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The energy component is responsible for the recent deterioration in the terms of trade


Economics in a picture: The energy component is responsible for the recent deterioration in the terms of trade

The terms of trade correspond to the ratio between the price of exports and the price of imports, representing the purchasing power of exported goods and services, i.e., the amount of goods and services that a country can import in exchange for a unit of goods and services exported.

In 2021, the goods terms of trade deteriorated, reflecting the increase in the prices of energy raw materials in international markets and the fact that the Portuguese economy is a net importer of these goods. In the first half of 2022, in a context of intensifying upward pressure on these prices, associated with the invasion of Ukraine by Russia, the loss increased (year-on-year change of -5.2%).

Excluding energy goods, the economy showed a gain in terms of trade in 2021 – and a zero change in the first half of 2022 – prolonging the favourable trend observed since 2011. This change in terms of trade can be broken down into a structure effect and a relative price effect. The first measures the impact of the country being specialized in products whose prices grow above or below the average and the second evaluates the effect of a greater or lesser increase in export prices compared to imports for the same group of products. The gains in non-energy terms of trade observed, on average, in the period 2011-2021 mainly result from the relative price effect, which points to increases in export prices probably associated with changes in quality – as well as the ability to import at a lower cost.


For more details, see Box 11 “Analysis of developments in Portuguese terms of trade in the recent period” in the May 2018 Economic Bulletin.


Prepared by Carlos Melo Gouveia. The analyses, opinions and findings expressed above represent the views of the author and not necessarily those of the Banco de Portugal or the Eurosystem.


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