EU maintains its forecast for Portugal’s economy, but revises Eurozone growth

  • ECO News
  • 7 July 2021

The European Commission is more optimistic about the Eurozone's economic evolution compared to the last forecasts. However, this has not affected the predictions for the Portuguese economy.

The European Commission has updated its economic forecasts and revised upwards the growth of the Eurozone, from 4.3% to 4.8% in 2021, and from 4.4% to 4.5% in 2022. For the Portuguese economy, Brussels left the forecasts intact at 3.9% in 2021 and 5.1% in 2022.

At this rate of growth, GDP in the European Union and the Eurozone will return to the pre-crisis level by the end of this year, rather than in 2022 as previously stated. In its Summer Economic Forecast released on Wednesday, the European Commission explains that the reopening of the member states’ economies is enabling a stronger recovery.

“The European economy is on track for the fastest growth in decades,” Paolo Gentiloni, European commissioner for the economy, says in a statement, noting that the upward revision of six tenths for 2021 growth is the largest the Commission has made in more than 10 years. But Gentiloni recalls that for the recovery to continue, support must be maintained “for as long as necessary.”

What will generate this GDP expansion? “Growth is expected to strengthen due to several factors,” describe the Brussels technicians, such as the better performance in the first quarter, the progress of the vaccination process, the reopening of the member states’ economies, which is reflected in consumer and business confidence indicators.

“Together, these factors are expected to outweigh the temporary production input shortages and rising costs hitting parts of the manufacturing sector,” they explain. Private consumption and investment will be the drivers of this recovery.

The European Commission also expects the national Recovery and Resilience Plan (RRP) of each country to make a “significant” contribution to the growth of the economy. Experts estimate that the RRP will generate in 2021 and 2022 a total wealth equivalent to 1.2% of the European Union’s GDP in 2019.

The uncertainty and risks surrounding this macroeconomic scenario remain “high”, admits Brussels, but they are “broadly balanced”. The forecasts encompass all the information available up to June 28.