Despite the negative impact of rising inflation and interest rates, the Portuguese economy managed to maintain moderate growth in the last quarter of the year, guaranteeing a GDP variation of 6.7% in the total for 2022, a result above what the government expected.
The first estimate of the value of GDP for the fourth quarter of last year, released this Tuesday by the National Institute of Statistics (INE), confirmed the latest expectations regarding the Portuguese economy: growth remains positive and the inflation crisis that is leading the country has not yet led to a recession.
GDP grew by 0.2% between the third and fourth consecutive quarters, with a deviation of 3.1% from the same period last year.
These figures represent a slowdown compared to the results of the third quarter, a period in which the Portuguese economy recorded chain growth of 0.4% and homologous growth of 4.9%.
In any case, at a time when it was feared across most of the Eurozone that economies would fall back in late 2022, leading to the entry into a technical recession (two consecutive quarters of negative GDP change in a chain) in In the first quarter of 2023, the Portuguese economy managed to maintain its growth rate in positive territory, making a scenario of recession less likely.
It should be noted that the fourth quarter of the year was the quarter in which the Portuguese not only faced very high inflation rates, but also began to feel the effect of the rise in interest rates on their credit terms, affecting their ability to consume. On the other hand, however, this was also the quarter in which they received extraordinary support from the state that had been created precisely to mitigate the effects of inflation.
In the flash estimate released this Tuesday, INE does not present data on the various components of GDP. Still, it shows that for chain growth of 0.2% in the fourth quarter, there was a decline in the positive contribution from internal demand, while net external demand maintained a “somewhat negative” contribution.
In total for 2022, the result now achieved means that the annual variation of GDP was 6.7%, the highest result since 1987 and an acceleration from the 5.5% of 2021. The performance is also slightly more positive than the 6 .5% set by the government in October, still below the Bank of Portugal’s forecast of 6.8% in December.
The strong growth of the Portuguese economy over the past two years is largely due to the resumption of activity in sectors that were practically stagnant in 2020, at the height of the pandemic. In 2022, the recovery of the tourism sector in the first quarter was responsible for a large part of the full year result now achieved. After the 8.3% decline in 2020, the Portuguese economy has already managed to return to pre-pandemic levels.
After this recovery, the economy is expected to grow at a much more moderate pace, as it has been since the second quarter of 2022. The government points to a GDP variation of 1.3% this year, while the Bank of Portugal has a growth forecast of 1.5%.
Above the European average
The 0.2% growth of the Portuguese economy in the fourth quarter of last year is in line with what has happened in the rest of the Eurozone.
Until a few weeks ago, most analysts pointed to the possibility that the Eurozone economy, impacted by rising inflation and interest rates, could enter a technical recession in the fourth quarter of 2022 and the first quarter of 2023. pessimism has diminished due to the evolution of some activity indicators in the major European economies. Eurostat’s Eurozone GDP data published this Tuesday confirmed this more favorable picture.
The Eurozone economy, while slowing in the fourth quarter, still managed to record a positive variation in GDP of 0.1%, meaning it is avoiding a recession scenario for now. On an annual basis, growth in the eurozone was 1.9%, compared to 2.3% in the third quarter.
However, it should be noted that some economies within the Eurozone may already be in recession, with the emphasis on the largest of them all. Germany recorded a GDP variation of -0.2% in the fourth quarter, entering negative territory for the first time since the pandemic.
Italy also recorded a slump in its economy, with a fall of 0.1%. Spain and France achieved positive GDP growth of 0.2% and 0.1% respectively.
Portugal, with a chain growth of 0.2% and a year-on-year growth of 3.1%, maintained, as already happened in the third quarter of 2022, a performance above the average of the Eurozone and the European Union. Of the 12 EU countries for which data are already available, the year-on-year GDP change in Portugal’s fourth quarter, compared to the same quarter of 2021, is only surpassed by one country, Ireland.
On an annual basis, Portugal’s performance, which was worse than the average in 2020, but better in 2021, has returned in 2022 to far exceed that of all other countries in the Eurozone and the European Union. While Portugal grew by 6.7% in 2022, the Eurozone grew by 3.5% and the European Union by 3.6%.