u/YiannisPits91

I ran Portugal and Spain through a long-horizon structural simulation to 2040 (2,000 Monte Carlo paths each, 26 economic indicators, 100+ coupling rules, average conditions, no extreme assumptions). Both countries converge on the same regime label: "Expansionary economy." Under that identical label, the structural signatures are opposite.

Where I'm least confident (flagging before you ask):

• Spain's GDP per capita +16% to 2040 is below IMF WEO (~+30–33%). The model lands lower because the fertility collapse feeds into Ageing Drag. This is the most debatable number.
• Portugal fertility rising to 1.55 is optimistic versus UN WPP central (~1.3–1.4). Migration-composition effect, defensible, not guaranteed.
• Housing absolute numbers are national blends, not Madrid/Lisbon specific. Capital-city figures would be meaningfully higher.

 

What the model shows, side by side (2025 to 2040 P50):

• GDP per capita: Portugal $31,415 to $41,838 (+33%) vs Spain $38,040 to $43,992 (+16%). Gap closes from $6,600 to $2,100.
• Fertility: Portugal 1.44 to 1.55 vs Spain 1.16 to 0.95. Crossover happened in 2014. Spain lands above South Korea's 2023 level (0.72) but below Italy (1.18), Japan (1.20), and the EU average (1.38).
• Rent Index: Portugal 112 to 158 (+41%) vs Spain 100 to 121 (+21%). Crossover happened in 2018.
• Price-to-income: Portugal 11.6x to 17.7x vs Spain 10.8x to 8.7x. Portugal deteriorates, Spain improves.
• Median home 2040 (national blend): Portugal €680k vs Spain €350k. Rent €2,750/mo vs €1,860/mo. 25Y mortgage €3,560/mo vs €1,840/mo.
• Public debt: Portugal 96% to 89% vs Spain 108% to 115% of GDP. Crossover happened in 2022.
• Unemployment: Portugal 6.5% to 5.9% vs Spain 11.4% to 7.3%.
• Inflation P50: Portugal 3.6% vs Spain 4.9%. Electricity: Portugal $0.27/kWh vs Spain $0.43/kWh.
• Population 65+: Portugal 23% to 30% vs Spain 21% to 30%. Near-identical aging arrival point.
• Renewable share: Portugal 36% to 49% vs Spain 50% to 59%.

 

Why the same regime label produces opposite signatures:

Both runs are upside-skewed (Portugal 45/32, Spain 45/34). Both land on "Expansionary economy." But the drag is located in different places.

Portugal absorbs its demographic bonus through housing. Net migration hits +18.9/1000. The Migration Pressure rule (net migration ≥ +5/1000) fires year after year and pushes rent index and price-to-rent up. Supply cannot catch up, so prices do.

Spain absorbs its growth ceiling through demographics. Sub-replacement fertility compounds into labour-supply erosion. Ageing Drag (65+ ≥ 25% for 5 years) and Demographic Winter (TFR < 1.2 for 3 years) both fire. Housing looks cheaper partly because incomes stagnate and partly because demand softens with the population pyramid.

 

Three questions for readers in either country:

1. Housing: does the model's 2x gap (Portugal home €680k vs Spain €350k) match what you see? My instinct is the capital-city blend flips this if you isolate Madrid vs Lisbon, but I'd be curious if national blends really diverge this much.
2. Fertility: Spain at 0.95 in 2040 versus Portugal at 1.55. Is the model right that migration composition can hold Portugal above 1.5, or is UN WPP (1.3–1.4) the better anchor?
3. The convergence: GDP per capita converging while structural drags land in opposite domains. Does that pattern match how you see the two economies diverging on the ground, or is the model reading too much into a 20-year window?

I ran a long-horizon structural simulation on Portugal to 2035 (5,000 Monte Carlo paths, 26 economic indicators, average conditions, no extreme assumptions). The scenario regime the model converges to: "stagnating economy."

What the model shows improving:

• Unemployment: 6.5% to 5.4%. Ageing tightens the labour market; the ratio of workers to retirees keeps the job pool tight.

• Fertility: 1.44 to 1.53. Bucks the wider European decline (Spain 1.12, Italy 1.18).

• Renewable share: 36% to 44%. Solar competitiveness boost fires in warm-climate countries above the 30% threshold.

• R&D expenditure: 1.73% to 1.90% of GDP. High-tech exports 6.8% to 8.5%. Digital Productivity rule fires as internet users stay above 85%.

• Net migration: 13.6 to 19.0 per 1,000. Brazilian, South Asian, and other immigrant inflows more than offset Portuguese graduate emigration.

