European Commission lowers growth forecast for the Portuguese economy in 2016 to 0.9%

10 November 2016

The Portuguese economy is expected to grow by just 0.9% this year, according to the European Commission’s autumn forecasts, which lower the figure published last May, when it expected economic growth of 1.5%.

The Commission also projects that this year Portugal will post a budget deficit of 2.7% of GDP, equal to the amount announced in May, but above the limit set out by Brussels to Portugal under the sanctions application process that sets an upper limit of 2.5% of GDP.

In 2017, the Commission expects the Portuguese economy to record annual growth of 1.2%, compared to a previous estimate of 1.7% announced in May and a budget deficit of 2.2%, far from the target of 1.6 % outlined by the Portuguese government.

To justify this more pessimistic economic outlook, the European Commission points out that the modest economic recovery is being led by private consumption and is “held back” by low investment levels.

Assuming that private consumption will slow in the coming quarters, in line with a stabilisation of consumption of durable goods, the “still high” household debt and an increase in oil prices, Brussels predicts that investment will “improve marginally” in the second half of the year.

The Commission concludes that the progress of economic growth in Portugal is “dependent on a recovery in investment,” which has remained “fragile and sensitive to the occurrence of any negative shock.” (macauhub)