Portugal’s economy is set to grow 4.8% in 2021, the Bank of Portugal confirmed Wednesday in the launch of the Economic Bulletin in October. If this growth is confirmed, the banking supervisor points out, it would mean that the gross domestic product (GDP) will it approach the pre-pandemic level by the end of the year… On the other hand, Banco de Portugal Governor Mario Centeno indicated that he sees “Calm” the consequences of the termination of the banking moratorium (in September), but stressed that the Portuguese economy is still heavily indebted and “this should be of concern to all of us.”
“Recovery of activity reflects tackling the pandemic through the vaccination process – with a positive impact on the confidence of economic agents – and the maintenance of expansionary economic policies, ”says Banco de Portugal, also expecting inflation to reach 0.9% in 2021, although they are recognized as“ clearly growing ”risks associated with price increases , that is, the risks that inflation will be higher than expected, the lower, higher.
At the press conference, Mario Centeno spoke about the problems facing the economy at the moment. From the outset, “the country and companies, families came out of the banking moratorium period in September. This is a challenge that everyone is facing now, and I would like to emphasize this. “
We believe that this problem will be overcome in the sense that we are going to resume regular debt service payments either by companies or families, and with the help of measures that have been taken by then, or others that may arise, we calmly consider the problem “, Says Mario Centeno.
With regard to public debt, Mario Centeno began by saying that “in the pre-crisis period we saw a very significant reduction in private debt”, in particular, “in 2019, for the first time in many cases, private debt as a percentage of GDP fell. on average in the euro area ”. At this stage of the pandemic, Centeno emphasizes that “we must renew this trend, we must take care of the level of debt, both public and private.“.
The largest debt effort was undertaken by the government in 2021, accounting for 80% of the increase in total debt. This is clearly a concern in the current fiscal system, “said Centeno, adding that” public policy, including the fiscal balance, must be adequate and redouble attention to systemic developments. “
Other short-term risks for the Portuguese economy are associated with the possibility of a worsening situation with the pandemic and, on the other hand, with increased restrictions on the supply (of goods and services). These are factors that may be relevant, for example, in private consumption, which Banco de Portugal recognizes as “amazing” (on the positive side), since the sanitary restrictions were lifted within a year.
This is the quarterly economic newsletter, which, as usual, in the October issue does not include new projections for 2022… The forecast made in June for the next year was 5.6%. Here’s how those forecasts compare to June’s.
Source: Bank of Portugal.
“In the first half of the year, the drop in activity and the subsequent recovery were more pronounced in the service sector, which presupposes wider social contact. Service costs are still lower than in the pre-pandemic period, given persistent precautions, slow tourism recovery and increased use of teleworking, ”says Banco de Portugal. “On the contrary, spending on goods has already risen, albeit constrained by supply disruptions,” the document says.
In 2021, private consumption will grow by 4.3%, the supervisor adds, highlighting the impact of “rising disposable income and a gradual decline in the savings rate.” “The growth in disposable income in real terms is the result of a rapid recovery in employment and the dynamism of nominal wages, which are mitigated by rising inflation,” notes Banco de Portugal.
Government consumption is expected to grow by 5.2% in real terms after near stabilization in 2020. Investments increased by 5.6%, boosted by the prospects for economic recovery, European funds and loans at low interest rates and guaranteed by the state, ”the Bank of Portugal said in a statement.
Merchandise exports “will grow by 10.7% in 2021 in line with the dynamism of external demand directed at the Portuguese economy,” notes Banco de Portugal, noting that “supply chain disruptions continue to affect this aggregate dynamics until the end of the year. “.
On the other hand, “exports of services will continue to be affected by the impact of the pandemic in 2021, up 7% after declining 37.2% in the previous year.” “At the end of the year, exports of services are about 20% lower than before the pandemic,” the supervisor concludes.
