Portugal flag Portugal: Economic outline

Economic Outline

Economic Indicators

For the latest updates on the key economic responses from governments to address the economic impact of the COVID-19 pandemic, please consult the IMF's policy tracking platform Policy Responses to COVID-19.

After achieving several years of sustained growth, economic output in Portugal fell sharply following the outbreak of the COVID-19 pandemic. Nevertheless, the country’s economy rebounded by an estimated 4.4% in 2021, as the gradual relaxation of pandemic-related restrictions pushed up consumer demand and employment. While tourism (accounting for around 15% of GDP) remained significantly below pre-pandemic levels with regards to international arrivals, domestic tourism performed particularly well, reaching historical highs in the summer. The implementation of the European Recovery and Resilience Plan is expected to support the economy over the forecast horizon, with the IMF forecasting a growth of 5.1% of GDP this year, followed by 2.5% in 2023. Growth will also be backed by an improvement in the current-account balance, although risks remain related to the evolution of the pandemic and to global supply constraints that could hinder industrial activity.

The Portuguese government had managed to gradually reduce its budget deficit in recent years, reaching positive territory. This trend was reversed by the impact of COVID-19, as the budget deficit stood at 1.6% of GDP in 2021, when continued growth in government expenditure in response to the crisis, higher spending on subsidies and social benefits, and the expansion of the public wage bill were only partially offset by an increase in government revenues and the intake of EU funds. Underpinned by the economic recovery, the deficit should float around 1.3% of GDP over the forecast horizon. After its peak at 135.2% in 2020, the general government debt-to-GDP ratio started a downward trajectory in 2021 (130.8%), driven by a favourable growth interest rate differential and a rebound in GDP. It is projected to moderate further to 125.7% in 2022, and to 122.8% in 2023. After stagnating for several years, inflation picked up to 1.2% in 2021 amid rising global energy prices. The IMF expects the rate to further accelerate to 1.3% this year and 1.4% in 2023.

The impact of the sanitary crisis on unemployment was partly offset by temporary forms of support granted by the government, which benefited around 750,000 employees or nearly 15% of the labour force. Hence, the unemployment rate increased only moderately, reaching an estimated 6.9% in 2021 from a pre-pandemic level of 6.6%. The rate is forecast to decline only marginally due to higher labour force participation rates and a gradual recovery in labour productivity, at 6.7% in 2022 and 6.3% the following year (IMF). Overall, Portuguese GDP per capita (PPP) is estimated at USD 36,079 in 2021 (IMF), still 23% below the EU’s average.

 
Main Indicators 201920202021 (e)2022 (e)2023 (e)
GDP (billions USD) 240.01228.36e251.71271.19286.90
GDP (Constant Prices, Annual % Change) 2.7-8.4e4.45.12.5
GDP per Capita (USD) 23,33322,149e24,45726,40427,998
General Government Balance (in % of GDP) -0.1-0.9e-1.6-1.3-1.3
General Government Gross Debt (in % of GDP) 116.6135.2e130.8125.7122.8
Inflation Rate (%) 0.3-0.1e0.94.01.5
Unemployment Rate (% of the Labour Force) 6.67.0e6.96.76.3
Current Account (billions USD) 1.04-2.54-4.23-5.77-4.23
Current Account (in % of GDP) 0.4-1.1-1.7-2.1-1.5

Source: IMF – World Economic Outlook Database, 2016

Note: (e) Estimated Data

 
Monetary Indicators 20162017201820192020
Euro (EUR) - Average Annual Exchange Rate For 1 GBP 1.271.141.131.131.12

Source: World Bank, 2015

 

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Latest Update: September 2022

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