Macroeconomic Picture

Indicator 2014 - 2018 2019 2020 2021 (f)
Source: Bank of Portugal, March 2021
GDP 2.5% 2.2% -7.6% 3.9%
Private Consumption 2.4% 2.2% -5.9% 2.0%
Investment 6.3% 6.3% -2.2% 3.6%
Unemployment Rate 9.3% 6.5% 6.8% 7.7%
Consumer Prices 0.8% 0.3% -0.1% 0.7%

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. GDP plunged 7.6% y-o-y in 2020.

In the labour market, layoff measures introduced by the Government, rent and bank moratoriums, as well as other incentives provided to several activity sectors, helped to support employment over 2020. Unemployment rate increased only 0.3 percentage point year-on-year to 6.8%.

Public debt increased to 138% of the GDP in 2020. Nonetheless, Portugal’s credibility remains high, a sentiment that is reflected in the 10-year government bond yields, which stand at a record lows.

Economy recovery is expected to be faster, when compared to the previous crisis which recorded four years of recession. Not only there is a healthier bank sector, but also external support from the European Union, from which Portugal is expected to receive €13.9bn in grants and €2.7bn in loans to leverage the economic and the transition to digital and green technologies. The Bank of Portugal forecasts point to a 5.2% and 3.8% growth in 2021 and 2022 respectively, which would drive economy activity in 2022 to levels close to those achieved in 2019.

Key Economic Indicators

Source: Bank of Portugal

GDP Volume

Source: Bank of Portugal