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Economic Bulletin – summer 2013: Projections for the Portuguese Economy 2013-2014

  1. The projections for the Portuguese economy are surrounded by a high level of uncertainty, reflecting recent domestic developments, which adds to the demanding and necessary implementation of the economic and financial assistance programme.
  2. The external environment of the Portuguese economy will be characterized by a moderate recession in the euro area in 2013, with an expected gradual pick-up in activity from the second half of the year onwards. Further progress in the normalization of monetary and financial conditions in the euro area, as well as in the European institutional architecture, will strengthen the external environment of the Portuguese economy throughout the projection horizon.
  3. The projection points to a contraction of 2 per cent in Gross Domestic Product (GDP) in 2013, reflecting a strong decline in domestic demand and a significant increase in exports (Tabel 1).
  2. For 2014 it is expected an increase in GDP of 0.3 per cent, reflecting a strong decline in Government expenditure, a smaller decline of private domestic demand and a robust increase in exports.
  3. Concerning inflation, the projection points to a growth rate of the Harmonized Index of Consumer Prices (HICP) below 1 per cent, in a context in which inflationary pressures, both internal and external, are likely to be very limited.
  4. The projection for the Portuguese economy is characterized by the correction of macroeconomic imbalances, being consistent with the reduction of the indebtedness levels of the private sector and with the maintenance of the process of 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, which is crucial to consolidate the return of the international investment position to a sustainable path, ensuring the intertemporal sustainability of external debt and promoting a gradual normalization of the financing conditions of the Portuguese economy.
  5. In a context of high uncertainty, the risks associated with the projection for economic activity are balanced for 2013 and on the downside for 2014. These risks reflect the possibility of a higher than projected contraction in private consumption induced by the announced fiscal policy measures, as well as the possibility of a less favourable evolution of exports. The risks for inflation are slightly on the downside, reflecting the possibility of a lower than projected increase in profit margins, in a context of depressed domestic demand.
  6. The current projection implies an upward revision of 0.3 p.p. in GDP growth in 2013 compared with the spring edition of the Economic Bulletin, which mainly reflects a more favourable evolution of exports of goods. In turn, the projection for 2014 is revised downwards by 0.8 p.p., reflecting mainly the impact of the incorporation of fiscal consolidation measures. This impact is partially compensated by a stronger increase in exports, as well as a lower disaccumulation of stocks over the projection horizon. The projection for inflation in 2013 and 2014 was revised downwards by 0.3 p.p. and 0.2 p.p., respectively, reflecting a lower increase in unit labour costs in the private sector and in the imports deflator in 2013.

Authored articles:

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


  • “Oil price shocks and their effects on economic activity and prices: an application for Portugal”
    Francisco Craveiro Dias
  • “Short-term forecasting of indirect tax revenues: an application for Portugal”
    Paulo Soares Esteves and Cláudia Rodrigues Braz
  • “The World Tourism Exports Cycle”
    Pedro M.D.C.B. Gouveia, Raúl Filipe C. Guerreiro and Paulo M.M. Rodrigues
  • “Predicting Aggregate Returns using Valuation Ratios Out-of-Sample”
    Ana Sequeira

Banco de Portugal, 16th of July 2013