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Press Release of Banco de Portugal on the December 2015 issue of the Economic Bulletin

Projections for the Portuguese economy – 2015-2017

1. Projections for the Portuguese economy point to continued gradual recovery of economic activity over the 2015-2017 period (Table 1). This is likely to translate into average annual GDP growth of 1.6 per cent in 2015, followed by growth of 1.7 and 1.8 per cent in 2016 and 2017 respectively, suggesting that the momentum of economic activity will be close to that projected by the European Central Bank (ECB) for the euro area.

Annual rate of change, per cent

2. Over the projection horizon, economic activity is expected to continue the gradual pace of recovery, reflecting the need for further adjustment of the balance sheets of the different public and private economic agents, in the wake of the international financial crisis and the sovereign debt crisis in the euro area.

3. Exports should grow robustly over the projection horizon, reinforcing the trend of transfers of productive resources to economic sectors more exposed to international competition.

4. Domestic demand shall gradually recover, in line with the deleveraging of households and non-financial corporations.

5. These projections are surrounded by particular uncertainty, given that, as at the cut-off date for data, no information was available on fiscal measures to be implemented in coming years. The main risk factors are the possibility of more moderate recovery of global activity and trade flows, particularly in emerging market economies.

6. The Portuguese economy continues to face a range of significant challenges. It is crucial to ensure a significant increase in productivity, and to ensure a distribution of returns on economic growth that contributes to a high level of social cohesion. It is also important to strengthen progress observed in the correction of accumulated macroeconomic imbalances characterising the Portuguese economy.

7. A sustained decline in public and private debt levels is paramount for this purpose. In this sense, the pursuit of a budgetary position close to balance over the medium term, in line with the rules of the European fiscal framework, is a desirable goal for the Portuguese economy. The current benign external financing conditions represent an opportunity to steer public policy towards increasing the Portuguese economy’s resilience to future adverse shocks.

8. The Economic Bulletin includes three boxes that review in more detail relevant aspects for the projection or recent developments: 
• Box 1 “Projection assumptions”;
• Box 2 “Impact of the decline in oil prices on economic activity growth”;
• Box 3 “Impact of the euro exchange rate devaluation on economic activity growth”.

9. The Economic Bulletin also includes a special issue “An interpretation of low public debt interest rates in the euro área”.

For the first time, the Economic Bulletin is simultaneously made available in the Bank’s App “Edições”.

Lisbon, 9 December 2015