A waitress removes drinks from a table at a restaurant in Lisbon, Portugal, June 6, 2022. Picture taken June 6, 2022. REUTERS/Pedro Nunes/File Photo
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July 29 (Reuters) – Portugal’s economy slowed in the second quarter after a very strong start to the year, with inflation at a three-decade high weighing on private consumption, official data showed on Friday.
The National Institute of Statistics (INE) said in its flash estimate that gross domestic product (GDP) shrank by 0.2% in the second quarter of 2022 from the previous three-month period when it grew by 2.5%, due to “the negative contribution from the domestic market Demand” – private consumption and investment – to GDP.
Still, net exports of services rose, including the key sector of tourism, which accounted for almost 15% of GDP before the pandemic.
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INE said the economy grew 6.9% from the same period last year, well below the 11.8% recorded in the previous quarter.
Filipe Garcia, an economist with advisers at Informacao de Mercados Financeiros, attributed the quarterly drop in consumption to rising food and energy costs following the Russian invasion of Ukraine.
“This not only reduces the Portuguese’s self-confidence, but also forces them to change their shopping basket,” he said.
INE said separately that consumer prices rose 9.1% yoy in July, the fastest pace since November 1992, and from 8.7% in June. Core inflation, which excludes volatile food and energy prices, rose 6.2%.
The tourism industry’s recovery from the pandemic is likely to offset the impact of higher prices, and the economy is still likely to expand significantly over the course of the year, Garcia said.
“Nevertheless, this year the Portuguese economy remains in good shape, consolidating its position as one of the fastest growing in Europe,” he said.
Last month, the Bank of Portugal raised its growth forecast for this year to 6.3%, up from the 4.9% forecast in March, helped by tourism, which is and is still recovering almost to pre-pandemic levels solid private consumption growth.
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Reporting by Sergio Goncalves and Mariana Ferreira Azevedo, editing by Inti Landauro, Kirsten Donovan
Our standards: The Thomson Reuters Trust Principles.
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