You are here

Press release of Banco de Portugal on the June 2019 issue of the Economic Bulletin

Today, Banco de Portugal publishes the June 2019 issue of the Economic Bulletin, which updates projections for the Portuguese economy for the period 2019-21.


Projections for the Portuguese economy in 2019-21

The Portuguese economy is expected to continue expanding until 2021, albeit at a slower pace than in previous years. Following an increase of 2.1% in 2018, gross domestic product (GDP) is estimated to grow by 1.7% in 2019 and by 1.6% in 2020 and 2021. The projection for GDP growth in 2020 was revised slightly downwards, reflecting the international environment.

In the coming years, economic activity in Portugal is expected to continue to benefit from a relatively favourable economic and financial environment. On average, Portuguese economic growth is projected to be slightly higher than in the euro area as a whole, continuing the very gradual process of real convergence. Nevertheless, in 2021 Portuguese GDP per capita is estimated to stand close to 60% of the euro area average, slightly below the level observed when the monetary union began.

From 2019 to 2021, the economic expansion is expected to be supported by the momentum in private consumption, investment and exports. As in 2018, the contribution of domestic demand to GDP growth is projected to be higher than that of exports, resulting in a negative balance in the goods and services account over the projection horizon.

After increasing by 3.6% in 2018, exports of goods and services are expected to grow by 4.5% in 2019, despite the deceleration in external demand for Portuguese goods and services. Underlying this increase are additional market share gains, related to exports of non-energy goods and tourism. 

For 2020 and 2021, exports are projected to grow by 3.1% and 3.4% respectively, less than in the past few years, reflecting a maturing business cycle in Portugal's main trading partners and lower market share gains. After experiencing significant growth in the past few years, tourism exports are expected to slow down in 2020-21.

Imports of goods and services are projected to increase by 8% in 2019, clearly above the 4.9% increase seen in 2018 and influenced by the strong growth observed in the first quarter. In subsequent years, the increase in imports is expected to slow down to around 4.3%.

Investment is projected to continue to recover, although experiencing a slight slowdown by the end of the projection horizon. After growing by 4.4% in 2018, gross fixed capital formation (GFCF) is expected to record annual increases of 8.7%, 5.8% and 5.5% until 2021, when it is projected to still stand below the level seen before the international financial crisis. In turn, corporate investment is expected to reach its pre-crisis level at the end of 2019, while public investment is projected to grow considerably in the coming years, partly reflecting inflows of European Union funds.

Private consumption is expected to increase by 2.6% in 2019, after growing by around 2.4% in recent years. The increase estimated for 2019 is associated with favourable developments in real household disposable income, reflecting the increase in employment and nominal wages, including the minimum wage, contained developments in prices and fiscal measures with a positive impact on household income. Private consumption is expected to decelerate in 2020 and 2021, growing by 2% and 1.7%, reflecting the slowdown in real disposable income.

Projections point to a decrease in the net lending of the Portuguese economy, reflecting growth in imports exceeding that of exports, which had already been observed in 2018 and became more marked in the first quarter of 2019. The current and capital account surplus, after a period in which it stood at around 1.4% of GDP, declined to 0.4% of GDP in 2018, and is expected to drop to 0.2% of GDP in 2021. These developments should be monitored closely, as the Portuguese economy's external indebtedness level remains high and is one of its major latent vulnerabilities.

Employment is expected to continue to grow, albeit at a gradually slower pace, reflecting the maturing business cycle and increased labour supply constraints. Against this background, employment is expected to record annual increases of 1.3%, 0.8% and 0.4% until 2021. The unemployment rate is projected to continue to decline, although at a slower rate, and is expected to stand at 5.3% in 2021. Labour productivity is expected to increase, as a result of a recovery in corporate investment and a better allocation of resources in the Portuguese economy, following a reorientation towards sectors that are more exposed to international competition.

After standing at 1.2% in 2018, the inflation rate is expected to decline to 0.9% in 2019 and gradually recover to 1.3% by 2021. Underlying projected developments for the next few years are a gradual increase in inflation excluding energy and marginally negative changes in energy prices.

Projections for the Portuguese economy in 2019-21

Projections point to a continued expansion of the Portuguese economy up to 2021, albeit at a slower pace than in recent years, reflecting the maturing business cycle and constraints on higher potential growth. It is vital to pave the way for an increase in the growth potential of the Portuguese economy, particularly taking into account the risks posed by high levels of indebtedness, and the challenges associated with demographic developments, low levels of capital per worker and skilled labour and with weaknesses in market functioning. In order to boost the growth potential of the Portuguese economy, conditions must be in place to foster an increase in productivity through a better allocation of resources, well-functioning product and labour markets and investment in human capital and innovation. In turn, measures must be adopted to mitigate the macroeconomic impact of a declining and ageing population. 

The Economic Bulletin identifies downward risks to economic activity in Portugal, reflecting the possibility of less favourable developments in world trade.


The June issue of the Economic Bulletin includes a Special issue, entitled: “Demographic changes and labour supply in Portugal”. 

It also includes three boxes:

  • Box 1 | The impact of the public sector purchase programme on euro area long-term interest rates;
  • Box 2 | Medium-term fiscal outlook;
  • Box 3 | The impact on the Portuguese economy of a no-deal Brexit.