Net lending of the Portuguese economy rose to 1.5% of GDP in the first quarter of 2017


Page created: Friday, 7 July 2017 14:50 GMT | Updated: Tuesday, 11 July 2017 14:56 GMT

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The unemployment rate fell to 9.4% in May 2017

In the first quarter of 2017, the Portuguese economy’s net lending rose to 1.5% of GDP. This development resulted from an improvement in the contribution of general government and non-financial corporations. In May, the unemployment rate dropped back to 9.4%, as did inflation, which fell to 1.5%. The IMF and Banco de Portugal improved the economic outlook.

In the Quarterly National Sector Accounts of the first quarter of 2017, INE registered a 0.1 pp rise in the economy’s net lending to 1.5% of GDP, through an improvement in the contribution of general government and non-financial corporations. The external balance of goods and services decreased by 0.2 pp to 1% of GDP, due to an increase in exports of goods and services of 3.2%, which was lower than the growth in imports of 3.7%.

According to the definitive estimate of INE – Statistics Portugal, the unemployment rate fell to 9.5% in April 2017. In May, the unemployment rate decreased again to 9.4%, which corresponds to a reduction of 1.8 pp in year-on-year terms. The unemployed population was 484 800 people, corresponding to a decrease of 5 900 people from the previous month. The employment rate stood at 59.8%, although the employed population fell to 4 658 900 people corresponding to a decrease of 4 600 people in comparison with the previous month.

The Consumer Price Index (CPI) registered a year-on-year change of 1.5% in May 2017, which corresponds to a reduction of 0.5 pp compared to the previous month. The underlying inflation indicator, CPI excluding energy and unprocessed food products, registered a year-on-year change of 1.2%. The Harmonized Index of Consumer Prices, which serves to compare prices between the different countries of the European Union, registered a year-on-year change of 1.7%, higher than in the Euro Area and in the European Union, 1.4% and 1.6%, respectively.

The Monthly Coincident Indicator of Banco de Portugal (Portuguese Central Bank) for Economic Activity increased again in May, while the Indicator for Private Consumption stabilized. The OECD Index of Composite Indicators fell again slightly, presenting the value of 99.89. This sets itself for the second consecutive month to a figure below 100, which may indicate a slowdown in economic activity in the next six to nine months.

Banco de Portugal (Portuguese Central Bank) has released projections for the Portuguese economy in the period 2017-2019, where it expects a GDP growth of 2.5% for this year, and 2% and 1.8% for 2018 and 2019, respectively.
It is estimated that this growth will be driven by the contribution of net exports of 1.8 pp in 2017 and 1.2 pp in 2018. Domestic demand also sustains this growth with the increase in gross fixed capital formation of 8.8, 5.3, and 5.5 in the next three years.

The IMF published the report after another visit to Portugal, under Article IV of the IMF’s Articles of Agreement, in the context of a request to use IMF resources. The Fund’s technicians predict that the country will grow 2.5% this year and 2% by 2018, primarily through domestic demand based on the growth of gross fixed capital formation. In the budget area, the IMF forecasts a deficit of 1.5% of GDP for 2017 and 1.4% for next year, as well as the continuous reduction of public debt, which will reach 122.6% of GDP by the end of 2018. The Fund underlines the effort to stabilize the banking system and reduce bad credit, and considers it fundamental to improve financial intermediation and increase the country’s growth potential. It also stresses the need to pursue structural reforms that increase investment and productivity.

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