Banco de Portugal publishes today the May 2016 issue of the Economic Bulletin. The Bulletin presents an analysis of the Portuguese economy in 2015.

The Portuguese economy in 2015

1. Portugal’s economic growth was once again moderate in 2015, in line with the euro area average. GDP grew by 1.5 per cent, i.e. 0.6 percentage points (p.p.) more than in 2014, reflecting, for the year as a whole, an increase in most domestic demand components and an acceleration in exports.
2. However, economic activity showed signs of weakness in the second half of the year, as a result of a deceleration in business gross fixed capital formation (GFCF) and exports.
3. Private consumption increased by 2.6 per cent, i.e. 0.4 p.p. more than in 2014, growing more than disposable income for the second consecutive year. This acceleration reflected a moderate recovery of household disposable income, higher consumer confidence and an expected rise in permanent income, in a context of improvement in the labour market, lower decline in public sector employment, and higher growth of transfers to households in pensions.
4. Exports of goods and services grew by 5.2 per cent, i.e. 1.3 p.p. more than in 2014. This acceleration largely resulted from strong growth in energy exports (by 35.9 per cent, after a fall of 12.2 per cent in 2014). Excluding energy, goods exports grew 1.9 p.p. less than in the previous year, mainly reflecting a fall in exports to Angola.
5. GFCF rose by 3.9 per cent, i.e. 1.1 p.p. more than in 2014. Despite having a low weight in the total, public investment grew, following marked falls recorded in the four previous years. Business GFCF declined in the second half of the year.
6. The current and capital account balance remained positive, i.e. the Portuguese economy continued to show positive external net lending, in a context of stabilising investment and savings. Nevertheless, net lending of households and non-financial corporations dropped, with the household saving rate declining further to 4.2 per cent of disposable income.
7. The fiscal consolidation process initiated in 2011 was interrupted as a result of a 0.8 p.p. fall in structural revenue, chiefly caused by non-tax revenue. The 1.1 per cent decline in compensation of employees contributed to a reduction of structural primary expenditure, which stood at its lowest level since 2003.
8. Labour market conditions improved, amid low wage growth and a virtual stagnation of productivity. Despite remaining at historically low levels, employment increased by 1.1 per cent. The unemployment rate declined by 1.5 p.p., to 12.4 per cent. The weight of long-term unemployment remained very high (63.5 per cent of total unemployment).
9. The harmonised index of consumer prices (HICP) rose by 0.5 per cent, after a 0.2 per cent drop in 2014.

The Portuguese economy has undergone important transformations in the past few years: it has became more open to external markets and productive specialisation changed towards sectors more exposed to international competition. Nevertheless, low productivity growth reflects persisting structural weaknesses, as well as some negative consequences of the past few years’ adjustment process. The Portuguese economy continues to record a long-term trend of low potential growth, associated with the vulnerabilities in labour and product markets and in the quantity and quality of productive inputs.  

Participation in the monetary union has softened the Portuguese economy’s adjustment process and in the current environment offers particularly favourable monetary conditions. However, the said participation also poses important challenges at a time of reduction of accumulated imbalances, insofar as it places the adjustment effort on the economy’s real side.

Special issue: The evolution of Portuguese household savings

The evolution of the household saving rate in Portugal is the theme of this Economic Bulletin’s special issue.
The Bulletin also includes four boxes detailing important aspects of Portuguese economic developments in 2015, namely:

• The trend of corporate indebtedness in Portugal (Box 2.2.1);
• The exposure of the Portuguese economy to Angola (Box 5.1);
• Market shares of Portuguese goods exports (Box 5.2);
• Real estate investment in Portugal by non-residents (Box 7.1).

 

Lisbon, 4 May 2016