Portugal Reports Robust Annual Expansion in GDP

Portugal’s economy is estimated to have grown 2.7% last year, the former bailout country’s strongest rate of annual expansion since 2000, the national statistics office said on Wednesday.

A flash estimate by Statistics Portugal said gross domestic product increased from 1.5% in 2016 to 2.7% last year, driven mainly by domestic demand, especially investment, while the contribution of net external demand remained unchanged, news outlets reported.

The 2017 growth rate consolidates an economic recovery that began in 2014 as Portugal exited a punishing three-year economic adjustment program overseen by the EU and the International Monetary Union. The Portuguese economy has now been expanding for 17 consecutive quarters.

Last year’s estimated GDP growth significantly outstrips the initial 1.6% growth forecast on which the minority Socialist government based its 2017 budget. The stronger-than-forecast growth contributed to a sharp fall in last year’s budget deficit to a record low of 2% of GDP.

The government revised its growth forecasts upwards in its 2018 budget proposals to 2.6% in 2017 and 2.2% this year. Portugal, however, remains at the tail-end of the overall eurozone recovery, with only Italy projected to grow at a slower rate than Portugal this year, according to the European Commission’s winter forecasts.

Statistics Portugal said GDP increased 2.4% in the fourth quarter compared with the same period in 2016 and was up 0.7% on the third quarter.

The economic recovery has enabled Portugal to sharply reduce its budget deficit and exit the EU’s excessive deficit procedure last year. The government expects to have cut the fiscal gap to around 1.2% of GDP last year—the lowest since the country’s return to democracy in 1974—and aims to trim it to 1.1% this year.

Praise From EC 

This week, Portugal has once more come in for praise from the European Commission for its continued strong performances on the economic front. This underlines Portugal’s turnaround in the corridors of Brussels, as it comes less than two years after the EU said Portugal should face sanctions for breaching its deficit target by a mere 0.2%—substantially less than other economies such as France, The Portugal online reported.

At the time, European Commission President Jean-Claude Juncker, questioned the differential treatment being given to Paris and said that the country could infringe targets “because it’s France”.

But upon unveiling Brussels’ Interim Winter Economic Forecast, Commissioner Pierre Moscovici, who is French, was full of praise for Portugal.

He termed the performance of Portugal’s economy during the course of 2017 as having been “remarkable”, after it grew by an estimated 2.7%.

Moscovici further described these latest figures as being “solid and robust”, and emphasized that Portugal has successively performed above economic forecasts. “Portugal is in a spectacular recovery, but it is not yet one of the seven biggest economies in the eurozone,” the commissioner for finance and economic affairs said.

Latest available official figures also showed recently that Portugal was the country that enjoyed the best economic performance between July and September in the eurozone. The acceleration of the economy confounded experts, who had forecast substantially lower growth and had even issued warnings of potential troublesome times ahead.

Growth Above Expectations

Overall, growth rates for the eurozone and the EU also beat expectations last year as the transition from economic recovery to expansion continues. The eurozone and EU economies are both estimated to have grown by 2.4% in 2017, the fastest pace in a decade, and slightly below that which was recorded here in Portugal.

Pierre Moscovici added that “the eurozone is enjoying growth rates not seen since before the financial crisis. Unemployment and deficits continue to fall and investment is at last rising in a meaningful way.”

These figures were followed by news on Thursday that Portugal’s unemployment rate for 2017 was fixed at 8.9%, down 2.2% on the previous year, and even better than the government forecast rate of 9.2%.

Labor and Welfare Minister Jose Vieira da Silva, welcomed the latest figures and was quoted as telling Lusa News Agency that these numbers were “very positive and encouraging for the future”. 

He stressed in particular the “very significant” reduction in long-term unemployment in recent months, as well as the fact that employment has been increasing by more than unemployment is falling, which he attributed to the fact that the active population is increasing and that the country has a greater capacity to create wealth.