The BdP holds on to its prediction of the country's GDP growth at 2.3% this year. However, the regulator considers the growth will happen mostly due to private consumption rather than investment.
The Bank of Portugal’s expectations for the economic growth in Portugal remain at an estimated 2.3% GDP growth for the current year. Carlos Costa’s regulatory body has the same estimate for the economic growth as the Portuguese government, but it considers that investment is key to reinforce the economy and boost potential growth.
According to October’s economic bulletin, published this Thursday, the gross fixed capital formation (GFCF) shall grow by 3.9% this year after it had grown by 9.2% in 2017. This means that all in all, private and public investment are expected to increase by only 42%. In June, when the last economic bulletin from the BdP was released, the prospects for investment were higher, at a 63% growth in comparison to last year.
The deceleration is mainly connected to the worsening of prospects in the construction sector, which had been pumping in the last year, mostly due to the increase in tourism. “Investment in housing has slowed down in this period (first semester), which was mostly the effect of the adverse meteorological conditions in the first trimester of the year. The deceleration in GFCF for the construction sector was influenced as well by the increase in public works in 2017”, the BdP wrote.
In the bulletin, the BdP considered that “the [public] investment growth is performing below the estimated levels”. On the stability programme, the government announced it estimated public investment to grow by 28.7%, but in the first semester, the growth in public investment had only hit 6.3%. However, these numbers still represented an increase in comparison to last year’s values.
The review of the investment growth estimates to a lower level has made the bank also readjust its estimates for imports, as while in June the BdP expected imports to grow by 5.7% and now it estimates a 5.1% growth.
As for exports, the BdP is also less optimistic now. The sales of goods and services shall grow 5% this year, in comparison to the 7.8% growth registered in 2017. In June, the BdP saw exports decelerate by 5.5% – less than in October. However, the exports are still gaining market share.
Private consumption, on the other hand, is expected to grow more than in June.
The new prospects of the BdP are updating many of the numbers for 2018. In December, the BdP will update the estimates for next year’s economic growth. The updates, for now, show that the Portuguese economy will grow less than last year when GDP growth hit 2.8%.
However, in comparison to the ECB’s predictions for Europe, Portugal is three percentage points above the Euro area GDP growth rate this year.