Portugal’s economy back to pre-pandemic levels
Portugal’s economy is growing at a higher rate than in 2019, before the Covid-19 pandemic struck.
The International Monetary Fund on Tuesday raised its forecast for Portugal’s 2023 economic growth to 2.6% from 1% estimated a month ago, following the release of official data showing a strong expansion in the first quarter – above the 1.8% forecast estimated by the Bank of Portugal.
The growth, which had been expected by the Government to be 1.3% by the end of 2023, has surprised international analysts.
Portugal led Eurozone growth in the first quarter of the year and is growing well above the growth trend seen between 2010 and 2019, while Germany has yet to bounce back to 2019 levels of economic growth.
Daniel Kral, an economist at Oxford Economics, is surprised at the performance of the Portuguese economy and GDP saying on Twitter: “There’s a new wonder-kid on the block”.
The economist told Negócios: “Portugal has experienced one of the strongest recoveries after the pandemic, both in terms of economic growth and employment, and has continued to grow despite the energy crisis”.
The growth in the economy also had a positive impact on budgetary consolidation with the size of the primary surplus (not including debt servicing responsibilities) and the reduction in Portugal’s public debt to GDP ratio.
The government is targeting a budget deficit of 0.4% of GDP this year the same as in 2022. The debt-to-GDP ratio, which finished last year at 113.9% after dropping from over 125% in 2021, is expected to decline further this year to 110.8%.
Daniel Kral says the strength of the recovery is part of the reason why Portugal is growing above the rates seen between 2010 and 2019. “This is a real change compared to 10 years ago when Portugal suffered from the financial crisis”.
“This is not the case with Germany which is suffering from poor industrial performance 10% below 2018 levels”, he said.
The IMF forecast estimate a 2.6% GDP growth for 2023, after a “surprising” performance in Q1 of this year which was down to tourism and exports.
Tourism has already recovered from the pandemic and continues to achieve record levels while exports have exceeded imports, inverting the usual pattern.
The IMF has revised Portugal’s growth upwards from the 1% forecast in April to 2.6% in its latest report released on Tuesday.
The review occurred after a press conference given by Rua Duttagupta who led the IMF Mission team in Portugal at which he said he was “surprised at the growth in Portugal’s economy” in the first half which had been “much stronger than expected”.
Portugal GDP grew 1.6% in Q1 compared to the last quarter of 2022, and 2.5% like-for-like on 2022.
The National Statistics Institute stated of Q1 that there had been an uptick in exports of goods and services and a contraction in imports of goods and services. As a consequence, the positive contribution of net external demand was greater than that in the previous quarter (Q4, 2022).
On April 28, Portugal’s statistics body said the economy expanded 2.5% in the first quarter from a year earlier, beating expectations.
EPA/MIGUEL FIGUEIREDO LOPES