Portugal Economic Forecast

Portugal Economic Outlook

September 28, 2021

A second release confirmed that the economy rebounded in Q2, benefiting from a favorable base effect after the lifting of the tough restrictions in place during Q1. Turning to Q3, momentum has likely slowed due to a less favorable base effect and some headwinds: A localized resurgence in Covid-19 cases led to some tightening of restrictions in July. That said, the Bank of Portugal’s economic activity indicator has continued to clock annual growth throughout much of the quarter. In other news, the government recently announced a EUR 815 million buffer to mitigate the adverse effects of rising energy prices. Additionally, Moody’s upgraded Portugal’s credit rating to Baa2 from Baa3 with a stable outlook in September, citing incoming EU funds as the key driver. Lastly, the country held local elections on 26 September, with the outcome unlikely to affect economic policy.

Portugal Economic Growth

The economy is seen returning to its pre-pandemic levels in 2022, with growth accelerating after a mild recovery in 2021. Incoming EU funds will strengthen capital spending, while an improving labor market should support private consumption. Meanwhile, a swift inoculation campaign, with over 80% of people fully vaccinated, should limit the risk of further outbreaks ahead. FocusEconomics Consensus Forecast panelists see GDP growing 4.2% in 2021. For 2022, the panel sees GDP climbing 5.0%, which is up 0.1 percentage points from the previous month’s forecast.

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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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