Portuguese economy to grow 3.9% in 2021

The country’s Central Bank updated on Monday its economic forecasts for Portugal over the next three years. In 2020, the economy is expected to contract by 8.1%, but recovering 3.9% in 2021.

The Central Bank’s economic bulletin maintains the same forecast for 2020 (-8.1%), but revises GDP growth downward in 2021 (5.2% in June). Moreover, the 3.9% growth rate is below the 5.4% forecast by the Portuguese government, a figure which is the basis for the 2021 State Budget projections. The BoP’s projections “assume that the restrictions are gradually withdrawn from Q1 2021, although the activity will remain conditioned until early 2022, when an effective medical solution will be fully implemented.”

In the following years, the Bank of Portugal foresees an acceleration in 2022 with an economic growth of 4.5%, which compares with the 3.8% estimated in the June economic bulletin. In 2023, the last year of this forecasting exercise, the economy should recover by 2.4%. “Economic activity should resume the level before the pandemic at the end of 2022”, forecasts, in line with the forecasts of other institutions.

For 2020, the Central Bank agrees with most economists: the recovery was stronger in Q3 than expected, “but the pandemic’s evolution and the containment measures led to a downward revision of activity in the fourth quarter”. The governor of the Bank of Portugal, Mário Centeno, made it clear at the press conference that he expects GDP to contract (quarter-on-quarter) in Q4.