Portugal: Economy grows at the best quarter-on-quarter rate since Q4 2016
Detailed national accounts figures, released by the Statistical Institute on 28 February, confirmed that the economy recorded its best performance since Q4 2016 in the final quarter of 2017: GDP grew 0.7% over the previous quarter, following a 0.5% quarter-on-quarter expansion in the third quarter.
A breakdown of the result showed that domestic demand grew at a substantially slower pace in Q4, rising a marginal 0.1% over the previous quarter (Q3: +0.9% quarter-on-quarter). Behind the moderation was largely a decline in the pace of expansion in private consumption (Q4: +0.3% qoq; Q3: +1.4% qoq). A contraction in investment by 0.4% quarter-on-quarter also dampened overall domestic demand (Q3: +0.2% qoq). The drop in investment was likely due to a slowdown in construction activity. The contribution of domestic demand to growth decreased from 1.0 percentage point in Q3 to 0.1 percentage points in Q4.
On the flip side, the external sector experienced a turnaround amid a stronger global economic terrain. Exports surged, growing 4.3% quarter-on-quarter (Q3: +0.5% qoq). Imports also picked up but expanded at a slower pace compared to exports (Q4: +2.9% qoq; Q3: +1.2% qoq). This translated into a 0.6 percentage-point contribution to growth by the external sector in the final quarter, contrasting a 0.3 percentage-point deduction in the third quarter.
Economic growth in annual terms was broadly unchanged: GDP expanded 2.4% year-on-year in Q4, marginally below Q3’s 2.5% annual growth. Notably, the economy accelerated at the fastest pace in 17 years in 2017, with full-year growth jumping to 2.7% (2016: +1.5%). Growth is set to remain strong this year on the back of a robust external sector, thriving tourist sector and the ongoing real estate boom.