Week ahead & in review

The autumn forecast from the EU Commission points to a continuing moderate recovery in the euro area, with GDP growing 1.6% in 2015 and 1.8% and 1.9%, respectively, in 2016 and 2017. These forecasts surge in a scenario of cooling in emerging markets and in global trade, and a fading positive impact from the decline in oil prices and the euro depreciation.

For Portugal, the EU Commission says the economy continues to consolidate, driven moreover by the recovery in domestic demand, and less by exports. Private consumption and investment are expected to slow down, although the growth rate of the latter is predicted to be high. GDP growth is seen broadly in line with other international institutions, although below the Bank of Portugal and the Portuguese Public Finance Council forecasts from 2016 onwards. Private sector debt and political uncertain are referred as important risks to the short term outlook. As for fiscal policy, the Commission report says that While the general government deficit is expected to reach 3.0% in 2015, the structural deficit is forecast to increase in 2015 [from -1.4% to -1.8% of potential GDP] and, under the no-policy-change assumption, also in 2016 [-2.3%]. Risks are entitled to the downside and include the economic risks referred, the uncertain and deadlocks in the political situation, which may harm consolidation measures for 2016 and 2017 and eventually reverse important policies undertaken so far.

The National Statistics released the Q3 unemployment rate, which has remained at the same value of Q2: 11.9% of the labor forece, down from the 13.1% recorded in the homologous period. The unemployed population was estimated at 618.8 thousand people, less 1.6 thousand people compared with Q2 2015. Employment fell 0.1%qoq but rose 0.2%yoy.

Industrial Production data was also positive in September, with the aggregate index rising 3.8%yoy and manufacturing increasing 2.8%. In the whole third quarter of 2015, the aggregate index rose 2.7%yoy, 0.5 pp above the Q2 rate, which gives a positive sign for Q3 GDP.

 

Week ahead

The political uncertainty continues in Portugal and will undoubtedly impact on household and business confidence. Furthermore, it is likely to affect Q4 GDP negatively and contribute to a slower fiscal consolidation. The Government’s programme is going to be presented in the Parliament early next week and it is likely to be rejected by the remaining three parties (the election’s second classified Socialist Party and the far left Bloco de Esquerda and the Communist Party), who are trying to reach an agreement for an alternative government.

Other events in the coming week:

November, 9

  • Portuguese International Trade in Goods (September) – National Statistics

November, 11

  • Consumer Price Index (October) – National Statistics

November, 13

  • Quarterly National Accounts Q3 – National Statistics
  • Flash Estimate EU and euro area GDP – Eurostat
  • Tourism activity (September) – National Statistics