Portugal Economic Forecast

Portugal Economic Outlook

September 25, 2018

The latest national accounts data revealed that the economy picked up marginally over the previous quarter in Q2, owing to an acceleration in total investment driven by a surge in inventories. Available data for the outset of Q3, however, suggests a slight slowdown in growth: Industrial production contracted at a sharper annual rate in July than in the previous month, and annual growth in retail sales also dropped as inflation picked up and ate into consumers’ purchasing power. The trend in the retail sector appears set to continue as consumer confidence remained in negative territory in August. On the other hand, the economic climate indicator stabilized at a positive level in August, while business confidence was more upbeat, signaling the prospect of more investment. Meanwhile, Portugal’s successful sale of EUR 1 billion worth of 5- and 11-year bonds helped lift sentiment towards peripheral markets. On another positive note, citing strong growth prospects and the government’s commitment to further easing the debt burden, S&P Global Ratings bumped up Portugal’s credit rating outlook from stable to positive on 14 September.

Portugal Economic Growth

Growth is expected to moderate again next year, as domestic demand is anticipated to moderate. Private consumption is expected to grow at a weaker pace amid increasing inflationary pressures, as is fixed investment. Export growth is also expected to slow, likely owing to heightened trade tensions. That said, tourist arrivals and the country’s real estate sector should remain strong, although there are growing concerns of a bubble brewing in the sector. Met the why particular panelists expect the economy to grow 2.1% in 2018 and 1.9% in 2019, which is unchanged from last month’s forecast.

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Portugal Facts

Bond Yield2.04-1.90 %Oct 18
Exchange Rate1.150.65 %Oct 18
Stock Market5,060-0.02 %Oct 18

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