Economy grows 6.7% in 2022, the highest since 1987

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The Portuguese economy will grow 6.7% in 2022, the “highest value since 1987”, according to the quick estimate released by the National Institute of Statistics.

The 6.7% growth of the Gross Domestic Product (GDP) in 2022 is one tenth below the government’s forecast, as Finance Minister Fernando Medina had stated in late December that Portugal would end “the year 2022 with a growth [of the economy] of around 6.8%.

This rate is, however, above the 6.5% estimated in the State Budget for 2023 (OE2023), which entered the parliament last October.

According to the INE, “for the year 2022 as a whole, the GDP registered a growth of 6.7% in volume, the highest since 1987, after the 5.5% increase in 2021 that followed the historical decrease of 8.3% in 2020, following the adverse effects of the pandemic on economic activity”.

Most economists from major national and international institutions expected Portuguese GDP to have grown between 6.5% and 6.8% in 2022, an upward revision from what was even projected after the outbreak of war in Ukraine.

The Bank of Portugal (BoP) was the most optimistic, after, over the past year, having successively revised upwards its outlook for Portuguese GDP growth: in March it cut its forecast to 4.9%, in June it improved to 6.3%, in October to 6.7% and in December to 6.8%.

Other institutions’ projections were similar: the Public Finance Council (CFP) expected the Portuguese economy to expand 6.7%, the Organization for Cooperation and Development (OECD) 6.7% and the European Commission 6.6%. The International Monetary Fund predicted GDP growth of 6.2%.

According to INE, the evolution recorded last year is explained by “a significant positive contribution” of domestic demand, although “lower than in the previous year”, with “an acceleration in private consumption and a slowdown in investment”.

As for the contribution of net external demand “was positive in 2022, after having been negative in 2021”, having registered “an acceleration in the volume of exports of goods and services and a deceleration of imports”.

In the fourth quarter of 2022, GDP grew 3.1% year-on-year (decelerating from 4.9% in the third quarter) and 0.2% quarter-on-quarter (0.4% in the previous quarter).

In year-on-year terms, the contribution of domestic demand to the year-on-year change in GDP “decreased in the fourth quarter, with a deceleration in private consumption and a reduction in investment. The positive contribution of net external demand also decreased, with exports of goods and services in volume having “decelerated more intensely than imports.

INE also notes that, in the fourth quarter of 2022, there was “a loss in terms of trade in year-on-year terms, but less intense than the losses observed since the second quarter of 2021, as a result of the more pronounced deceleration of the import deflator than that of exports”.

Compared to the third quarter of 2022, GDP increased 0.2% in volume, with “a decrease in the positive contribution” of domestic demand to the GDP growth rate, while the contribution of net external demand remained “slightly negative”.

According to INE, the flash estimate released today “incorporates new primary information, particularly with regard to international trade in goods for the third quarter of 2022, which, however, did not involve revisions in the year-on-year and quarter-on-quarter rates of change in GDP published in the issue of Quarterly National Accounts by Institutional Sector of 23 December 2022”.

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