Week Ahead & in Review: Bank of Portugal sess stronger growth in 2016 and 2017

The Bank of Portugal updated its forecasts for Portugal until 2016 and presented the first predictions for 2017. GDP growth was revised 0.2 pp to 1.7% in 2015 due to better prospects in domestic demand, namely private consumption. In 2016 and 2017 growth is seen at 1.9% and 2%, respectively. The evolution of economic activity within this horizon is mainly caused by a sustainable growth in exports and a moderate recovery in domestic demand, namely investment. These projections are conditional on a strong rise assumed for external demand, sovereign bonds yields under control and a mild rise in oil prices, though well below 2014 average levels.

Despite stronger prospects, the Portuguese economy remains affected by several structural bottlenecks that need to be eased in order for trend growth to rise, namely the high leverage rates of the private sector.

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The Portuguese economy net lending was 1.9% of GDP in the 4th quarter of 2014, 0.5 percentage points (p.p.) less than in the previous quarter, according to the quarterly sectorial accounts released by the National Statistics. This reduction was motivated by the decrease of the current savings of the economy, as a result of the decrease of 0.4% in Gross Disposable Income. The annual net borrowing of the General Government rose from 4.4% of GDP in the 3rd quarter (12-months cumulated) to 4.5% in the whole year 2014. For the year 2013, the Government’s net lending of was 4.8% of GDP.

Week ahead: Data should be consistent with an ongoing moderate recovery in Europe. The labour market is also likely to improve but at a slower pace.

. 30 March: Portuguese Industrial Production (Feb 2015) – National Statistics: the January figures may have been affected by the weekday new year fell on. The February data will give a better idea of whether the January negative surprise was just a giltch or it was signalling a slowdown.

. 30 March: ESI (March 2015) – EU Commission. Exepect a small rise in most countries, also partly related to the news of QE by the ECB

. 30 March: Portuguese Employment and Unemployment (Feb 2015) – National Statistics

. 31 March: EU unemployment (Feb 2015) – Eurostat

. 31 March: Credit issued by the financial sector (February 2015) – Bank of Portugal

. 02 April: ECB minutes of previous meeting to be released