Portugal: Growth accelerates slightly in the first quarter
The economy gained traction in the first quarter of the year, according to preliminary estimates released by the National Statistical Institute (INE) on 15 May. GDP growth in quarter-on-quarter, seasonally-adjusted terms rose to 0.5%, up from 0.4% in Q4 2018. Economic growth, on an annual basis, also improved marginally in Q1 2019, inching up to 1.8% from 1.7% in the final quarter of last year.
While a detailed breakdown of the result has yet to be released, the flash estimate indicated that domestic demand was in the driver’s seat, making a bigger contribution to GDP growth than in the fourth quarter of last year. A surge in imports in the quarter, mainly of capital goods, suggests that fixed investment growth shot up. Improvements on the domestic front more than compensated for a downturn in the external sector, which dragged more severely on growth, as exports expanded at a relatively subdued pace compared to imports. Consequently, the current account deficit widened more than three-fold in the quarter from the same period last year.
Looking ahead, the economy is set to lose ground this year on a slowdown in exports amid an adverse global backdrop and a loss of steam in tourism activity. Weaker domestic demand dynamics also means a softer expansion going forward. While EU structural funds will aid the rollout of several delayed investment projects, less favorable economic conditions are seen weighing on fixed investment and household consumption.