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Portugal Economic Forecast

Portugal Economic Outlook

According to a flash estimate, quarter-on-quarter growth decelerated to 0.2% in Q4. Domestic demand slowed due to multi-decade-high inflation and rising interest rates. Moreover, the external sector continued to weigh on growth amid an increasingly challenging international environment. Turning to Q1 2023, activity is set to remain muted. Survey data for consumers and firms pointed to sustained pessimism in January, while the execution of investment related to EU recovery fund slowed in the same month. In other news, in mid-February, the government announced a set of measures to tackle the housing crisis, with funding of at least EUR 900 million. Notably, it will end the “Golden Visa” program, which offered EU passports in exchange for investment in the country. This could have a negative effect on foreign inflows of capital.

Portugal Inflation

Harmonized inflation came in at 8.5% in January, down from November’s 9.8% due to subsidies providing some relief from energy price pressures. Inflation is seen decelerating further in the coming months on higher interest rates and easing commodity prices.

Portugal Economic Data

2017 2018 2019 2020 2021
Population (million) 10.3 10.3 10.3 10.3 10.3
GDP (EUR bn) 196 205 214 201 215
GDP per capita (EUR) 19 19 20 19 20
Economic Growth (Nominal GDP, ann. var. %) 5.1 4.7 4.5 -6.7 5.6
Economic Growth (GDP, ann. var. %) 3.5 2.8 2.7 -8.3 5.5
Domestic Demand (ann. var. %) 3.3 3.2 3.1 -5.4 5.6
Private Consumption (ann. var. %) 2.1 2.7 3.4 -7.1 4.7
Government Consumption (ann. var. %) 0.2 0.6 2.1 0.3 4.6
Fixed Investment (ann. var. %) 11.5 6.2 5.4 -2.2 8.7
Exports (G&S, ann. var. %) 8.4 4.1 4.1 -18.6 13.4
Imports (G&S, ann. var. %) 8.1 5.0 4.9 -11.8 13.2
Industrial Production (ann. var. %) 3.9 0.1 -2.3 -7.0 3.0
Retail Sales (ann. var. %) 4.1 4.1 4.4 -3.1 4.5
Disposable Income (ann. var. %) 3.1 4.3 4.6 -1.1 3.6
Unemployment (% of active population, aop) 9.2 7.2 6.6 7.0 6.6
Fiscal Balance (% of GDP) -3.0 -0.3 0.1 -5.8 -2.9
Public Debt (% of GDP) 126.1 121.5 116.6 134.9 125.5
Inflation (HICP, ann. var. %, eop) 1.6 0.6 0.4 -0.3 2.8
Inflation (HICP, ann. var. %, aop) 1.6 1.2 0.3 -0.1 0.9
Inflation (PPI, ann. var. %, aop) 3.3 2.7 0.0 -4.2 8.9
ECB Refinancing Rate (%, eop) 0.00 0.00 0.00 0.00 0.00
10-Year Bond Yield (%, eop) 1.94 1.72 0.45 0.06 0.49
PSI-20 (var. %, eop) 15.2 -12.2 10.2 -6.1 13.7
Exchange Rate (USD per EUR, eop) 1.2 1.1 1.1 1.2 1.1
Exchange Rate (USD per EUR, aop) 1.1 1.2 1.1 1.1 1.2
Current Account Balance (EUR bn) 3 1 1 -2 -2
Current Account Balance (% of GDP) 1.3 0.6 0.4 -1.0 -0.8
Merchandise Trade Balance (EUR bn) -15 -18 -20 -14 -20
Foreign Direct Investment (EUR bn) 6 6 11 6 7

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