Lisbon, Portugal street

Portugal Economic Forecast

Portugal Economic Outlook

The economy shrank 0.2% in quarter-on-quarter terms in Q3, swinging from Q2’s 0.1% uptick. External demand detracted from the final reading, while domestic demand was growth-supportive. The temporary closure of a large Volkswagen factory in early September likely weighed on activity. Our panel expects GDP to return to sequential growth in the current quarter. Inflation fell considerably in October, which should support households’ purchasing power and spending. That said, economic sentiment fell in the same month. In politics, Prime Minister António Costa resigned in early November amid a corruption inquiry that reached his inner circle. Subsequently, President Rebelo de Sousa called a snap election for 10 March. Privatization plans and expatriate tax reform have, therefore, been suspended and political uncertainty has increased.

Portugal Inflation

Harmonized inflation fell to 3.2% in October from September’s 4.8%. The deceleration was driven by softer price pressures for food, housing and transportation. Inflation should average lower next year than in 2023, benefiting from a favorable base of comparison and the lagged effects of higher interest rates.

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 21,001 23,588
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 6.7 6.2
Fiscal Balance (% of GDP) -0.3 0.1 -5.8 -2.9 -0.3
Public Debt (% of GDP) 121.5 116.6 134.9 124.5 112.4
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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