Bank of Portugal foresees economic slow down in 2020

The Bank of Portugal foresees a GDP rate growth of 1.6% for the next year, 0.1% below March’s forecast, thus anticipating an economic deceleration for 2020. The new macroeconomic scenario for Portugal, released this Wednesday, reveals that the country will return to trade balance deficit on goods and services, something that did not happen since 2012.

For this year, the institution led by Governor Carlos Costa points out an increase in GDP of 1.7%, keeping its March forecast, despite the first trimester results indicating an acceleration. Next year will be different, however, and the Bank of Portugal is not as optimist as it was, projecting a GDP growth of 1.6%.

This new forecast is in line with the Portuguese Public Finance Council and closer to the International Monetary Fund’s projection of a GDP growth of 1.5% in 2020. For that year, the Portuguese Government projected a growth of 1.9%, the same projection for the current year.

For 2021, the Portuguese Central Bank keeps the same projection of 1.6%. If there are no substantial alterations to the growth projections relative to March’s bulletin, the institution expects novelties regarding the trade balance on goods and services, forecasting a negative balance of 0.5% of GDP.

This is particularly relevant because:

1. 2011, the year Portugal requested financial assistance, was last time the country registered a negative trade balance of 3.7% of GDP.
2. Between 2012 and 2018, Portugal always managed to keep it positive.
3. In June’s forecast, the Bank of Portugal foresees the country returning to a negative trade balance.
4. This happens at a time when the Portuguese economy presents high levels of indebtment.

Not everything is bad news, though. Portugal keeps presenting a surplus in its current account and financial account thanks to the reduction of public debt interest rates and the increasing transferences from the EU to the country.