Portugal GDP Q4 2016


Portugal: Growth slows in Q4 due to higher imports

March 1, 2017

Although the Portuguese economy is gradually moving into a higher gear, a surge in imports due to higher energy prices and more dynamic domestic demand dragged on growth in Q4. Portugal’s GDP increased 0.6% in the fourth quarter of 2016 compared to the previous quarter, according to the National Statistics Institute (INE). This figure, which matched the result from the 14 February preliminary estimate, was down from the 0.9% growth recorded in the third quarter of 2016. On a year-on-year basis, growth reached 2.0% in Q4, up from 1.7% in Q3 and marking the fastest expansion since Q2 2010. Over last year as a whole, the economy expanded 1.4% (2015: +1.6%).

Cheap loans as a result of the European Central Bank’s accommodative monetary policy, falling unemployment and rising consumer confidence caused private consumption growth to accelerate to 1.2% (Q3: +0.4% quarter-on-quarter). Gross fixed investment expanded at the fastest pace since Q4 2010 (Q3: +0.2% qoq; Q4: +4.6% qoq) mainly due to healthy construction activity, while government spending rebounded timidly in Q4 (Q3: -0.6% qoq; Q4: +0.3% qoq).

On the external side of the economy, improving domestic demand and higher energy prices led imports of goods and services to expand a robust 4.5% (Q3: -0.1% qoq), while growth in exports steadied at 2.5%. As a result, the contribution from the external sector to overall growth fell from plus 1.2 percentage points in Q3 to minus 1.0 percentage point in Q4.

The Bank of Portugal expects the economy to expand 1.4% this year, followed by 1.5% in 2018. FocusEconomics Consensus Forecast panelists expect GDP to expand 1.5% in 2017, which is up 0.1 percentage points from last month’s projection. For 2018, the panel sees the economy growing 1.4%.

Author: Ricard Torné, Lead Economist

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Portugal GDP Chart

Portugal GDP Q4 2016 1

Note: Year-on-year and annual average variation in %.
Source: Statistics Portugal (INE) and FocusEconomics calculations.

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