Portugal’s economy continues to recover

4.9% growth in 2021

São Bento Palace, home to the Portuguese parliament, as the country's economy continues to recover
São Bento Palace, home to the Portuguese parliament

Diário de Notícias on the mainland reported late last week that the European Commission had presented their interim winter macroeconomic bulletin, in which it calculates the growth of the Portuguese economy was 4.9% last year, in line with the estimate of the Portuguese National Institute of Statistics.

In the last quarter of 2021, the recovery continued, with GDP growth of 1.6%, but at a slower pace than in the third quarter. The Portuguese economy thus recovers just over half the level of production, compared to 2020, the year in which GDP fell by 8.4% due to the pandemic.

Already at pre-pandemic levels are “all components of demand, investment and exports”, says the European Commission in the interim winter macroeconomic bulletin.

The tourism economy is still limited by travel conditions

The economy is still restricted by travel

Private consumption recovered at a slightly slower pace, owing to “continued restrictions for most of the year” on contact services thereby affecting the economy. Exports of services “increased substantially in the second half of the year”, but still remain well below the pre-pandemic level, since “the country’s large foreign tourism sector was still limited by international travel conditions”.

The beginning of 2022 was marked by the emergence of infections, with a record increase in the number of cases, and this was reflected in “a further drop in international travel”, which should represent a “slowdown in economic growth in Portugal to 0.5 % in the first quarter of 2022”.

Recovery in 2022

Brussels assumes, however, “an improvement in conditions”, projecting a recovery of growth in the economy in the second quarter to “pre-pandemic levels”.

In annual terms, Brussels forecasts growth of “5.5% in 2022 and 2.6% in 2023”, considering that “domestic demand” will make a “substantial” contribution to the result in both years, but also ” for the implementation of the Recovery and Resilience Plan”.

The tourism recovery “is expected to have a positive net contribution to growth in 2022”, and a “neutral” impact next year. In this forecast, Brussels is already ruling out any scenario of further interruptions due to the pandemic.

Energy and inflation

“Inflation increased from -0.1% in 2020 to 0.9% in 2021, due to significant volatility in energy prices”, calculate the experts of the European Commission.

For the consumer, “energy prices increased by 13.2% in the last quarter of 2021″ when compared to the previous year”, mainly driven by “crude oil prices”.

Brussels points out that “changes in the regulated components of electricity have protected households from the sharp rise in wholesale prices”. However, the energy component of producer prices “has risen at a much higher rate”, reflected in the cost to the consumer “in a wide range of goods and services”.

“Overall, global inflation as measured by the Harmonized Consumer Price Index reached 2.4% in the last quarter of 2021” compared to the same period last year.

The European Commission maintains the expectation that “energy price inflation will decline” this year and next. But base effects – higher energy prices – and a further rebound in services prices “are expected to lift inflation to 2.3% in 2022, before moderating to 1.3% in 2023”, which will have an impact on the Portuguese economy.

COVID-19 in Madeira: daily updates can be found in an earlier post

New restrictions: a detailed updated explanation of the latest regulations can be found here

Thanks to PeterA for the link

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