Economic projections III (Portugal)

Despite European estimates, a lower growth in the Eurozone, expectations for Portugal show an inverse behavior. Because in the autumn bulletin, the European Commission predicted a growth of 4.5%, while current projections show a value of 4.9% (in everything similar to the forecasts of the National Institute of Statistics).

In fact, the report indicates an alignment with the Government version, which recently reiterated confidence in a minimum growth of 5.5% for the Portuguese economy. If this macroeconomic scenario is confirmed, it means in practice that the national economy will outperform the Eurozone. However, it is important to understand the reasons and/or explanatory factors for this potential result…

According to the European Union, “the resurgence of Covid-19 infections at the beginning of 2022, as well as a new drop in international travel, should slow Portuguese economic growth to 0.5% in the first quarter of 2022”. Even so, in the second quarter, as a result of the improvement in weather conditions and the respective impact on the pandemic, Portugal is expected to exhibit economic levels similar to the pre-pandemic period.

And, as in the European Union, domestic demand should contribute significantly to the economic performance of 20022 and 2023. It should be noted that the Recovery and Resilience Plan will play an important role, however the Commission refers to a slight tendency towards negative risks in the face of potential setbacks that tourism may suffer due to the behavior of the pandemic.

As for inflation, Portugal’s behavior continues to show a better scenario vis-à-vis the European Union. It is estimated that prices in Portugal will increase by 2.3% in 2022, after 0.9% in 2021. For 2023, a slowdown in the inflation rate is recognized, with an expectation of 1.3%.

With the scenario outlined, the current Minister of Finance, highlighted the positive prospects for the recovery of the Portuguese economy, alluding to an alignment of European and Government projections: “the Commission reviews the country’s growth for this year upwards, in line with the latest official government estimates, reinforcing the credibility that Portugal has achieved with international institutions”. And, he also stressed that the “revision takes place in a context of unemployment at a minimum of the last 19 years (5.9% in December 2021) and with employment 1.5% above the pre-pandemic level”.

However, this optimism must be tempered, because until the Socialist Government takes office there may be a considerable time gap; that is, if the issue of emigrants’ votes is confirmed, the inauguration does not take place before mid-April. In practice it means that the state budget will only be approved in June! Therefore, it is important to question the influence of this on the future results of the Portuguese economy…