Lisbon, Portugal street

Portugal Economic Forecast

Portugal Economic Outlook

A third release confirmed that the economy flatlined in quarter-on-quarter terms in Q2, having expanded in Q1. A sharper contraction in fixed investment amid higher interest rates and a downturn in exports due to a weaker global economic environment more than offset solid consumer spending. The economy likely returned to growth in Q3 amid improved consumer sentiment in July-August compared to Q2. That said, the temporary closure of a large Volkswagen factory and the slow absorption of EU funds will keep momentum subdued. Meanwhile, in early September, the government announced that it would extend the zero VAT rate on basic food items until year-end in a bid to support household purchasing power. Also in early September, S&P Global Ratings raised the country’s outlook from stable to positive, while keeping its rating at ‘BBB+’, citing a declining debt-to-GDP ratio and steady economic growth.

Portugal Inflation

Harmonized inflation rose to 5.3% in August from July’s 4.3%. The acceleration was driven by a softer decline in housing and utilities prices and a rebound in transportation inflation. Inflation should continue to fall this year and next, restrained by rising interest rates and weakening economic activity.

This chart displays Economic Growth (GDP, annual variation in %) for Portugal from 2013 to 2022.

Portugal Economic Data

2018 2019 2020 2021 2022
Population (million) 10.3 10.3 10.3 10.3 10.3
GDP (EUR bn) 205 214 201 216 242
GDP per capita (EUR) 19,952 20,841 19,474 20,992 23,547
Economic Growth (Nominal GDP, ann. var. %) 4.7 4.5 -6.5 7.7 12.2
Economic Growth (GDP, ann. var. %) 2.8 2.7 -8.3 5.7 6.8
Domestic Demand (ann. var. %) 3.2 3.1 -5.4 5.9 4.4
Private Consumption (ann. var. %) 2.7 3.4 -7.1 4.8 5.6
Government Consumption (ann. var. %) 0.6 2.1 0.3 4.5 1.4
Fixed Investment (ann. var. %) 6.2 5.4 -2.2 8.1 3.0
Exports (G&S, ann. var. %) 4.1 4.1 -18.6 12.3 17.4
Imports (G&S, ann. var. %) 5.0 4.9 -11.8 12.2 11.1
Industrial Production (ann. var. %) 0.1 -2.3 -7.0 3.0 0.3
Retail Sales (ann. var. %) 4.3 2.6 -2.5 8.1 -1.8
Disposable Income (ann. var. %) 4.3 4.6 -1.1 5.2 8.2
Unemployment (% of active population, aop) 7.2 6.6 7.0 6.6 6.0
Fiscal Balance (% of GDP) -0.3 0.1 -5.8 -2.9 -0.4
Public Debt (% of GDP) 121.5 116.6 134.9 125.4 113.9
Inflation (HICP, ann. var. %, eop) 0.6 0.4 -0.3 2.8 9.8
Inflation (HICP, ann. var. %, aop) 1.2 0.3 -0.1 0.9 8.1
Inflation (PPI, ann. var. %, aop) 2.7 0.0 -4.2 8.9 20.5
ECB Refinancing Rate (%, eop) 0.00 0.00 0.00 0.00 2.50
ECB Overnight Deposit Rate (%, eop) -0.40 -0.50 -0.50 -0.50 2.00
3-Month EURIBOR (%, eop) -0.31 -0.38 -0.55 -0.57 2.13
10-Year Bond Yield (%, eop) 1.72 0.45 0.06 0.49 3.60
PSI-20 (var. %, eop) -12.2 10.2 -6.1 13.7 2.8
Exchange Rate (USD per EUR, eop) 1.14 1.12 1.22 1.14 1.07
Exchange Rate (USD per EUR, aop) 1.18 1.12 1.14 1.18 1.05
Current Account Balance (EUR bn) 1.1 0.9 -2.1 -1.6 -2.8
Current Account Balance (% of GDP) 0.6 0.4 -1.0 -0.8 -1.1
Merchandise Trade Balance (EUR bn) -15.6 -16.3 -12.5 -16.0 -26.4
Foreign Direct Investment (EUR bn) 6.3 10.9 6.3 8.5 8.5

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