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Banco de Portugal sees record inflation of 7.8% this year and economic slowdown in 2023

This year’s inflation should average 7.8%, the Bank of Portugal (BdP) announced on Thursday, which is the highest estimate so far made by the main institutions monitoring the Portuguese economy. In June, the BdP said about 5.9%.

Growth forecast for 2022 has also been revised slightly upwards, from 6.3% to 6.7%, but the economy is expected to suffer severely next year as the effects of the current crisis hit households and businesses at their peak. .

In its new economic bulletin (October), which only covers 2022, the Mário Centeno-ruled central bank says that “the short-term prospects for the Portuguese economy have deteriorated due to the consequences of the invasion of Ukraine”.

And he adds that “the impact of the adverse shocks that occurred throughout the year will be more noticeable in 2023, ahead of a significant slowdown in economic activity compared to 2022”.

This year Portuguese household income should stagnate and business investment will progress very slowly.

“Real disposable income is stagnating under the influence of the inflation profile, while the savings rate falls from 9.8% to 4.9%,” says the BdP.

“Investments are slowing, growing by 0.8%, in an environment of supply constraints, higher production costs, deteriorating financing conditions, low implementation of Recovery and Resilience Plan (PRR) funds and high uncertainty,” the Bank warns.

In this sense, the BdP insists that “in a more unfavorable external and financial environment, there is an urgent need to accelerate the pursuit of reforms under the PRR and to promote an effective and efficient use of the respective funds, to economic growth in the short and medium term”.

Author: Luis Reis Ribeiro

Source: DN

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