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Portugal Real GDP growth is projected to reach 2.5% in 2023 and 1.5% in 2024. The Recovery and Resilience Plan (RRP) should significantly boost public investment, though there are risks that implementation delays continue. Strengthening external demand will support exports, particularly of services. The employment rate will remain historically high and wages will accelerate. However, headline consumer price inflation of 5.7% in 2023 and 3.3% in 2024 will reduce purchasing power and weigh on consumption growth. The implementation of the RRP is supporting growth and renewed support measures in 2023 are helping to smooth the inflationary shock on households’ purchasing power. While public debt has declined below its 2019 level, it remains the third highest in the EU. A strengthened fiscal framework and more efficient spending will help to address mounting spending pressures from an ageing population and strong investment needs. A timely implementation of the RRP will strengthen green infrastructure, skill acquisition and healthcare capacity, supporting sustainable growth, but could also slow the decline in inflation. Growth is picking up As energy and food prices remain high and interest rates continue to rise, growth in domestic demand has declined. Elevated consumer price inflation, which eased to 6.9% in the year to April, is reducing household purchasing power. Yet, RRP spending, fiscal support measures worth around 3.7% of GDP in 2023 and increasing activity in trading partners are supporting activity. GDP grew by 1.6% on a quarterly basis in the first quarter of 2023, significantly boosted by strong export growth. Consumer confidence has increased recently but remains subdued and the Bank of Portugal’s coincident private consumption indicator increased in April. Business confidence in services, retail and industry has been increasing, although from a low level. Despite an increase in the unemployment rate, historically-high employment rates, rising wage growth and government cash transfers are providing support to households.
Portugal
Source: OECD Economic Outlook 113 database. StatLink 2 https://stat.link/7if2do
OECD ECONOMIC OUTLOOK, VOLUME 2023 ISSUE 1: PRELIMINARY VERSION © OECD 2023