Inflation peaked in the third quarter

  • ECO News
  • 6 October 2022

The Bank of Portugal has revised its estimate for this year's economic growth and inflation rate. The rise in the price index will be the highest since 1993.

The Bank of Portugal has revised its estimate for economic growth this year to 6.7%, up from 6.3% in June. However, the most significant change in the Autumn Economic Bulletin is the inflation. The average annual inflation should reach 7.8%, the highest level since 1993.

The central bank’s latest assessment of the state of the economy points out that “inflationary pressures remain high in the second half of the year” but notes “some signs of relief”. The Bank of Portugal estimates that the change in the price index reached “the highest point in the third quarter (9.5%),” decreasing slightly at the end of the year.

Stressing that “business owners’ price expectations have seen a turnaround in the recent period,” the publication refers to chain falls in oil prices, slowing activity and the fading of constraints in supply chains as factors contributing to easing inflationary pressures.

The entity led by Mário Centeno estimates a slightly more robust growth of the economy than it anticipated in June, improving by four-tenths the forecast for the evolution of GDP in 2022, now placing it at 6.7%. In the previous year, the economy grew by 5.5%.

The economy benefited this year from the recovery of tourism and private consumption (5.5%). The latter benefited from the “good performance of the labour market, reflected in the dynamism of employment and nominal wages, as well as in the increase of the activity rate to historically high levels”. The resilience of private consumption also derives from channelling part of the savings accumulated by families during the pandemic crisis into expenditure.

The investment is expected to decelerate, growing by only 0.8% in 2022, compared to 8.7% in 2021.