Despite feeling the negative impact of rising inflation and interest rates, the Portuguese economy managed, in the last quarter of the year, to continue to show a slight growth rate, guaranteeing a GDP variation of 6.7% overall for 2022 .a result above what was expected by the government.
The first estimate of the value of GDP for the fourth quarter of last year published this Tuesday by the National Institute of Statistics (INE) confirmed the most recent expectations regarding the Portuguese economy: growth continues to be positive and the inflationary crisis that surpasses the country does not yet lead to a recession.
GDP increased by 0.2% between the third and fourth quarters, sequentially, with the year-on-year variation at 3.1%.
These figures represent a slowdown compared to the results of the third quarter, during which the Portuguese economy recorded a chain growth of 0.4% and a bond growth of 4.9%.
In any case, at a time when most of the eurozone feared that the economies could go into reverse at the end of 2022, which would then lead to entering a technical recession (two consecutive quarters of negative GDP change in a chain) the first quarter of 2023, the Portuguese economy managed to maintain its growth rate in positive territory, making a recession scenario less likely.
It should be noted that the fourth quarter of the year was when the Portuguese, in addition to having to endure very high inflation rates, began to feel the effect of the increase in interest rates on their credit installments, which reduced the ability to consume. On the other hand, however, this was also the quarter in which they received extraordinary support from the state created precisely to mitigate the effects of inflation.
In the preliminary estimate published this Tuesday, the INE does not present data on the various components of GDP. However, it reveals that for fourth-quarter chain growth of 0.2%, there was a decline in the positive contribution of domestic demand, with net external demand maintaining a “slightly negative” contribution.
Overall for 2022, the result obtained now means that the annual variation in GDP was 6.7%, the highest result since 1987 and an acceleration compared to 5.5% in 2021. The performance is also slightly more positive than the 6.5% predicted by the Government in October, remaining below the 6.8% forecast made by the Bank of Portugal in December.
The strong growth of the Portuguese economy over the past two years is largely due to the return of activity in sectors that practically remained stagnant in 2020, at the height of the pandemic. In 2022, the recovery of the tourism sector in the first quarter was responsible for a large part of the result that has now been achieved for the full year. The Portuguese economy has already managed, after falling 8.3% in 2020, to return to pre-pandemic levels.
After this recovery, the expectation is that the economy, as it has been since the second quarter of 2022, will show much more moderate levels of growth. The government points to a GDP variation of 1.3% this year, while the Bank of Portugal forecasts growth of 1.5%.
Above the European average
The 0.2% growth recorded by the Portuguese economy in the fourth quarter of last year is in line with what happened in the rest of the eurozone.
Until a few weeks ago, most analysts pointed to the possibility that the eurozone economy, affected by rising inflation and interest rates, would enter a technical recession during the fourth quarter of 2022 and the first quarter of 2023. , more recently, considering the development of some indicators of activity in the largest European economies, pessimism has decreased. Eurozone GDP data released this Tuesday by Eurostat confirmed this more favorable view.
The Eurozone economy slowed down in the fourth quarter, it is true, but it managed to register a positive GDP variation of 0.1%, which means that, for now, it manages to avoid the recession scenario. On an annual basis, growth in the eurozone was 1.9%, up from 2.3% in the third quarter.
It should be noted, however, that some economies within the eurozone may already be in recession, with the focus on the largest of all. Germany recorded a GDP variation of -0.2% in the fourth quarter, entering negative territory for the first time since the pandemic.
Italy also saw a recovery in its economy, with a decrease of 0.1%. Spain and France posted positive GDP growth of 0.2% and 0.1%, respectively.
Portugal, with chain growth of 0.2% and growth of 3.1% on an annual basis, maintained, as already happened in the third quarter of 2022, a performance above the average of the Eurozone and the European Union. Among the 12 EU countries for which data is already available, the annual change in GDP in the fourth quarter of Portugal, compared to the same quarter in 2021, is higher than only one country, Ireland.
In annual terms, Portugal’s performance, which was worse than average in 2020 but better in 2021, returned in 2022 to largely outperform that of all other Eurozone and European Union countries. While Portugal grew 6.7% in 2022, the Eurozone grew 3.5% and the European Union 3.6%.