Portugal flag Portugal: Economic outline

Economic Outline

Economic Indicators

After achieving several years of sustained growth, economic output in Portugal fell sharply following the outbreak of the COVID-19 pandemic. Nevertheless, the country recovered quickly, growing by 6.7% of GDP in 2022. After a strong start to the year, Portugal’s economic growth slowed down to 2.3% in 2023, still well above the eurozone average. Within the realm of domestic demand, both private consumption and investment contracted, influenced by rising interest rates and subdued confidence among consumers and businesses. The surge in interest rates has a pronounced impact on Portuguese households, given that nearly 90% of their mortgage portfolio, constituting more than three-quarters of their overall debt, is tied to floating-rate loans. On the external front, the export of goods saw a decline due to weakened demand from trading partners, while the export of services maintained a healthy expansion, primarily fueled by the tourism sector. Amid a weaker macroeconomic outlook among Portugal's main trading partners, the IMF forecasts growth at 1.5% this year, with an acceleration in 2025 (2.2%).

The Portuguese government managed to gradually reduce its budget deficit in recent years, reaching positive territory. This trend was reversed by the impact of COVID-19 first, and then by the energy prices shock that was exacerbated by the Russian invasion of Ukraine (-1.7% of GDP in 2022). In 2023, government revenue increased thanks to a robust labour market, wage increases and the still high inflation, with the overall deficit estimated at 0.7% of GDP by the IMF (although in contrast with the EU Commission estimates, which pointed to a 0.8% surplus). The general government balance is projected to narrow to 0.3% of GDP in 2024 (IMF). Government revenue is expected to decelerate, influenced in part by fiscal policy adjustments in direct taxes, as well as a moderation in inflation. Concurrently, government expenditure is poised to increase, driven by sustained upward pressures on current spending, particularly in areas such as the public wage bill and social transfers. The general government debt-to-GDP ratio remained on a sharp downward trend in 2023 (108.4%, from 113.9% one year earlier), driven by a favourable growth-interest rate differential and primary balance effect. The IMF projects a further decline over the forecast horizon, to around 99.9% by 2025. Consumer price inflation has eased during the year, averaging 5.3%, with the easing trend being primarily linked to energy prices, whereas underlying inflation, which excludes energy and food components, persisted in its upward trajectory. The rate should gradually return towards the ECB’s target by 2025 (2.4%).

The unemployment rate increased to 6.6% in 2023 (up from 6.1% one year earlier) and is projected to flatten over the forecast horizon due to the subdued near-term growth outlook. Overall, Portuguese GDP per capita (PPP) is estimated at USD 45,227 in 2023 (IMF), still 20.6% below the EU’s average. According to the latest figures from the National Statistical Office INE, 17% of the population is at risk of poverty, corresponding to the proportion of inhabitants with an annual net equivalent monetary income below EUR 7,095.

Main Indicators 20222023 (E)2024 (E)2025 (E)2026 (E)
GDP (billions USD) 255.40287.42298.95309.72321.83
GDP (Constant Prices, Annual % Change)
GDP per Capita (USD) 24,79927,88028,96929,98331,235
General Government Balance (in % of GDP) -1.30.3-
General Government Gross Debt (in % of GDP) 112.499.094.790.887.0
Inflation Rate (%)
Unemployment Rate (% of the Labour Force)
Current Account (billions USD) -2.933.954.694.704.70
Current Account (in % of GDP) -

Source: IMF – World Economic Outlook Database, 2016

Note: (e) Estimated Data

Monetary Indicators 20162017201820192020
Euro (EUR) - Average Annual Exchange Rate For 1 GHS

Source: World Bank, 2015


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Latest Update: June 2024