Portugal Economic Forecast

Portugal Economic Outlook

May 3, 2022

The economy gained steam in Q1, growing at a faster pace in sequential terms than in Q4. An acceleration in household spending was behind the rosier print. Moving to Q2, spiking energy prices led the government to adopt a non-refundable subsidy for companies with significant gas needs which will cover 30% of the increase in their bills. Moreover, the European Commission recently greenlighted a cap on natural gas prices which should reduce energy bills for consumers and firms but will also feed into regulatory uncertainty and distort markets. A cut to the fuel tax in April should further support activity but will widen the fiscal deficit. In politics, on 31 March the new government headed by Prime Minister Antonio Costa was sworn into office. The government submitted its revised budget in April, which includes more than EUR 1.2 billion in tax cuts and subsidies for households and firms.

Portugal Economic Growth

GDP growth should remain healthy this year. Household spending is expected to expand solidly, supported by lower income taxes, while a recovering tourism industry and incoming EU funds further underpin the economy. However, risks are skewed to the downside as Russia’s invasion of Ukraine could further stoke inflation and disrupt supply chains. FocusEconomics Consensus Forecast panelists see GDP growing 4.6% in 2022, which is down 0.3 percentage points from the previous month’s forecast. For 2023, the panel sees GDP climbing 2.5%.

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Portugal Facts

Value Change Date
Bond Yield0.45-1.90 %Jan 01
Exchange Rate1.120.65 %Dec 31

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