16/11/2024
The European Commission released it’s economic forecast for Portugal, which shows growth for 2025 and 2026. Economic growth in Portugal is set to gradually pick up over the forecast horizon, supported by private consumption and investment.
In full-year terms, growth is forecast to moderate from 2.5% in 2023 to 1.7% in 2024. However, economic activity is projected to rebound to 1.9% in 2025 and 2.1% in 2026, mainly supported by domestic demand. Private consumption is expected to continue benefitting from growth in real wages while the projected acceleration in the implementation of the Recovery and Resilience Plan is set to boost investments.
In the external sector, foreign tourism is projected to remain an important growth factor, albeit less than in recent years. However, considering the expected rebound in demand for investment goods, imports are forecast to rise faster than exports. Consequently, the current-account surplus is set to narrow in 2025-2026 after a spike in 2024.
The working-age population continued to benefit from positive net migration flows while the country’s employment rate remained at record high. Employment growth is projected to moderate further over the forecast period, though still allowing for a marginal decline in the unemployment rate.
Headline inflation decreased from 5.3% in 2023 to 2.3% (y-o-y) in the third quarter of 2024, reflecting a deceleration across all main HICP components. Energy prices were also pushed up by increased network fees in the electricity sector in the first half of 2024 but dropped again in the third quarter. Non-energy industrial goods and unprocessed food contributed consistently to the slowdown in inflation.
Portugal’s general government surplus is expected to decrease to 0.6% of GDP in 2024. Government revenue is set to continue expanding, benefiting from the performance of tax revenues and social contributions amid sustained economic activity, higher households’ disposable income, and a resilient labour market.
Portugal’s public debt-to-GDP ratio is projected to continue declining, albeit at a slower pace. Maintained primary balance surpluses and favourable growth-interest rate differentials are forecast to drive the ratio down from 95.7% in 2024 to 90.5% in 2026.
What global dynamics will impact Portugal’s economy in the short-term? And long-term? How can foreign investment and business growth have the greatest impact in Portugal?
To read the full report, see: https://economy-finance.ec.europa.eu/economic-surveillance-eu-economies/portugal/economic-forecast-portugal_en
