Government’s 2.7% growth target may evaporate

Portugal’s economic growth stalled by the end of the second quarter with less than expected tourism figures for the summer months.

A spurt in tourism in the first quarter had given an unexpected boost to the economy but GDP gains have all been wiped out by a weaker second quarter which revealed a fair summer season but hardly the bumper holiday period expected.
According to data published yesterday from the statistics institute (INE) for Q2, Portugal’s economy “stalled” from April to June with GDP registering a zero variation MoM in real terms (it was +1.6% in Q1), losing momentum compared to the same period in 2022 when it was 2.3% (Q2) and 2.5% (Q1).
According to the INE, Q1 2023 saw growth because of net overseas demand while the internal market benefited improved family consumption and lesser falls in investment.
But overseas demand for services, largely based on tourism, suffered a MoM fall of 5.4% over the Easter period (April/May).
If it hadn’t been for an improved internal consumer market, this fall in net overseas demand (tourism) would have resulted in a quarterly GDP fall of 0.4% while sales of goods overseas fell 0.6%.
Investment fell 0.5%, family consumption grew 0.6% and overall public consumption grew 0.4%.
The economist Susana Peralta told Negócios that the figures for Q2, 2023 were “a surprise and not a very good one” which could put a damper on the ambitions of the Finance minister, Fernando Medina’s plans for a 2.7% growth in 2023 given a lacklustre summer for tourism and a slowdown in the German economy, which would have a huge impact on Portuguese exports.

Photo: Lusa – Miguel A. Lopes