The Portuguese economy is still not feeling the effects of the war in Ukraine and the resulting price increases, namely energy. The National Statistical Institute (INE) corrected flash estimates published at the end of July that showed a 0.2% decline in GDP in the second quarter compared to the previous quarter. Now the statistics agency is forecasting zero growth, according to data released yesterday. On an annual basis, the country continues to grow, with GDP growing at 7.1%, albeit below the 11.8% recorded between January and March.
“Compared to the first quarter of 2022, GDP registered a volume of zero, after growing 2.5% in the previous quarter,” the INE report reads. Compared to the same quarter last year, the projections point to an increase of “7.1% in real terms, with an upward revision of 0.2 percentage points compared to that calculated in the flash estimate at the end of July,” the statistics office reports. According to Dinheiro Vivo, economist João Duque believes this change in forecasts “increases confidence that the country will have a record growth rate this year”. The ISEG professor believes that “the Portuguese economy will be able to reach the target of about 6% of GDP growth by 2022”. Banco de Portugal estimates GDP will grow by 6.3% this year. The European Commission is more optimistic and predicts an increase of 6.8%.
But GDP declined not only due to the increase in exports and their values, impacted by high inflation, and the dynamism of tourism, now without the constraints of the Covid-19 pandemic. Domestic consumption has slowed significantly between April and June this year. According to INE, “there was a significant reduction in the contribution of domestic demand to the year-on-year change in GDP in the second quarter, from 10 points in the first quarter to 3.7 points”. In this context, “the slowdown in private consumption, including non-profit institutions serving households, stands out, with a year-on-year change of 4.2% between April and June, when in the previous quarter the contribution 12, Similarly, government consumption grew timidly: it rose only 1.4% year-on-year, 3.4 points less than in the previous quarter, and investment slowed, from a growth of 6.4% in the first quarter to 3.3% households Expenditure also fell year-on-year and even fell by 0.3% compared to the first quarter.
In the opposite direction, and stimulating economic growth, “exports of goods and services accelerated significantly in volume in the second quarter, with a year-on-year change of 26.8%”. In the previous quarter, the increase was 18.6%. In this area, “services exports continued to grow significantly, with rates of 68.4% and 65.1% respectively in the first and second quarters, largely reflecting the strong dynamism of the tourism component,” emphasizes the INE.
The country ultimately benefited from the escalation of inflation in terms of trade. It is true that he paid more money for the purchases he made abroad. However, it sold more expensive products and services that it exported, especially in the service components (including tourism). “The effect of the evolution of the terms of trade combined with the positive behavior in volume resulted in an improvement in the external balance of goods and services in nominal terms, which amounted to -2.2% of GDP,” emphasizes INE. In the previous quarter, the external balance was negative at 3.6% of GDP, according to the report of the statistical office.
While households and businesses are already feeling the harsh effects of inflation and the energy crisis, driven largely by the Ukrainian conflict but also by the expansionary measures taken by the European Central Bank, the economy as a whole has shown resilience. However, the worst is yet to come. João Duque believes that “the effects of the war and the rise in energy and food prices will not be felt until the end of the year or early 2023”. “For now, families still have some savings, but with the arrival of winter heating needs increase and the uncertainty about the supply of Russian gas and the behavior of Germany, which may stop buying that hydrocarbon from Russia, could be a very difficult one. December month for the Portuguese economy,” according to the economist’s analysis.
Work improves and overnight stays slow in July
The unemployment rate was 5.9% in July, 0.1 percentage point lower than in June and lower than 6.6% in July 2021, according to preliminary data released by INE yesterday. These statistics also revise the June unemployment rate from its preliminary value of 6.1% to 6%, “the same value as the previous month”.
According to INE, tourist accommodations registered 8.6 million overnight stays in July, 90.1% more than in the same period last year, with external markets accounting for 5.7 million and a year-over-year increase of 205.2%. However, July registered a slowdown from June, a month in which guests and overnight stays recorded increases of 97.6% and 110.7% respectively.
Inflation drops to 9%
According to the INE, inflation fell to 9% in August, from 9.1% in July. The institute estimates that the average change over the past 12 months is 5.3%, up from 4.7% last month.
Dinheiro Vivo journalist
Source: DN
