recovery in 2021 despite pandemic effects, with a real GDP growth of 7.4%, surpassing the national average of 5.7%. In 2022, the Algarve’s GDP exceeded pre-pandemic levels, reaching 11.624 billion euros, reflecting a 17% year-on-year increase, well above the national rate of 6.8%. The region’s contribution to the national product strengthened, reaching 4.8%, the highest value since 1995.

The GDP per capita rose to 26.8 thousand euros, the second-highest in NUTS II, expanding the gap with the national average to 114%. In purchasing power parity terms, it represented 90% of the EU average, a significant increase from 79% in 2021.

The Gross Value Added (GVA) generated by the Algarve’s economy in 2022 reached 10.060 billion euros, with a nominal growth rate of approximately 21%, nearly double the national level of 12%.

Examining the breakdown of GVA by 10 economic sectors, it is observed that the “Wholesale and retail trade; repair of motor vehicles and motorcycles; transport and storage; accommodation and food service activities” contributed significantly, accounting for 70.4% of the increase compared to 2021, with a 39.5% share of the total regional GVA, up by 6.6 percentage points from 2021.

The sector including “Consulting, scientific, technical, and similar activities; administrative and support services” contributed 10.6% to the GVA growth, despite representing only 7.6% of the regional GVA.

In contrast, “Real estate activities” and “Public administration and defense; mandatory social security; education, human health, and social action,” the second and third most important sectors in terms of GVA volume, saw slight reductions in their shares to 16.3% and 15.8%, respectively.

In 2021, Household Gross Disposable Income (HGDI) in the Algarve increased by 8.4%, surpassing the national average of 5.2%. The HGDI per capita reached 17,766 euros, an 8.8% year-on-year increase, maintaining the region’s position with the highest HGDI per capita in NUTS II and a significant disparity compared to the national average of 14,465 euros.

Algarve’s Economic Renaissance: Diversification and Tech Acceleration

In addition to the presented economic data, it is crucial to highlight the significance of a diversified economy, especially in the context of the Algarve region. The notable performance across various economic sectors underscores the importance of not being overly reliant on a single vertical, such as tourism.

Diversification contributes to economic resilience, mitigating the impact of external shocks, as witnessed during the challenges posed by the pandemic.

The strong growth observed in sectors like “Wholesale and retail trade; repair of motor vehicles and motorcycles; transport and storage; accommodation and food service activities” indicates a broader economic base. Dependence on multiple sectors ensures that the region can withstand disruptions in any specific industry, fostering stability and sustained development.

Moreover, the contributions of sectors like “Consulting, scientific, technical, and similar activities; administrative and support services” reveal the growing importance of technology-related and service-oriented activities in the Algarve’s economic landscape.
This diversification is a positive trend, as it aligns with global shifts towards digitalization and technology-driven economies.

The acceleration of tech-related activities and the digitization of the economy, as suggested by the growth in certain sectors, not only enhances economic resilience but also positions the region for long-term competitiveness. Embracing innovation and technology-driven industries can create high-value jobs, attract investments, and foster sustainable economic development.

Therefore, the Algarve’s ability to diversify its economic activities, coupled with an emphasis on technology and digitization, reflects a strategic approach to building a robust and adaptable economy. This not only ensures the region’s ability to navigate uncertainties but also positions it for continued growth and prosperity in an evolving economic landscape.

The full report can be found here

By Jorge Cabaço

Member of Algarve Evolution Association, CMO of Dengun, Founder and CEO of SHARE Algarve, and Member of BPCC [British-Portuguese Chamber of Commerce]

 

*This post represents the author’s perspective and does not necessarily reflect the stance of Associação Algarve Evolution.*