Macroeconomic Picture

Indicator 2015 - 2019 2020 2021 2022 2023 2024 (F)
Source: Oxford Economics, February 2024    
GDP 2.6% -8.3% 5.7% 6.8% 2.2% 1.2%
Private Consumption 2.5% -7.0% 4.7% 5.6% 1.2% 0.9%
Investment 6.3% -2.2% 8.1% 3.0% 2.0% 2.8%
Unemployment Rate 9.5% 7.1% 6.6% 6.0% 6.6% 6.8%
Consumer Prices 0.8% 0.0% 1.3% 7.8% 4.3% 2.0%

The Portuguese economy has grown solidly since 2014 and emerged until Covid-19, 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 pandemic severely impacted the global economy and, in Portugal, due to the high dependence on foreign tourism, the effects were more prejudicial. However, tourism and economy have revamped in 2022.

Portugal enters 2023 having recorded in 2022 the second highest economic growth at a European level, only behind Ireland and well above the Eurozone average (3.3%); to which must be added a low unemployment rate of 6%. Equally surprising was the reduction of public debt - from 125.5% to 115% -, reflecting the third biggest decrease in the European context.

There already seems to be a consensus that the Euro Zone will manage to escape recession in 2023, and once again forecasts indicate that Portugal will stand out in the top three countries with the highest GDP growth. Oxford Economics has forecasted a mid-contraction of GDP at the start of 2023, followed by a modest growth throughout the year.

In 2022, Portugal did not live in a bubble and was affected by many risks. But also in this context, it had a particularly positive performance. In 2022, Portugal was the 4.º country where inflation grew the least, standing at 7.8% (vs. 8.4% in the Euro Zone average) and, in 2023, had a sustained economic growth when comparing with the Euro Area average, specially at the end of the year, with forecasts stating that it will be the 6th country in the Euro Area with the highest GDP growth, staying above the average of Eurozone. Government debt is expected to be lower than 103% in 2023, which is below the estimations done at the beginning of the year.

Unemployment stayed at the same level as the Eurozone in 2023 – currently standing at 6.6% -, however, it is expected to be above the average in the Euro Area over the upcoming years. In 2024, it is forecasted to be at 6.8%, while the Euro average will stay at 6.7%.

In addition to inflationary pressures - inflation eased its pressures over 2023 and will continue to do so in 2024 -, other major concern at the moment is interest rates upsurge by ECB. After almost 3 years below 1%, the 10-year bond yield exceed this benchmark in February 2022 and in September 2022 reached 3% and between September and December 2023 surpassed 4%

key economic indicators

Source: Oxford Economics, February 2024