Portugal: GDP growth of 5.8% in 2022 as country has lowest inflation in EU – EC

The European Commission considered on Monday that the “most explicit” reason for the 5.8% growth forecast for Portugal this year is that it has the lowest inflation in the EU, because the country is “less exposed to the increase in energy prices”.

In an interview with the Lusa news agency and other European media in Brussels, Paolo Gentiloni, reiterated the idea already put forward this morning at the press conference to present the spring macroeconomic forecasts, that the strong recovery of foreign tourism in Portugal contributes to the country having the highest Gross Domestic Product (GDP) growth projection this year among the 27 member states.

However, the European commissioner pointed out that several reasons could be listed, and “the most explicit is the fact that Portugal has the lowest level of inflation” amongst all member states, although he admitted that “there is no automatic relationship”.

Although it has today revised upwards by 2.1 percentage points the inflation rate for Portugal, to 4.4% this year – compared to the 2.3% projected in February, before the start of the war in Ukraine, and above the government’s forecast of 4% – the Brussels estimate for this year places Portugal as the country with the lowest inflation rate, with the average for the euro zone estimated at 6.1% and for the European Union (EU) at 6.8%.

Reaffirming that the forecast for growth in the Portuguese economy of 5.8 percent of GDP well above the European average (of 2.7 percent), is also due to the fact that Portugal recorded moderate growth in 2021 compared to other countries and the “strong recovery of tourism,” Gentiloni added as another important factor, “the fact that Portugal is less exposed to the increase in energy prices.”

Admitting that “obviously forecasts are forecasts”, the European Commissioner for the Economy nevertheless expressed his conviction that Portugal could effectively achieve this year the growth rate anticipated today by the Commission, presenting as a “solid basis” for this projection “the already known figures from the rapid growth estimate in the first quarter of this year”, which he classified as “surprisingly very positive”.

According to the rapid estimate released on 29 April by the EU’s official statistics office, Portugal’s GDP was the fastest growing (11.9%) in the first quarter, among European Union (EU) countries for which data is available, well above the eurozone average of 5%.

The European Commission today revised upwards by 0.3 percentage points the economic growth expected for Portugal this year, to 5.8%, despite external challenges, according to the spring macroeconomic forecasts, the first since the beginning of the war in Ukraine.

This is the highest figure among the 27 EU member states, followed by Ireland (5.4%), and well above the average for the European bloc and the eurozone, both of which have growth projections of just 2.7% this year.

Brussels forecasts that Portugal’s GDP will grow by 5.8 percent in 2022, when in February it expected expansion of 5.5 percent, with the services sector, particularly foreign tourism, recovering strongly from a low base. 

The European Commission report noted that “growth prospects remain favourable, despite challenges related to commodity prices, global supply chains and greater uncertainty in external demand.