What is the inflation rate in Portugal 2023? And what is the long term inflation forecast for Portugal? The European Commission (EC) has improved the projection of the inflation rate in Portugal to 5.1% this year, expecting a moderation to 2.7% in 2024, reflecting initially energy prices and then food prices. Meanwhile, the Finance Minister has already reacted to the EC forecasts, welcoming the "good news". According to Fernando Medina, the Portuguese economy will be able to "face the adverse scenario" of high inflation. Let's have a closer look at the Portugal inflation forecast, with the latest Portugal inflation news from the EU.
In the spring economic forecasts released on Monday, 15th May 2023, Brussels notes that after reaching 10.2 percent in the fourth quarter of 2022, inflation measured by the Harmonised Index of Consumer Prices (HICP) moderated to 8.4 percent in the first quarter of 2023, a reduction largely driven by lower energy prices, while food prices remained high.
The EU executive believes inflation is expected to moderate further over the forecast horizon, "driven initially by the energy price index and subsequently by food and non-industrial goods". "In 2023, the moderation in food prices is also supported by a suspension of VAT rates for essential food products in Portugal, effective from 18th April until the end of October," it notes.
In previous projections, Brussels forecast an inflation rate for Portugal of 5.4% this year and 2.6% in 2024. On the other hand, in April the Portuguese government forecast an inflation rate of 5.1% this year and 2.9% in 2024.
The European Commission has again revised upwards its forecast for the Eurozone's inflation rate for 2023, to 5.8% from the 5.6% previously predicted, admitting that it is proving "more persistent". Brussels points out that the inflation rate "has again surprised" with its upward trend, so that it is now forecast at 5.8% this year in the single currency area, compared to 5.6% in the previous winter projections, published in February.
For 2024, the forecast is for an inflation rate in the Eurozone of 2.8% when previously 2.5% was expected. For the EU as a whole, inflation is projected at 6.7% this year and 3.1% the next, compared with 6.4% and 2.8%, respectively, in the winter forecast.
Brussels revises Portuguese GDP growth to 2.4% in 2023
Brussels has revised upwards projections for Portugal's economic growth this year to 2.4%, the third highest rate in the Eurozone, helped by tourism, proving more optimistic than the government. In its spring economic forecasts, the European Commission improved its projection for Portuguese gross domestic product (GDP) growth this year from the 1% forecast in February and kept its forecast of a 1.8% rate for 2024 unchanged.
The forecast places Portugal in the top three eurozone countries with the highest growth rate this year, along with Greece, only surpassed by Ireland (5.5%) and Malta (2.4%).
This scenario also places Portugal's GDP growth above the average for the Eurozone (1.1% this year and 1.6% in 2024) and the European Union (1% this year and 1.7% in 2024). The Community executive is thus more optimistic than the Portuguese Government, which in the Stability Programme, delivered in April, points to a growth rate of 1.8% this year.
However, the Government's figures were delivered before the National Statistics Institute (INE) disclosed that GDP in Portugal grew 1.6% year-on-year in the first quarter of this year, which Brussels highlights as being "strongly above the rates recorded in the three previous quarters".
The European Commission notes that domestic demand remained weak in this period, "as private consumption was constrained by the decline in household purchasing power in previous quarters and investors were faced with higher interest rates", so that "the external sector was the main driver", benefiting from the recovery in global supply chains and an improvement in the external balance.
Although growth is expected to weaken in the second quarter, Brussels believes it will improve in the following quarters, with consumption gradually picking up.
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