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Economy and Finance

Economic forecast for Portugal

The latest macroeconomic forecast for Portugal. 

After a strong start of the year, Portugal’s growth is expected to moderate in quarterly terms but to remain significant in annualised terms in 2022. Exports of services are projected to contribute most to growth, reflecting an exceptional expansion of 75% y-o-y in the first quarter of the year. This was clearly supported by the recovery of the tourism sector, with overnight stays by non-residents surging by 846% for the same period while still trailing 26% below the pre-pandemic level. Latest data suggest a continued strong performance in tourism with international flights and foreign tourist visits nearly reaching their pre-pandemic level in the second quarter of 2022. At the same time, short-term indicators suggest a slowdown in private consumption, industrial output and construction amid rising cost pressures from energy prices and global supply constraints. Weaker demand from trading partners is also projected to weigh negatively on exports of goods.

Last update : Summer 2022 Economic Forecast (14/07/2022)

Indicators2020202120222023
GDP growth (%, yoy)-8,44,96,51,9
Inflation (%, yoy)-0,10,96,83,6

In full-year terms, growth is forecast to remain strong at 6.5% in 2022, reflecting the accumulated carry-over and the continued rebound in tourism. Growth is then projected to moderate to 1.9% in 2023 amid lower growth in private consumption and investment as well as subdued external demand. Risks to the growth outlook remain on the downside as a result of Russia’s war of aggression against Ukraine and, more recently, in the context of rising concerns about staff shortages in the aviation sector, which may have negative repercussions on foreign tourist visits to Portugal.

Inflation rose substantially to 8.2% (y-o-y) in the second quarter of 2022, driven by a steep increase in the prices of energy and food products. Prices of services also increased reflecting a wide range of factors, including pent-up demand, pass-through effects from energy to transport services as well as large base effects for the prices of accommodation and air transport.

In light of the current high energy prices, inflation is projected to moderate only marginally in the second half of 2022. A more substantial moderation is expected in 2023. Overall, inflation is projected at 6.8% in 2022 and 3.6% in 2023. Core inflation is set to remain below the headline rate until the end of 2022. Wage adjustment pressures in the context of record high employment in Portugal are then expected to move core inflation slightly above the headline rate in 2023.