Macroeconomic Picture

Indicator 2015 - 2019 2020 2021 2022 (f)
Source: Oxford Economics, July 2022
GDP 2.6% -8.4% 4.9% 6.9%
Private Consumption 2.5% -7.1% 4.5% 5.5%
Investment 6.3% -2.7% 6.6% 7.7%
Unemployment Rate 9.5% 7.1% 6.6% 5.9%
Consumer Prices 0.8% 0.0% 1.3% 7.4%

The Portuguese economy has grown solidly since 2014, until Covid-19 emerged in March 2020. Exports, supported by strong tourism activity, were a major driver, together with an increase in household consumption and investment, namely in the construction sector. The labour market was likewise performing very positively. After reaching an all-time high above 17% in early 2013, the unemployment rate decreased sharply, standing at 6.5% in 2019.

The Coronavirus pandemic severely impacted the global economy, and in Portugal, due to the high dependence on foreign tourism, the effects were more prejudicial. However, economy and tourism are already revamping

After plunging 8.4% y-o-y in 2020, GDP increased 4.9% in 2021 and is forecasted to increase 6.9% in 2022 (Oxford Economics, July 2022), being the country with the expected highest growth rate in Europe.

Tourism is one of the major economy drivers. In the months of April and May, the number of overnight stays in tourism accommodation units in Portugal was already at pre-pandemic levels.

In the labour market, layoff measures introduced by the Government, rent and bank moratoriums, as well as other incentives, helped to support the labour market. Therefore, the unemployment rate was quite stable in 2020 and in 2021 maintained the downward trend, standing at 6.6%. For 2022 a rate of 5.9% is forecasted (after recording 6.1% in May 2022).

Consumer confidence index has fallen in March 2022 but since then is quite stable. Private consumption is expected to grow 5.5% in 2022 (Oxford Economics, July 2022).

In addition, economy should be strongly stimulated by the use of the funds agreed in the Recovery and Resilience Plan (RRP).

The major concerns at the moment concentrates on inflationary pressures and interest rates increases. Inflation was 1.3% in 2021 (quite below the 2.6% recorded in the Eurozone) but is expected to upsurge to 7.4% in 2022 (Oxford Economics, July 2022).

After almost 3 years below 1%, the 10 year bond yield exceed this benchmark in February and since then has been growing continuously achieving 2.5% at the end of June.

key economic indicators

Source: Oxford Economics, July 2022