IMF foresees Portugal will suffer a GDP decrease to 2% in the fourth quarter

  • ECO News
  • 10 October 2017

The International Monetary Fund believes the Portuguese economy will decelerate to 2% in the fourth quarter of 2017. In the first quarter, GDP grew 2.9%.

The entity headed by Christine Lagarde estimates the Portuguese economy will have a 2% homologous growth in the fourth quarter of the year. This amount represents a deceleration in comparison to the first semester of the year, but economists already expect it because of the basis of comparison. In the long term, IMF believes the Portuguese GDP will stabilize at 1.2%.

One year ago, in the first half of 2016, the Portuguese GDP decelerated to 1%, and accelerated to 2% in the second semester. One year later, it will be the other way around, precisely due to the comparison basis. Those are IMF’s projections in the October update of the World Economic Outlook: GDP should grow 2% in the fourth quarter of the year, the same variation as the fourth quarter of 2016.

In the first quarter of 2017, GDP accelerated to 2.8%. The  second quarter suffered many upward revisions from Statistics Portugal (INE), having reached 3% — thanks to an upward revision of the 2015 growth. The performance of the Portuguese economy in the first semester led to an upward revision from many entities: the Bank of Portugal, the Public Finance Council and the International Monetary Fund estimate a yearly growth of 2.5% or more.

Portuguese GDP variations according to IMF

Source: IMF

Given the comparison basis for the second semester of 2016 is higher, it is expected that the GDP variation in the second half of 2017 will decelerate — in comparison to the first semester. This prediction is made by the IMF and also by the Public Finance Council and the Bank of Portugal, which foresees a 2% GDP growth in the second half of the year.

As for the latest report on public finance in upcoming years, the entity headed by Teodora Cardoso stated that they projected a 2.7% of GDP growth, which reflects an economic softening during the second half of the year. As for the fourth quarter of next year — in a year when IMF foresees a 2% GDP growth –, IMF believes the GDP will increase 2.3% in an homologous comparison.

On the long run, the International Monetary Fund is not optimistic. “Without more ambitious efforts to solve structural obstacles to investment”, medium-term growth “tends to get close to the 1.2% potential growth”, was stated in the Article IV disclosed last month. IMF added that investment in Portugal needed to increase 6.4% per year in order for the country to have a 2% growth in 2021.

PUB