Economy bounces back in the second quarter

GDP reading: According to a preliminary estimate, GDP increased 0.6% on a seasonally adjusted quarter-on-quarter basis in the second quarter, contrasting the 0.5% contraction seen in the first quarter. On an annual basis, economic growth edged up to 1.9% in Q2 from the previous period's 1.6% growth.

Drivers: Absent a detailed breakdown, the statistical office noted that domestic demand posted a stronger contribution than in Q1, boosted by a rebound in private spending. Additionally, net trade posed less of a drag on GDP thanks to a recovery in exports of goods and services. A comprehensive release is set to be published on 29 August.

GDP outlook: Our panelists expect the economy to retain its Q2 momentum in H2, supported by recent ECB monetary policy easing and disbursements of EU funds.

Panelist insight: Analysts at the EIU commented on risks to the outlook: “The main risks for Portugal's economic outlook in 2025 will come from slower EU growth and US import tariffs. Slower than usual growth in Germany and France (Portugal's second and third most popular export destinations) is set to damage important economic sectors such as the automobile industry, which accounts for 5.6% of GDP and represents 15% of tradeable goods. Portugal's exposure to US market is limited, and therefore the impact will come more via an indirect effect through its main EU trade partners.”

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