Since the start of the war until the end of the third quarter, the growth of the Portuguese economy has taken the biggest hit in the group of 27 countries of the European Union (EU), Eurostat showed yesterday in the peak of now complete national accounts covering all Member States.
A month ago, Portugal was already at the top of this ranking, but only ten countries were included in this first (preliminary) estimate by Eurostat.
Now, with all 27 selected, Portugal confirms its leadership in the group where growth erosion is faster.
The shock to growth is the greatest, but Portugal is not even in stagnation or recession yet.
But there are cases in Europe where the crisis has already almost taken the form of a recession. There are eight EU economies on the brink (a contraction of the economy in the third quarter and Estonia has in fact already entered a technical recession, which is when the economy shrinks for two quarters in a row).
In fact, in the first quarter, before Russia’s war on Ukraine broke out, Portugal grew by a whopping 12% compared to the first three months of 2021, reflecting a huge base effect due to the pandemic.
In the first quarter of last year, the economy was on its knees due to successive restrictions on activity and movement of people put in place to fight the pandemic. At that time, the country experienced its most devastating moments in terms of deaths and hospitalizations due to covid.
This year, however, tourism, construction, trade and services in general encouraged a recovery, but this was soon overshadowed by the energy crisis and very high inflation (something not seen since the euro).
At first, inflation actually drove up many companies’ revenues (and government tax and premium revenues) significantly, but signs are beginning to emerge that we have entered a tunnel of increasing difficulties and where uncertainty is setting us in. prevents seeing where it can end up.
In Portugal, the bitterest numbers are already coming out. The crisis is turning into more unemployment, less employment, less activity, less production. Tourism is the sector that still seems to resist.
In the third quarter, Portugal grew by 4.9%, above the European average (2.5%), one of the highest rates in the Union. But, as mentioned, the decline was huge, more than seven percentage points in year-over-year growth.
Portugal’s real gross domestic product (GDP) continued to grow by 0.4%, showing that, despite the cold, the economy is holding up until September (for example, taking advantage of the scorching tourist summer), but if we looking around us, scenario is starting to get worrisome.
Belgium, Spain, France and Austria are almost at a standstill (they only grew 0.2% in the third quarter), Eurostat indicates.
The Czech Republic, the Netherlands, Finland, Croatia, Hungary, Greece, Slovenia and Latvia are in the middle of a recession (their economies collapsed in the third quarter).
Estonia is the first EU country to officially enter a recession.
For 2023, the predictions of the central (not very serious) scenario of the European Commission (EC) say that in 2024 everything has to get worse before it gets better.
And here too, Portugal is taking the biggest hit from the economy, bringing the annual growth forecast for 2023 to just 0.7%, the EC recently said.
But there are more difficult and even threatening cases. Sweden is expected to record a 0.6% recession next year, while Latvia will register a 0.3% contraction.
It is Germany, the EU’s largest economy and one of Portugal’s largest economic partners, that will contribute most to the decline of the European economy. The Commission forecasts a 0.6% withdrawal in 2023. The IMF says Italy can follow in its footsteps.
Losing power in this growth championship
Back to Portugal. As mentioned, the image is becoming increasingly gray. The most recent official indicators, which already measure the beginning of the fourth quarter of this year, are almost all unfavorable.
“Retail sales slowed from a year-over-year variation of 2.3% in September to 0.5% in October 2022, mainly due to declining trade in food products,” says INE.
In manufacturing, a sector that represents the hard core of the economy and can help anticipate how negative and long the business cycle is taking shape, the signs are also bad.
Industrial production registered “a year-on-year change of -2% in October (0.3% in September)” and “excluding the Energy group, the change was -2.4% (1.5% in the previous month)” .
In the manufacturing industry segment, the most important in the secondary sector and heavyweight in exports, INE is already seeing a sharp drop in turnover. Production here fell by 1.9% in October. It grew 1.2% in September.
Yesterday, AICCOPN – Association of Civil Construction and Public Works Industries highlighted the “high resilience” of the sector it represents, but there are worrying signs.
“In the first nine months of 2022, according to quarterly national accounts [do INE]the sector’s GDP increased by 8% year-on-year”.
However, investment and gross value added of the construction sector only grew by “0.8% and 1.1% respectively”, in a period of “high uncertainty, characterized by an accelerated rise in inflation, by the rise in interest rates and a delay in the start of the planned public works”, regrets the association of entrepreneurs.
Luís Reis Ribeiro is a journalist for Dinheiro Vivo
Source: DN
