Central bank cuts Portugal’s GDP forecast for 2022 to 4.9%

The Bank of Portugal (BoP) revised downwards the country’s GDP for 2022, from 5.8% to 4.9% due to the war in Ukraine.

In its new economic bulletin, the Bank of Portugal (BoP) downgrades Portugal’s economic growth to 4.9% in 2022, below the 5.8% it forecast in the December bulletin. The central bank admits this Thursday that “the Russian invasion of Ukraine contributes to limiting economic momentum.” In the adverse scenario made by the BoP, GDP growth stands at 3.6% this year.

“The Portuguese economy will maintain a growth profile in 2022-24, amid heightened uncertainty associated with the conflict in Ukraine,” write the central bank’s economists, anticipating that “gross domestic product (GDP) will grow by 4.9% in 2022, 2.9% in 2023 and 2.0% in 2024, benefiting from larger inflows of EU funds and continued favourable financial conditions.”

The forecast released by the Bank of Portugal reflects “the negative impact on activity stems from even higher commodity price increases, reduced confidence among economic agents, financial market turmoil and the effects of trade and financial sanctions imposed on Russia.”

The central bank also informs that the Portuguese economy grew less than expected in the fourth quarter of 2021 and that in the first quarter there were “weaker indicators” due to the fifth wave of the pandemic. Added to this is the “reduced purchasing power due to inflation and less favourable external assumptions”.

However, “underlying the projections is the assumption that the conflict will not escalate and that the impact of these factors and global supply constraints will unwind in the medium term”.