GDP maintained its growth rate with an increase of 0.7% at the start of the year – Situation

The Portuguese economy did not lose pace and remained to grow in a chain of 0.7% in the first quartersimilar to what occurred in the final quarter of last year, marked by surprising growth supported by household consumption.

According to the first quick estimate from the National Statistics Institute (INE) for the first quarter, published this Tuesday, the variation compared to the same period last year was 1.4%, after a year-on-year variation of 2.1% in the fourth quarter of last year. This year-on-year comparison, however, is hampered by the high base on which GDP was placed in the first quarter of 2023, when the Portuguese economy advanced 1.5% quarter-on-quarter (2.5% compared to a year before) on the back of a strong recovery in exports of services associated with tourism.

According to the INE note, the chain growth now recorded once again benefited from the contribution of external demand, something that has not happened since spring of last year. According to INE, this reflected “the slowdown in imports of goods and services that was more pronounced than that in exports of goods and services”.

However, the contribution of domestic demand was reduced, indicates INE in this first reading that has not yet been detailed. Although household consumption grew more than in the final quarter of 2023, accelerating, there was a drop in investment compared to that period.

When comparing the evolution of activity in these first three months of 2024 with that which occurred in the same quarter a year earlier, investment still rises. In this comparison, the contribution of domestic demand to growth is now lower than it was a year ago and the contribution of external demand is zero.

The 0.7% growth in the period from January to March confirms the forecast for this quarter by the Bank of Portugal (BdP), which expects an average annual GDP increase of 2% in 2024. The Ministry of Finance is less optimistic by Joaquim Sarmento, who pointed to just 1.5% annual growth in the Stability Program – in invariant policies – delivered this month in Parliament, as well as the Public Finance Council (1.6%).

Among international institutions, the International Monetary Fund projected 1.7% growth this month. The European Commission and the Organization for Economic Cooperation and Development still expect 1.2% in the latest forecasts they published, which will be updated in the coming weeks.