Portugal’s economy is slowing after gaining 6.7% in 2022
Portugal’s economy grew by 6.7% last year. That is the strongest boost in the last 35 years. The government stated that the robust tourism sector and domestic demand contributed to such a surge. However, like so many other European countries, Portugal is also suffering from high inflation. The latter weighed on private consumption in the fourth quarter of 2022. It is also one of the reasons for the sharp slowdown this year.
On Tuesday, the National Statistics Institute (INE) published its second reading of gross domestic product (GDP). It revised its forecast for fourth-quarter growth. While the new reading is slightly higher, the institute kept its annual figure the same. The report said Portugal’s economy added 0.3% in the last quarter of last year. That is higher compared to the 0.2% growth estimated a month ago. Moreover, year-on-year growth hit 3.2%, slightly higher compared to its flash estimate of 3.1%.
Even though this is good news, INE stated that domestic demand contributed only 1.9 percentage points to year-on-year GDP. This number was 3.2 pp in the previous quarter, though. At the same time, external demand added only 1.1 pp, lower than 1.6 pp in Q3.
Furthermore, private consumption suffered due to soaring inflation. It usually represents two-thirds of gross domestic product. However, this index only grew by 2.7% between October and December. Considering that it showed a 4.3% increase in the previous three months, that number concerned economists.
Will Portugal’s economy continue to slow?
The Portuguese government expects economic growth to slow to just 1.3% this year. It announced that private consumption had decreased significantly. Families struggle with high food and energy prices. Increasing interest rates and slowing exports don’t help matters.
Household consumption expenditures dropped by 0.5% quarter-on-quarter. They had soared by 1.1% in the previous quarter, though. In addition, Portuguese consumer prices skyrocketed by 8.2% year-on-year this month. Core inflation rose to 7.2% from 7.0% in January.