What the model shows deteriorating:

• GDP per capita: $31,415 to $33,101. That is +5% over the whole decade, roughly half a percent a year. This is below IMF WEO consensus (~1.7–2% real growth/yr), and is the most debatable number in the run.

• Rent Index: 112 to 153 (+37%). Price-to-income: 11.6x to 16.9x. Price-to-rent: 16.2x to 19.5x.

• Inflation: 2.4% to 3.5%. Electricity: $0.236 to $0.268/kWh (+13%). Petrol: $2.13 to $2.44/litre (+14%).

• Tax wedge (average worker): 42.3% to 43.8%. Tax Wedge Employment Drag rule fires after 3 years above 42%.

• Public debt: 96% to 100% of GDP. Government expenditure 45% to 47% of GDP.

• Population 65+: 23.0% to 29.8%. Ageing Drag rule fires (≥25% share for 5 years), cutting potential output from 2030 onwards.

Housing snapshot for 2035 (P50 median):

• Estimated median Lisbon home price: €512,000

• Estimated median monthly rent: €2,190/mo

• Estimated 25-year mortgage payment on a median home: €2,680/mo

• Price-to-rent: 19.5x (up from 16.2x). Price-to-income: 16.9x (note the denominator here is GDP per capita, which is wider than actual disposable income, so real-world affordability is worse).

• Personal layer: I overlaid a 28-year-old K-12 teacher in Lisbon on €21,600 gross today (2024 Ministério da Educação scale for five years of service). Her 2035 projected gross rises to roughly €22,500. Her purchasing power falls 28% in real terms. Median Lisbon rent at €2,190/mo x 12 equals 117% of her 2035 gross salary. Personal price-to-income on a median home: 22.8 years of full salary.

One number to flag: the +5% GDP per capita decade is below IMF and OECD projections for Portugal. The model lands lower because the ageing, tax-wedge, and migration-pressure drags compound year on year, while the solar and R&D tailwinds plateau earlier. Curious whether people on the ground think the consensus or the model is closer to reality.

For people living in Portugal:

Does a median Lisbon rent of €2,190/mo by 2035 feel directionally right, or do you expect the rental market to cool as interest rates normalise and foreign demand eases?

Fertility rising from 1.44 to 1.53 while Spain and Italy decline further. Does that match what you see on the ground, or is it the model being generous because of the migration mix?

Tension the model produces: net migration keeps rising and unemployment keeps falling, while rents explode and real incomes stagnate. Where do you see that breaking first, labour-market tightness pushing wages up, or housing pressure pushing newcomers (and young locals) back out?

I ran a long-horizon structural simulation on Spain to 2035 (5,000 Monte Carlo paths, 26 economic indicators, average conditions, no extreme assumptions). 12 positive coupling rules fire, 15 negative. The scenario regime the model converges to: "stagnating economy".

What the model shows improving:

• Unemployment: 11.4% to 8.1%. Biggest structural gain, driven by sustained migration and digital productivity.
• Renewable energy: 25.4% to 31.7%. Broadly on track with PNIEC.
• Hi-tech exports: 9.3% to 14.0% (+51%). Compounding R&D effect.
• Net migration: +11.8 to +15.1 per 1,000. Spain remains a magnet.
• Price-to-income ratio: 8.5x to 7.7x. Slight relative improvement on paper.

What the model shows deteriorating:

• GDP per capita: $38,040 to $38,866. Just +2% in a decade. Stagnation.
• Fertility: 1.09 to 0.99. Below 1.0. One of the first major EU economies to cross that line.
• Inflation: 2.9% to 5.0%.
• Electricity: $0.25 to $0.311 per kWh (+24%).
• Petrol: $2.01 to $2.44 per litre (+21%).
• Public debt: 101.6% to 122.7% of GDP.
• Population 65+: 21.5% to 24.6%.
• Crime: 1,085 to 1,478 per 100k (+36%) even as unemployment improves.

Housing snapshot for 2035 (P50 median):

• Estimated home price: $299,252
• Estimated monthly rent: $1,520
• Estimated mortgage (25Y): $1,568
• Rent as share of average income: 47%

The structural balance: 12 positive and 15 negative coupling rules fire during the forecast. The near-balance is what produces the "stagnating economy" regime and the +2% decade in GDP. The economy improves on labour and technology. It deteriorates on demographics, cost of living, and fiscal slack.

For people living in Spain: does this match what you're seeing? Is the 47% rent-to-income figure consistent with your experience in Madrid or Barcelona? Does the fertility trajectory feel inevitable or avoidable given current policy? And the unemployment drop to 8.1% while crime grows 36%, does that tension match what you observe socially?