Portugal GDP Q1 2021


Portugal: GDP records sharpest contraction since Q2 2020 in the first quarter

May 31, 2021

A second estimate confirmed that GDP fell 3.3% on a seasonally-adjusted quarter-on-quarter basis in the first quarter, contrasting the 0.2% expansion logged in the fourth quarter of last year. Q1's reading marked the sharpest contraction since Q2 2020.

Household spending dropped 4.5% in Q1, marking the steepest decline since Q2 2020 (Q4 2020: -0.4% s.a. qoq), due to the tight lockdown that lasted for most of the quarter. Moreover, public consumption contracted 1.1% (Q4 2020: +0.7% s.a. qoq). Meanwhile, a stronger construction subsector and higher investment in machinery and equipment pushed fixed investment growth up to 3.1% in Q1, above the 1.0% increase in the prior quarter.

Exports of goods and services fell 2.5% on a seasonally-adjusted quarterly basis in the first quarter, which contrasted the fourth quarter's 6.2% expansion. Despite higher goods exports, tougher restrictions at home and abroad hampered foreign demand for domestic services—chiefly tourism. In addition, imports of goods and services fell 0.1% in Q1 (Q4 2020: +6.5% s.a. qoq), marking the worst reading since Q2 2020. In a similar pattern to exports, goods imports rose, while imports of services fell. All in all, the contribution of the external sector grew more negative in Q1.

On an annual basis, GDP contracted 5.4% in Q1, up from the previous quarter's 6.1% contraction.

Moving forward to the second quarter, the lifting of the lockdown in April should be bolstering activity. Notably, the Central Bank’s daily economic activity indicator is upbeat so far in the quarter.

On the outlook for Q2, Ricardo Amaro, senior economist at Oxford Economics, said:

“We see signs that growth momentum has been improving since early Q2, with survey-based indicators recording widespread gains in April. We expect sentiment and activity trends to improve further in the months ahead as the economy proceeds with its reopening journey, supported by encouraging news flow on coronavirus containment and vaccine rollouts.”

On the outlook for the year as a whole, analysts at the EIU added:

“The [Q1] contraction was worse than The Economist Intelligence Unit was expecting, and we have revised our growth forecast for 2021 to 3.8%, compared with 4.3% previously. However, owing to the generosity of government support programmes, the impact of the crisis on disposable incomes has been contained, and this will boost consumer demand once restrictions are fully lifted. Several indicators point towards recovering consumption patterns.”

FocusEconomics Consensus Forecast panelists see GDP climbing 3.8% in 2021, which is unchanged from last month’s forecast. In 2022 the economy is seen growing 4.8%.

Author:, Junior Economist

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Portugal GDP Chart

Portugal GDP Q1  2021 1

Note: Quarter-on-quarter and year-on-year changes in GDP in %.
Source: Statistics Portugal (INE) and FocusEconomics calculations.

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