Lisbon, Portugal street

Portugal GDP Q1 2024

Portugal: Economy records best reading in a year in Q1 2024

A second national accounts release confirmed that the economy improved in the first quarter, expanding 0.8% on a seasonally adjusted quarter-on-quarter basis from 0.7% in the fourth quarter of last year. This marked the fastest increase since Q1 2023.

On an annual basis, economic growth lost momentum, cooling to 1.5% in Q1 from the previous period’s 2.1% increase and marking the worst reading since Q1 2021. That said, the result outpaced a preliminary estimate of a 1.4% expansion, and Portugal beat the Euro area average in both annual and sequential terms.

The quarterly upturn chiefly reflected the external sector’s improving performance, as net trade added one percentage point to the reading. Exports of goods and services increased by 1.6% on a seasonally adjusted quarterly basis in the first quarter, below the fourth quarter’s 3.5% expansion, dragged on by slowing services exports growth. That said, imports of goods and services swung into contraction, falling 0.6% in Q1 (Q4 2023: +3.9% s.a. qoq).

On the domestic front, private consumption growth accelerated to 1.0% in seasonally adjusted quarter-on-quarter terms in January–March (Q4 2023: +0.7% s.a. qoq), which marked the best reading since Q1 2023. Diminishing price pressures and improving consumer sentiment in the quarter drove households to increase spending on services and non-durable goods at a faster clip. Government spending growth, meanwhile, flatlined in Q1 (Q4 2023: +0.3%). Meanwhile, fixed investment contracted 3.0% in Q1 (Q4 2023: +3.5% s.a. qoq), marking the worst result since Q2 2022. Declines in construction and intellectual property, as well as non-transportation machinery and equipment, weighed on investment in the three months to March. As a result, domestic demand detracted from overall growth, in contrast to the previous quarter.

Our panelists expect sequential growth to slow to around half of Q1’s level in the second quarter. Moreover, our Consensus is for GDP growth to cool in 2024 as a whole from 2023 and fall short of the Central Bank’s estimate of 2.0%. Still-tight monetary policy and diminished post-pandemic household savings will restrain private spending growth. This, paired with weaker exports growth, will outweigh looser fiscal policy and a faster rise in fixed investment—underpinned by EU funds inflows. That said, economic activity will still outpace the Euro area average and the government’s target of 1.5% in 2024.

Analysts at the EIU commented:

“Given the upwardly revised first quarter GDP data for Portugal, we will consider revising slightly upwards our current real GDP forecast of 1.9% for 2024. A stronger than expected performace of Portugal’s buoyant tourism sector (which accounted for about 17% of GDP in 2019) represents an upside risk to our current economic growth forecast.”

Free sample report

Access essential information in the shortest time possible. FocusEconomics provide hundreds of consensus forecast reports from the most reputable economic research authorities in the world.
Close Left Media Arrows Left Media Circles Right Media Arrows Right Media Circles Arrow Quote Wave Address Email Telephone Man in front of screen with line chart Document with bar chart and magnifying glass Application window with bar chart Target with arrow Line Chart Stopwatch Globe with arrows Document with bar chart in front of screen Bar chart with magnifying glass and dollar sign Lightbulb Document with bookmark Laptop with download icon Calendar Icon Nav Menu Arrow Arrow Right Long Icon Arrow Right Icon Chevron Right Icon Chevron Left Icon Briefcase Icon Linkedin In Icon Full Linkedin Icon Filter Facebook Linkedin Twitter Pinterest