portugal

According to the most recent projections for the close of the year, Portuguese GDP has recovered above expectations, with an expected economic growth of 6.2% in 2022. After the recovery period from the pandemic crisis, the recent evolution of the Portuguese economy has been conditioned by the effects of the Russian military aggression against Ukraine, namely by the increase of geopolitical uncertainty and by the energy crisis in Europe, which contributed both to the increase of production costs and the prices of goods and services, and to the deterioration of economic agents' confidence.

Private consumption is forecast to increase by 5.9% in 2022, in a context of consumption recovering to pre-pandemic levels, real disposable income stagnating and the savings rate falling to historically low values. In relation to public consumption, real growth is forecast at 2.0% in 2022, compared to 4.6% last year. This development is explained by the reduction of the effects associated to the pandemic, including lower growth in general government employment.

Reflecting the lifting of restrictions on international mobility and the realisation of demand postponed during that period, exports of services rebounded sharply in 2022 - particularly in the tourism sector, which increased by about 80%. Exports of goods also grew by 6.3% in 2022, benefiting from increased external demand. Overall, these effects led to a 17.7% increase in the volume of exports. In turn, the growth of imports in 2022 will have been 11.1%, and it is expected that this growth will gradually moderate over the next few years.

The labour market continued to perform well in 2022, with an unemployment rate of 5.9% - a historically low value - and is estimated to be close to full employment. Despite the slowdown in activity, the unemployment rate is projected to stabilise between 2023 and 2025, due to a context of labour shortage that encourages companies to retain workers.

With regard to inflation, over 2022, there was a faster and more persistent increase than expected, standing at 7.9% at the end of the year. The price increase profile reflects, to a large extent, external pressures on energy and food goods, which subsequently spread to the remaining categories of goods and services.

These forecasts of a reduction in the pace of inflation are based on the response of the European Central Bank, with the increase of reference interest rates as a way of controlling demand.

To mitigate the effects on consumers, the Government has granted extraordinary subsidies to families and has applied measures to combat rising prices, namely specific rules for the increase of rents and for the renegotiation of mortgages for first homes, reduction of indirect taxes on fuel, among others.

In 2023, the Portuguese economy is expected to slow significantly, to a GDP growth rate of around 0.7%, with a projected acceleration to 2.4% in 2024.