You are here

Economic Bulletin - Spring 2013: Projections for the Portuguese Economy 2013-2014

  1. The projection points to a contraction of 2.3 per cent in economic activity in 2013. This contraction reflects a sharp decline in domestic demand (Table 1), against a background of lower permanent income prospects. Exports are projected to decelerate, although maintaining a positive growth, despite the deteriorating outlook for external demand.
  2. The projection only considers the fiscal consolidation measures included in the State Budget for 2013, given the absence of detailed additional measures, in particular for 2014. In this context, domestic demand is projected to stabilize in 2014, following decreases in previous years. This evolution is underpinned by an acceleration of exports, reflecting the assumption of a recovery of external demand. Economic activity is thus projected to grow 1.1 per cent in 2014.
  3. Regarding inflation, the growth rate of the Harmonized Index of Consumer Prices is projected to be, on average, slightly below 1 percent over 2013-2014, in a context in which inflationary pressures, either internal or external, are likely to be very limited.
  2. The Portuguese economy is conditioned by a process involving the correction of macroeconomic imbalances, which implies a recessive impact with negative consequences on the labour market. In the public sector, the correction of imbalances involves the need to maintain the fiscal consolidation process. In the private sector, the current projection is consistent with a reduction in debt levels and with maintaining the process of a gradual and orderly deleveraging of the banking sector. In the current projections, the Portuguese economy reinforces its financing capacity against the rest of the world over the next two years, after, in 2012, putting an end to a series of high external deficits recorded over a long period of time.
  3. The risks associated with the projection are globally on the downside for economic activity and are especially marked in 2014. These risks are mainly contingent on external demand recovery, which may be less significant than assumed, as well as on the adoption of fiscal policy measures in order to meet the budgetary goals itemised in the Economic and Financial Assistance Programme. In turn, additional gains in export market shares may be achieved, in line with the evolution seen in recent years.
  4. "Box A scenario with alternative fiscal assumptions" presents a scenario with additional fiscal policy measures, taking into account the intention of the Portuguese government to adopt a comprehensive programme of public spending cuts. This box also presents a sensitivity analysis of this scenario to alternative export growth.
  5. The current projection presents a deeper GDP fall in 2013 than published in the Winter 2012 Economic Bulletin. This revision reflects more updated information, which points to a less favourable external environment and depicts in general a more recessive environment for the fourth quarter of 2012 in comparison to the projection, with implications for 2013.
  6. An assessment of recent projection errors of Banco de Portugal is presented in the Special Issue "Evaluation of projection errors of the Banco de Portugal for economic activity in the period 2009-2012".

Authored articles:

As usual, this Bulletin includes one Issue for discussion and four articles authored by Banco de Portugal economists (or in co-authorship with external researchers). The Issue for discussion and the articles, which are the sole responsibility of the authors, are:

Issue for discussion

  • “Output effects of fiscal policy in Portugal: a structural VAR approach”, Manuel Coutinho Pereira and Lara Wemans


  • “Trade and Wage Inequality”, Luca David Opromolla
  • “Competition in the Portuguese economy: A view on estimated price-cost margins with imperfect labour markets”, João Amador and Ana Cristina Soares
  • “Foreign Investment and Institutional Reform: Portugal in European Perspective”, Paulo Júlio, Ricardo Pinheiro Alves and José Tavares
  • “Business Cycle Accounting for Portugal”, Nikolay Iskrev

Lisbon, 26 March 2012