The Portuguese economy is already set to stagnate or even contract, and goods exports, one of the main drivers of Portugal’s recovery (along with tourism), recorded their first annual decline in the nine months from January to September (compared to January – September 2022) since the time of the pandemic, the new available data – the advanced activity indicator of the Bank of Portugal (BdP) and the international trade of the National Institute of Statistics (INE) – analyzed by Dinheiro Vivo (DV) show .
Even beyond that, the signs are not very encouraging: the main advanced indicators confirm an already long three-quarter recession in Germany and, as a result, serious problems for the eurozone as a whole, taking into account that the German economy is the largest. of the common currency as a whole.
This Tuesday, Eurostat will release preliminary data for gross domestic product (GDP) for the third quarter and inflation for October.
But as mentioned, the Portuguese central bank’s daily activity indicator suggests that real GDP growth will already be below 1%, according to the weekly moving average calculated until October 19, at the weakest pace since July and very much since a clear slowdown at the beginning of October.
To give you an indication, activity still managed to grow by more than 7% at the beginning of this month.
However, daily data after October 19 show that the development of the Portuguese economy has already entered negative territory, albeit briefly, according to the Bank of Portugal.
This sharp cooling in GDP is in line with the latest estimate from the bank led by Mário Centeno, which points to a real decline in activity in the third quarter.
According to INE, the Portuguese economy grew by 2.3% year-on-year, but already stagnated in the second quarter (0%).
The component of GDP that best reflects the decisive conditions weighing on a small open economy such as the Portuguese one is precisely the rate of exports. Even more so when their weight (goods and services) already represents approximately 50% of prosperity.
Foreign sales stop growing
Yesterday, in its rapid estimate of international trade in goods to the end of September 3rd quarter, INE reported the first contraction in (nominal) value since the time of the pandemic, when many trade flows were interrupted due to restrictions.
“In the third quarter of 2023, the rapid estimate of international trade in goods indicates a decline, in nominal terms, of 8.8% and 12.3% in exports and imports, respectively, compared to the same period last year,” said INE.
“The decline in goods traffic occurs for the second consecutive quarter and was accentuated compared to the previous quarter, which recorded year-on-year variations of -4.7% in exports and -6.4% in imports ” he added.
According to DV calculations, the drop in exports of almost 9% in the third quarter means that the value invoiced by Portuguese exporters will have fallen by around 0.7% in the first nine months of this year compared to the same period in 2022.
This means that it is the first time since the darkest time of the pandemic (early 2021, when mortality reached a maximum) that goods exports have contracted.
It is necessary to go back to the first two months of this year to note a decline in Portuguese sales abroad. At the time the decline was 3.9%.
As mentioned, the economy is weakening. The impact of inflation has brought very high interest rates and consumption and investment are failing.
Exports are also in trouble, because Portugal’s major customers, most of which are in Europe, are also in difficulty.
In the Economic Bulletin, the BdP states that “after the momentum seen in early 2023, activity will have stagnated in the second and third quarters and weak growth is expected to persist until the end of the year.”
In this new study, the BdP indicates that the chain variation in GDP (between the 2nd and 3rd quarter) must already have been negative.
“The slowdown in Portugal reflects lower dynamics in its main trading partners, the cumulative effects of inflation and the greater restrictiveness of monetary policy, which resulted in a deterioration of financial conditions in the euro area and in Portugal,” the Bank illustrated.
Europe is cooling down
The inflation battle and the historic and severe tightening of interest rates in the Eurozone continue and today Eurostat could emerge with even more bad news.
The single currency succumbed for the first time in late 2022, with a 0.1% decline in the fourth quarter (in one chain), followed by two consecutive quarters of near stagnation (0.1% in both).
According to the BPI research house’s weekly analysis, “the economic slowdown in the eurozone is intensifying at the start of the fourth quarter.”
The latest PMI survey, a survey of thousands of purchasing managers from leading European companies, shows that “business sentiment in the Eurozone fell again in October and remains at values consistent with the decline in activity due to the intensification of the economic crisis. crisis in the manufacturing sector and the ongoing deterioration in the services sector,” say the economists at BPI Research.
“In both Germany and France, activity appears to be quite weak, although the deterioration since the summer has been more intense in Germany, where the Ifo index [confiança empresarial]In fact, it is still at a level compatible with a recession.”
Therefore, “this data increases the risk that eurozone GDP will decline by the end of the year,” the research team believes.
Luís Reis Ribeiro is a journalist for Dinheiro Vivo
Source: DN
