Brussels worsens Portuguese growth forecasts to 4,1% this year

The European Commission today published its winter macroeconomic forecasts

The European Commission (EC) forecasts Portuguese gross domestic product (GDP) growth of 4,1%, a downward revision of the 5,4% forecast made in November, according to the winter macroeconomic forecasts released today.

According to today's figures, for 2022 the European Commission has revised upwards the expected growth, rising from the 3,5% pointed out in November to a forecast of 4,3%.

The Portuguese government currently expects a GDP increase of 5,4% this year, according to forecasts made when presenting the 2021 State Budget (OE2021), but the finance minister has already admitted, on Tuesday, that the Government will have to “significantly review” the macroeconomic scenario, due to the effects of the covid-19 pandemic.

The forecasts released today by the executive of the European Union (EU) place the Portuguese numbers above those of the euro zone, as Brussels points to a growth of 3,8% in the bloc of countries with the single currency, both in 2021 and in 2022.

"With the introduction of tighter confinement in mid-January 2021, GDP is expected to fall again in the first quarter of 2021, before starting to recover in the second quarter of the year, with a further recovery in the summer months", reads refer to the section dedicated to Portugal of the macroeconomic forecasts for winter released today.

Brussels has "expectations for a notable recovery in summer tourism, particularly in intra-EU travel, and a more gradual recovery thereafter", although the sector is expected to remain "somewhat below its pre-crisis level until the end of the period. forecasts'.

As for GDP, "a complete return to pre-pandemic levels is expected towards the end of 2022, but risks remain significant due to the country's heavy dependence on external tourism, which continues to face uncertainties related to the evolution of the pandemic".

The European Commission points out, on the other hand, that the measures presented in the draft of the Recovery and Resilience Program (PRR) presented in October are not accounted for, and represent a positive impact of 0,25% on GDP.

“Depressed demand and the expected rise in economic sentiment should boost economic recovery. Private consumption is also expected to benefit from a relatively resilient labor market, where falling employment compares favorably with output, and public social transfers provide more income support. from Brussels.

Today's interim figures only present forecasts for GDP and inflation, and in this chapter, Portuguese prices are expected to increase 0,9% in 2021 and 1,2% in 2022, according to the forecasts of the Harmonized Index of Consumer Prices ( HICP).

"The projected increase in energy prices is expected to be the main driver of inflation in the first half of 2021, followed by a gradual rise in services prices in the third quarter of 2021", says the European Commission.

As for last year, the European executive pointed out that the 7,6% drop in GDP in 2020 was due to the impact of the covid-19 pandemic, "with a particularly strong impact on the large hospitality sector in the country."

Thus, “exports of services and investment in equipment registered the biggest falls in 2020, but private consumption also fell significantly, amidst an increase in savings”.

“On the other hand, investment in construction continued to grow, helped by the cycle of projects financed by the EU. After the initial shock, the manufacturing industry also did relatively well, recovering close to pre-crisis levels,” notes Brussels in today's report.