Unit from Fitch makes upward revision of GDP estimates for Portugal

  • ECO News
  • 6 March 2018

BMI Research is optimistic about Portugal. In spite of having anticipated a "slight deceleration" of economic activity, it made an upwards revision on its growth estimates for 2018 and 2019.

BMI Research, a unit from the group Fitch, made an upward revision of it estimates for the Portuguese economy growth in 2018 and 2019. In spite of anticipating the Portuguese economic activity will “slightly decelerate” in that period, it improved its growth forecasts to 2.3% this year, and to 1.9% in the next.

“Portuguese economic activity will decelerate slightly in 2018-19 following a multi-decade high real GDP growth performance in 2017”, BMI Research starts by saying in a note sent to newsrooms, highlighting, however, that “fixed investment and private consumption will remain relatively buoyant as consumer and business confidence in the economy and the broader eurozone remains strong”.

Given this scenario, Fitch’s unit made an upwards revision of their growth estimates in Portugal for the next couple of years. Their GDP growth forecast moved from 1.9% to 2.3% in 2018, and from 1.3% to 1.9% in 2019. It anticipates, for the long run, a potential growth of around 0.8%.

In this Tuesday’s report, Fitch’s unit foresees that fixed investment will decelerate to 5% this year, and 3% in 2019, far from the 9% increase registered in 2017, remaining “one of the biggest contributors to growth in each year”.

It also foresees that the real estate market will continue accelerating, aided by the increase in construction, and that business investment will “remain strong”: investment has been growing, with special highlight to Google opening up a new support center in Oeiras.

Political prudence will be key

According to BMI Research, “political prudence” should continue playing a major role in “anchoring business confidence”. The unit anticipates a reinforcement in fiscal consolidation, after the debt to GDP ratio fell from 130% to 126% in 2017. BMI Research also anticipates the budget deficit to stand at “just 1.3% of GDP in 2018, and a similar out turn in 2019”. “This will keep creditors onside, and private sector participants confident”, the report explains.

As for the foreseen increase in interest rates following the change in ECB’s stimuli policy, it should not imply a considerable increase in Portugal’s risk premium, “so long as policy remains well-anchored”, Fitch’s unit foresees.