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Press Release: Economic bulletin – December 2014

1. The projections for the Portuguese economy in 2014-2016 reflect the continuation of the process of gradual correction of macroeconomic imbalances, in a context of moderate growth of economic activity and price levels, and of reduction of external indebtedness (Table 1). 

2. After a virtual stabilization of the level of economic activity in the first three quarters of 2014, the gradual recovery included in the current projections implies an average rate of growth in 2014-2016 slightly above the one projected for the euro area. The composition of Gross Domestic Product (GDP) in 2014 is expected to be characterized by a recovery in domestic demand, as well as by a deceleration of exports, which stems partly from temporary effects. For 2015-2016, the current projections include a relative stabilization of the growth of domestic demand (excluding inventories), in tandem with a progressive acceleration of exports.

3. Over the projection horizon, the economy is expected to continue its redirection towards the tradable sectors, supporting a better resource distribution in the economy and, consequently, favorable productivity developments, in particular in 2015-2016. Employment is expected to evolve globally in line with its historical relationship with GDP over 2015-2016, after recovering more strongly than economic activity in 2014.

Table 1 •  Projections of Banco de Portugal: 2014-2016
Annual rate of change, per cent

4. A slight increase in the financing capacity of the economy, measured by the combined surplus of the current and capital accounts, is projected for 2014-2016. This evolution is supported by a progressive increase in the goods and services account in percentage of GDP from the end of 2014 onwards, stemming to a large extent from a volume effect, as well as from an improvement in terms of trade in 2014 and 2015.

5. Inflation, as measured by the Harmonised Index of Consumer Prices (HICP), is projected to moderately increase in 2015-2016, reflecting subdued domestic and external price pressures.

6. The risks to the projected outlook for economic activity growth are slightly on the downside in 2015 and 2016, given the possibility of less favourable external demand developments and further cuts in public consumption, partly compensated by an upside risk associated with the impact of structural reforms.

7. The risks to the outlook for price developments are seen to be marginally on the downside over the projection horizon. However, the technical assumptions of the projection exercise have a cut-off date of 19 November, and therefore do not reflect the recent decline in oil prices. These developments are expected to create additional downward pressure on prices over the next months.

8. By comparison with previous editions of the Economic Bulletin, the projections for GDP growth remained broadly unchanged, in spite of revisions in the composition of demand in 2014 and 2015, which resulted in a higher contribution of domestic demand and a lower contribution of exports to developments in economic activity. The projections for inflation have been revised downwards, particularly for 2015, reflecting lower than expected outturns, as well as the downward revision of technical assumptions on oil prices in euros. The projection for developments of HICP in 2016 has remained virtually unchanged.



The Economic Bulletin includes five boxes that analyze with greater detail relevant aspects of the projection or recent economic developments: 

  • Box 1 “Technical assumptions”;
  • Box 2 “Recent employment developments in the Portuguese Economy”;
  • Box 3 “Recent non-standard monetary policy measures”;
  • Box 4 “Recent evolution of the risk profile of credit granted to the Portuguese non-financial corporations”;
  • Box 5 “Fiscal Outlook for 2015”.

Authored articles

The Economic Bulletin includes three articles signed by Banco de Portugal economists. The articles, which are the sole responsibility of the authors, are the following:

  • “The Dynamics and Contrast of House Prices in Portugal and Spain”, by Rita Fradique Lourenço and Paulo M.M. Rodrigues;
  • “Sovereign Debt Crises”, by Pedro Teles;
  • “Wage Adjustments During a Severe Economic Downturn”, by Fernando Martins and Pedro Portugal.

Lisbon, 10 December 2014