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Portugal GDP growth is projected to be 2.2% in 2023, 1.2% in 2024 and 2.0% in 2025. Low business and household confidence, modest global growth and high uncertainty are holding back activity, although the tight labour market will support wage growth and private consumption, and the implementation of the Recovery and Resilience Plan (RRP) will boost investment. A progressive strengthening of external demand will support exports in 2024-25. As energy and food prices stabilise and labour demand slows, inflation will fall to 3.3% in 2024 and 2.4% in 2025. Fiscal policy will ease. The phasing out of support measures to smooth the inflationary shock is projected to be compensated by the implementation of the RRP and household tax cuts in 2024. Timely implementation of the RRP will strengthen green infrastructure, skills acquisition and healthcare capacity. Public debt will decline further and fall below 100% of GDP in 2025. More efficient public spending and a strengthened fiscal framework will help to address mounting spending pressures from an ageing population and strong investment needs. Growth has declined The effects of inflation, tighter financial conditions and weak growth in Portugal’s main trading partners have curbed economic activity, although fiscal measures are providing some offset. GDP broadly stagnated over the second and third quarters of 2023. The strong recovery in the tourism sector and increasing RRP spending have supported activity. Yet, industrial production has slowed, and goods exports have declined. Consumer price inflation, which eased to 3.2% in the year to October, and rising debt servicing costs are reducing household consumption and investment. Despite historically high employment rates and wage growth, household and business confidence declined between August and October.
Portugal
1. Maastricht definition. Source: OECD Economic Outlook 114 database; and Statistics Portugal (INE). StatLink 2 https://stat.link/fnqs79
OECD ECONOMIC OUTLOOK, VOLUME 2023 ISSUE 2: PRELIMINARY VERSION © OECD 2023