Economy posts €2.204B external deficit 9M22

The Portuguese economy recorded an external deficit of €2.204 billion to September, compared to a surplus of €1.042 billion in the same period of 2021, the Bank of Portugal (BdP) said on Friday.

According to the BdP, in September the current and capital accounts reached a surplus of €285 million, which corresponds to an increase of €326 million compared to the same month of 2021.

In the balance of goods, there was an increase in the deficit, of €764 million, “explained by a higher growth in imports than in exports compared to September 2021 (year-on-year rates of change of 29.8% and 24.3%, respectively)”.

This reduction in the goods balance in September “was more than offset by the evolution of the services balance, especially the increases in exports and imports, up 46.8% and 14.2%, respectively against September 2021,” the BdP noted.

The main contributor to these increases was the travel and tourism sector, where exports and imports grew 72.2% and 29.6%, respectively, year-on-year. The surplus in this item rose by €857 million, to €1.762 billion.

The remaining components of the current and capital accounts showed “less expressive” developments in the month of September, highlighting the decrease in the surplus of the secondary income account, by €114 million and the increase in the surplus of the capital account, by €98 million.

In the year to September, in which the Portuguese economy posted an external deficit of €2.204 billion, BdP highlights the increase in the goods account deficit, with imports growing more than exports (35.9% and 24.3%, respectively) and the rise in the services account surplus, mainly due to growth in the travel and tourism sector.

The deficit of the primary income account increased, due to the increase in net payments of investment income, namely in the form of dividends.

In the first nine months of the year, according to the BdP, “the lower allocation of European funds to final beneficiaries determined the reduction of the surplus of the secondary income account and the capital account”.

“The sharp reduction in the capital account surplus was also due to the exceptional receipt, in July 2021, of the return of the financial margin related to the Economic and Financial Assistance Programme,” it adds.

With regard to the financial account, until September 2022 it recorded a negative balance of €1.5 billion, “reflecting an increase in liabilities to the outside (€10.9 billion) greater than the increase in assets (€9.3 billion)”.

According to the BdP, the change in liabilities in this period is essentially explained by growth in foreign direct investment in Portugal, particularly real estate investment; increases related to investment by non-residents in Portuguese public debt and debt securities issued by non-financial companies; increases in deposits by non-residents with resident banks; and reductions in liabilities of the BdP with the Eurosystem.

The increase in assets “was largely due to investments by banks and insurance companies in long-term securitised debt issued by non-resident entities”.

In the month of September 2022, the financial account balance was €190 million, as a result of an increase in assets, of €3.1 billion, higher than the growth in liabilities, of €2.9 billion.

“The increase in assets is mainly explained by residents’ investment in debt securities issued by the rest of the world and the increase in residents’ deposits abroad,” explains the central bank.

As for liabilities, the growth was mainly due to the increase in TARGET (Trans‑European Automated Real‑time Gross settlement Express Transfer system) liabilities and direct investment made in Portugal, especially securitised debt.

According to the BdP, these increases were partially offset by the reduction in loans obtained by the central bank.

The balance of payments statistics will be updated by the central bank on 20 December.