Positive surprise from Portuguese GDP in Q1
GDP performed better than expected in Q1 2023, rallying 1.6% quarter-on-quarter and 2.5% year-on-year thanks to the buoyancy of the foreign sector, especially tourism.
![EP](/sites/default/files/styles/destacado/public/content/image/2023/05/10/34454/ICO_IM_05_23_PT.jpg?itok=7g1TXzX0)
GDP performed better than expected in Q1 2023, rallying 1.6% quarter-on-quarter and 2.5% year-on-year thanks to the buoyancy of the foreign sector, especially tourism. With these results, GDP now exceeds the pre-pandemic level by 4.3%. This also makes an upward revision of our current growth forecast for 2023 (1%) inevitable, which we will present in the next edition of the Monthly Report. Even if the economy were to stagnate in the next three quarters, growth in 2023 as a whole would still exceed 2.1%. Moreover, the latest data remain positive.
![Portugal: GDP](/sites/default/files/styles/container_1400/public/content/image/2023/05/16/34455/IM05_23_EP_01_en.jpg?itok=KYYrr3Zn)
The National Statistics Institute’s flash indicator revealed a sharp slowdown in inflation to 5.7% (7.4% in March); again, energy products, with a year-on-year rate of –12.7%, account for more than 60% of the decline in the CPI. The core inflation rate also moderated, albeit more timidly, to 6.6%. This dynamic will persist over the coming months due to the base effects in the energy component when compared with months which were marked by sharp price rallies last year.
![Portugal: CPI](/sites/default/files/styles/container_1400/public/content/image/2023/05/16/34455/IM05_23_EP_02_en.jpg?itok=MD1bEER_)
In seasonally adjusted terms, it rose to 4,911,800 people in March, with year-on-year growth of 0.4% (+21,800 people). At the same time, the number of unemployed fell for the second consecutive month, to 362,500 people, and the unemployment rate stood at 6.9%.
In March, 2.1 million visitors and 5.1 million overnight stays were recorded, meaning that for Q1 2023 as a whole, the number of overnight stays exceeded those of the same period in 2019 by 14.1%. In April, the data from ForwardKeys highlight Portugal as one of the countries with the highest growth compared to 2019 in terms of installed air capacity (intra-European flights). If we add to this other exceptional factors (World Youth Day and the growth of tourism originating in the US), 2023 could prove to be a record year, in terms of both visitors and revenues.
![Tourism: overnight stays in Q1](/sites/default/files/styles/container_1400/public/content/image/2023/05/16/34455/IM05_23_EP_03_en.jpg?itok=vybXwVjs)
Following the positive surprise of 2022 (deficit of 0.4% of GDP, versus the 1.9% initially forecast), in the 2023-2027 Stability Programme the deficit forecast for 2023 has been reduced from 0.9% of GDP to 0.4%, with further reductions foreseen in subsequent years before finally achieving a small surplus in 2027. Public debt will also continue to fall, reaching below 100% of GDP by 2025. For the time being, budget execution remains quite favourable: in Q1 there was a surplus of 3.0% of GDP, with revenue growing far in excess of expenditure (7.4% year-on-year vs. 2.4%). As a result, our 2023 budget balance forecast (currently at –0.9% of GDP) is likely to be too cautious.