Lisbon, Portugal street

Portugal GDP Q4 2021

Portugal: GDP grows at softest pace since Q1 2021 in the fourth quarter

According to a preliminary estimate, GDP growth slowed markedly to 1.8% on a seasonally-adjusted quarter-on-quarter basis in the fourth quarter, from 2.9% in the third quarter. Q4’s reading marked the worst result since Q1 2021.

Although a full breakdown is not yet available, the flash estimate reported that the slowdown was mainly due to weaker net external demand.

On an annual basis, economic growth gained steam, rising to 5.8% in Q4 following the previous quarter’s 4.2% expansion. Meanwhile, the economy grew 4.7% in 2021 overall, partly recovering from the 8.4% contraction recorded in 2020.

Turning to this year, the snap election held on 30 January provided the incumbent socialist Prime Minister António Costa with an absolute majority in parliament, signaling political stability ahead and fast-tracking the inflow of EU funds. That said, significant headwinds hit the economy at the outset of the year, with the Bank of Portugal’s daily economic activity indicator pointing to a significant deterioration in activity up to 23 January, likely a result of rising daily Covid-19 cases. In addition, downside risks stem from high inflation leading to higher interest rates, as 10-year bond yields have risen sharply in recent months. Further complicating matters, an ongoing drought will likely dampen energy production ahead, boding ill for the industrial sector.

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