Portugal: Economic growth slumps to an over three-year low in Q3 amid a challenging external backdrop
According to preliminary estimates released by the country’s Statistical Institute (INE) on 14 November, GDP grew 0.3% in quarter-on-quarter, seasonally-adjusted terms in the third quarter, half that of the second quarter’s 0.6% expansion and marking the weakest expansion since Q2 2016. Meanwhile, in annual terms, growth remained stable at Q2’s 1.9%.
While a detailed breakdown has yet to be released, the preliminary estimate indicated that the external sector dragged more severely on growth amid challenging external conditions. On the flip side, the flash estimate highlighted that domestic demand made a more positive contribution to the expansion. Increased imports of capital goods suggest fixed investment drove the upturn in domestic demand, although weaker retail sales growth in the quarter signals a loss of steam in private consumption.
Looking ahead, the economy is seen losing more momentum next year, owing to softer private consumption growth amid downbeat consumer confidence and a notable deceleration in fixed investment due to a reduced absorption of EU funds. A less supportive external environment is also projected to weigh on growth.