Bank of Portugal: summer forecasts

Yesterday, the Bank of Portugal published its summer forecasts for the Portuguese economy. Projections are under high uncertainty due to recent internal developments and to the required resilience to implement the economic and financial adjustment programme, says the Bank.

The Bank of Portugal revised up its projection for GDP in 2013 (-2.0%, against higher values predicted by most institutions), on the back of higher than expected growth of exports. The Bank points to 4.7% exports’ growth in 2013; in May, the OECD and the European Commission predicted only 1.4% and 0.9%, respectively. The good performance of international trade in goods in April and May led analysts to eventually foresee a higher contribution of net exports to GDP, anticipating higher activity in the second half of 2013. Those effects are likely to already materialize in Q2 2013, with confidence indicators and industrial production pointing that way.

Forecasts for GDP in 2014 were revised down to 0.3%, somehow in line with other institutions, due to the measures of fiscal consolidation, meanwhile known in more detail. However, projections for exports in 2014 remain high in 5.5%, being the major contribution to growth, although under risks of failing to materialize.

The performance of international trade will also revert in a strengthening of net lending, crucial to regain international credibility and assure debt sustainability.

Inflation, as expected by all institutions, is seen to be less than 1% both in 2013 and 2014.

These forecasts are relatively good news for 2013 but very sensitive. Numbers are subject to change face to new developments in the political arena.