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Economics in a picture

Economics in a picture

The components that contributed the most to the GDP fall in 2020 were exports and private consumption, although to a lesser extent when adjusted for the import content


Economics in a picture: Decomposition of the real GDP growth rate

Typically, the contributions of the final demand components to real GDP growth are not adjusted for the associated imports, which makes it harder to assess the real contribution of each component. In this case, the contributions are over estimated, and it is necessary to subtract the total contribution of imports from the sum of those components contributions to obtain GDP growth. In contrast, the net contribution of each demand component results from subtracting to that demand aggregate the associated direct imports (the final demand of goods and services directly imported) and the imports used as intermediate consumption in the domestic production of these goods and services.

In 2020, given the variations registered, the quantitative difference between the two methods of computation is quite substantial. The very negative contributions of exports and private consumption to the fall in GDP in 2020 are noteworthy, but clearly lower when calculated net of imports. In the case of investment, its contribution is negative when considered in gross terms, while if adjusted from imports, the contribution to the change in GDP is marginally positive. This difference reflects different dynamics within investment. The components that have fallen the most are those with higher import content (machinery and equipment and transport material) while investment in construction, which has a low import content, increased in 2020.


For further details see Cardoso and Rua (2021) “Unveiling the real contribution of final demand to GDP growth”, published in Banco de Portugal Economic Studies, vol. VII, n.º 3.


Prepared by Fátima Cardoso and António Rua. The analyses, opinions and findings expressed above represent the views of the authors and not necessarily those of Banco de Portugal or the Eurosystem.


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