Portuguese economy moves from deficit to external surplus of 704 ME by May

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The Portuguese economy recorded an external surplus of 704 million euros until May, compared to a deficit of 3,661 million euros in the same period last year, the Bank of Portugal (BdP) announced today.

According to the central bank, the shift from deficit to surplus is due to the decrease in the deficit of the balance of goods, of €520 million, since in the first five months of the year exports grew more than imports (€1,657 million and €1,137 million), and the increase in the surplus of the balance of services, of €2,741 million, a development justified mainly by the increase of €1,755 million in the balance of travel and tourism.

The reduction in the primary income account deficit by EUR 543 million to EUR 2,208 million, explained by investment income that had an increase in receipts higher than payments, the growth of the secondary income account surplus by EUR 79 million to EUR 2,136 million, reflecting the increase in receipts from social benefits and the decrease in the financial contribution paid by Portugal to the European Union budget, also contributed to the evolution.136 million, reflecting the increase in receipts from social benefits and the decrease in the financial contribution paid by Portugal to the European Union budget, and, finally, the increase in the capital account surplus by EUR 482 million to EUR 988 million, mainly due to the greater allocation of EU funds.

Considering only May 2023, there was a current and capital account surplus of €11 million, compared to a deficit of €1,696 million in the same month of 2022.

In May, the balance of goods and services turned into a surplus, with a balance of EUR 124 million, resulting from the EUR 121 million reduction in the deficit of the balance of goods to EUR 2,220 million. This reduction reflects the fall in exports of EUR 176 million, which was less than the fall in imports of EUR 297 million (down 2.5% and 3.2% respectively).

There was also an increase in the surplus on the balance of services, from EUR 474 million to EUR 2 344 million.

Banco de Portugal reports that exports and imports of services increased by 14.7% and 4.6% respectively.

“Travel and tourism and transport services contributed most to this increase. Exports and imports of travel and tourism grew by 20.9% and 8.9%, respectively, and resulted in an increase in the balance of this item of EUR 333 million,” he says.

In May, travel and tourism exports amounted to €2,184 million, which is the highest value in the series for the month of May.

As for the primary income account, the deficit decreased by €891 million to €852 million compared with May 2022, “mainly due to the reduction in investment income paid abroad”.

The secondary income account saw its surplus increase by EUR 52 million to EUR 482 million and the capital account showed a surplus of EUR 257 million, EUR 170 million more than in the same period of the previous year.

BdP data also point out that the Portuguese economy’s financing capacity in May 2023 resulted in a positive financial account balance of EUR 282 million.

This balance results from the increase in foreign assets of €489 million, especially the foreign assets of Banco de Portugal in cash and deposits (€316 million), the increase in foreign liabilities of €207 million, explained by the growth of non-resident deposits with resident banks (€749 million) and the central bank’s liabilities to the Eurosystem (€573 million). On the other hand, there was a reduction in Portuguese public debt securities held by non-resident entities (reduction of €1,247 million).

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