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.
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.