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Press release of the Banco de Portugal on the June 2021 issue of the Economic Bulletin

The growth of the Portuguese economy in 2021-23 is revised upwards while unemployment is revised downwards compared to the March projections. GDP is projected to grow by 4.8% in 2021, 5.6% in 2022 and 2.4% in 2023. The economy will return to its 2019 level in the first half of 2022. Inflation will rise marginally over the horizon, to 0.7% in 2021, 0.9% in 2022 and 1.0% in 2023.

The economic growth profile reflects a faster-than-expected response to the lifting of restrictions from March onwards. This improvement also applies to external demand and investment.

Private consumption will grow by 3.3% in 2021 and recover more markedly in 2022 (4.9%), when it will return to its pre-pandemic levels. Real disposable income will increase by 1.3%, on average, in 2021-23, on the back of a rebound in employment and wages. 

Investment will grow, on average, by 7% in 2021-23. The corporate component is expected to grow by 6.4%, in annual average terms, supported by favourable financial conditions, European funds, a rebound in demand and a gradual reduction in uncertainty. Public investment will grow more markedly, by 20% on average, reflecting the implementation of the Recovery and Resilience Plan, which accounts for approximately 30% of public investment projected for 2022-23. 

Exports will grow by around 14% in 2021-22, with substantial differences between goods and services. Exports of goods returned to their pre-crisis levels as soon as the second half of 2020. The rebound in exports of services will be more sluggish, and they will stand below their 2019 level at the end of the projection horizon.

The current and capital account will post a surplus of 0.9% of GDP in 2021 and of close to 2% of GDP in 2022-23 due to the recovery in tourism and the inflow of European funds. 

In the labour market, employment is projected to rise by 1% in annual average terms in 2021-23. The unemployment rate will increase slightly in 2021, to 7.2%, but will decrease in the course of the following years, down to 6.8% in 2023. 

The balance of risks surrounding the projections for activity is skewed upwards in 2021-23, most notably due to the upside risk stemming from the use of household savings built up during the crisis. In the medium term, activity is expected to record a loss, albeit small, compared to pre-crisis projections, as a result of longer-lasting effects in some segments of the economy. Underlying the economic recovery over the projection horizon is the assumption that fiscal and monetary policies will not be withdrawn abruptly, as support measures should be tailored to developments in the crisis. 

Press release of the Banco de Portugal on the June 2021 issue of the Economic Bulletin