Portuguese economy on road to recovery
According to recent data for June, 2021 the Portuguese economy is expected to grow 4.8% in 2021, above previous forecasts, with a growth of 5.6% in 2022. Portugal’s Gross Domestic Product has been revised upwards by 0.9 percentage points in 2021 from these new projected estimates, and by 0.4% in 2022 compared to previous forecasts for March. It is estimated that the economy should recover to 2019 levels in the first half of 2022.
This review carried out by the Bank of Portugal at the end of the first half of 2022 took into consideration the “more positive economic outlook in the short term, essentially related to an improvement in confidence from business and sector leaders. This means a more rapid reaction in economic activity than had initially been expected with the end of the lockdown and lifting of health restrictions from March 2021”.
According to indicators, economic recovery has, in the second quarter of 2021, been “boosted by internet demand, in particular private consumption”.
Moreover “the contribution of exports in the second half of 2021 and in 2022 will be more significant,” reflecting the recovery in services.
The Government also notes that Portugal should grow by 5% this year, above the 4% expected in the Stability Program.
Regarding the housing sector and according to recent studies, a continued lack of product offer is unlikely to bring any kind of stability in the residential market throughout 2021, although a slight fall in prices may be seen, particularly in the non-new build segment of the residential housing market. The residential segment of the market which is more dependent on the overseas market will continue to suffer.
In 2021, the impact of the Covid-19 pandemic on the economy more than the health emergency in itself will be felt, particularly in job retention, which in turn will affect sales. Whilst it is much more difficult to make predictions within this context, it is expected that transaction levels will be identical to those seen in 2020. This means 165,000 houses sold.
In line with what had been experienced throughout 2020, the luxury residential housing segment of the market will continue to enjoy high demand, demand outstripping product offer. This is for a variety of reasons, including a) delays in planning permission from the majority of national municipal councils b) greater difficulty in getting credit for construction.
At the same time, market studies from both national and international consultancies highlight Lisbon as one of the world capitals where prices will continue to rise.
Finally, it is important to emphasise that the prestigious magazine ‘Monocle’ placed Lisbon as the 7th best city in the world in which to live in terms of lifestyle and quality of living in its ranking. After a gap year in 2020 because of Covid-19, the Portuguese capital has in 2021 bounced back as one of the best cities in the world to live in, offering the best quality of living.