Portugal exports are expected to grow to 13 percent in 2022 versus 10 percent this year. Leading that charge will be tourism, the Bank of Portugal reports. Will Omicron require a revision on that bullish prediction?
Portugal’s economy is expected to expand by 5.8% in 2022, boosted by growing exports and investment, the central bank said on Friday, urging the country to efficiently use EU pandemic recovery funds to sustain growth.
In its December economic bulletin, the Bank of Portugal said the economy is expected to have grown 4.8% this year, adding activity will reach pre-pandemic levels in the first half of 2022.
Despite a snap general election snap set for Jan. 30, central bank Governor Mario Centeno said “there is no political risk identified in these forecasts.”
However, he said “the efficient execution of projects under the recovery programme and the implementation of associated reforms are key to sustain growth.”
“It would be unforgivable not to take this unique opportunity to boost the long-term pace of growth,” he told a news conference.
Some analysts say the election might fail to resolve an existing political stalemate, which could ultimately complicate the timely arrival and use of the EU funds.
Still, the central bank sees gross fixed capital formation, which measures investment, increasing 7.2% next year, after growing 4.9% this year, supported mainly by European funds.
Exports are expected to grow 12.7% next year, after an increase of 9.6% in 2021, and be led by exports of services, namely tourism.
Tourism, which represented around 15% of GDP before the pandemic, was hard hit by lockdowns and travel restrictions in Portugal and elsewhere in the world in 2020 and 2021.
The unemployment rate is expected to end this year at 6.6%, falling to 6% next year.
Centeno reiterated his call for Portugal to resume the pre-pandemic trajectory of public debt reductions. The debt burden hit a record 135% of GDP in 2020 and the government aims to cut it to 126.9% this year.
(Reporting by Sergio Goncalves; editing by Andrei Khalip and Susan Fenton)
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