Not only did the Portuguese economy not contract in the beginning of 2022 because of the war, it actually accelerated. GDP grew by 2.6% quarter-on-quarter and 11.9% year-on-year.
Following growth of 4.9% in 2021 and despite the impact of the war from the end of February, the Portuguese economy grew by 2.6% quarter-on-quarter (versus the fourth quarter) in the first quarter of this year, according to INE’s flash estimate released this Friday. In year-on-year terms, GDP grew by 11.9% after contracting in the first quarter of 2021 and 2020.
The Government is expecting GDP growth of 4.9% for 2022, 0.7% above the pre-pandemic level, in line with the Bank of Portugal (4.9%) and the Public Finance Council (4.8%). However, there are institutions with more conservative forecasts, such as the International Monetary Fund (IMF) which points to 4%.
It was private consumption that gave this unexpected boost to GDP during the first three months of 2022. “Compared to the fourth quarter of 2021, GDP increased by 2.6% in volume (1.7% in the previous quarter), with a more intense contribution of domestic demand to the quarter-on-quarter rate of change of GDP, partly due to the acceleration of private consumption, while the contribution of net external demand remained slightly positive,” INE explains.
Thus, contrary to what was expected by most economists who pointed to a slowdown of the economy in the first quarter, the Portuguese GDP has actually shown signs of growth compared to the fourth quarter of 2021 and exceeded all forecasts.
“Gross Domestic Product (GDP), in real terms, registered a year-on-year rate of change of 11.9% in the first quarter of 2022 (5.9% in the previous quarter),” INE reveals, explaining that “this evolution in year-on-year terms reflects a base effect, since, in January and February 2021, several measures to mitigate the pandemic were in place that conditioned economic activity.”
The statistics office said the contribution of domestic demand, particularly private consumption, to the year-on-year rate of change of GDP increased. As for net external demand, there was also a greater contribution due to the rise in exports of goods and services, “reflecting the rebound in tourism activities.”