The Portuguese economy should continue to grow, supported more by exports and investment than by private consumption, but not by more than the Eurozone average.
Portugal's Central Bank predicts economic growth accelerating to 1.5%, supported by exports which will provide nearly half of the country’s annual income, and investment.
A rise in private consumption, one of the key areas the government is depending on to fuel growth, will not happen as families and businesses will concentrate on reducing borrowings rather than spending on consumer goods.
The bank’s economic forecast is part of its Economic Bulletin published on December 14th covering 2017 to 2019.
Exports will be linked to external demand which is expected to recover with a growth in Portugal’s market share in overseas markets. This export-led growth, which between 2017 and 2019 was above 4% a year, will increase its weight in the country’s GDP to 48% by 2019, compared with 32% at the beginning of the decade.
Investment is expected to return to growth of 4% or more, explained by increased business investment despite public and construction sectors remaining under pressure.
Private consumption will grow at a rate below 1.5%, reflecting the efforts of households to reduce their debt against a backdrop of high taxes.
According to the Bank of Portugal, growth will allow the country to continue to record external surpluses at 1% of GDP per year, which will enable only a gradual reduction of external debt.
"The recovery of economic activity will be accompanied by a continuation of the gradual improvement of the labour market," with the unemployment rate falling to 8.5% in 2019, the lowest since 2004.
The Central Bank’s predictions at the end of 2016 are devoid of any dire scenarios for the national economy but they do highlight the fragility of the Portuguese economy which is to recover more slowly than after previous recessions.
