Portugal: Economy accelerates in Q4 2019
February 28, 2020
Detailed national accounts released on 28 February showed that the economy grew 0.7% in quarter-on-quarter, seasonally-adjusted terms in Q4 (Q3: +0.3% quarter-on-quarter), a notch above the preliminary estimate (0.6% qoq). Meanwhile, in annual terms, GDP growth accelerated to 2.2% in the final quarter of the year, up from Q3’s 1.9% expansion and boosting overall growth for 2019 to 2.2% (preliminary estimate: 2.0% year-on-year).
The external sector drove the overall uptick, with net exports contributing 1.7% to Q4’s reading (Q3: -1.1% qoq). Exports grew 4.2% in the quarter on strong goods outflows (Q3: -2.0% qoq), while imports growth halved to 0.3% (Q3: +0.6%). Robust capital inflows and solid growth in tourist arrivals helped the external sector weather tough trading conditions in the quarter.
In contrast, domestic demand contracted 1.0% in Q4 (Q3: +1.5% qoq), the sharpest decline in nearly seven years, thus curbing the upturn. Private consumption growth almost flatlined (Q4: +0.1% qoq; Q3: +1.7% qoq) amid still-pessimistic consumer sentiment and an uptick in inflation; government expenditure growth remained subdued (Q4: +0.2% qoq; Q3: +0.2% qoq) amid ongoing fiscal consolidation measures; and fixed investment contracted 5.7% after expanding 1.9% in Q3, weighing heavily on the overall reading.
Looking ahead, the economy is expected to lose some steam this year as fixed investment and export growth both moderate. However, industrial production is projected to rebound from 2019’s contraction, while continued gains in disposable income, subdued inflationary pressures and a tightening labor market should support private consumption.
Author: Stephen Vogado, Economist