Economic outlook, analysis and forecasts

Portugal - Economic forecast summary (June 2016)


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Moderate growth is projected for 2016 and 2017. Private consumption will strengthen mildly due to lower unemployment, a higher minimum wage and reversals of public sector pay cuts. However, job creation will be too weak for consumer spending to expand at its current pace beyond 2016. High corporate leverage and weak bank conditions have been holding back investment. In 2017, investment will partly recover and somewhat compensate the loss of momentum in consumption.

Recent fiscal policy changes are likely to raise disposable incomes, particularly benefitting low-income households. Public debt remains high and putting it on a declining path may require further fiscal consolidation measures.

Structural bottlenecks hold back productivity growth. Recent simplification efforts to cut red tape are welcome. More determined policy action to tackle high corporate debt would boost investment and – together with stronger competition in non-tradable sectors – accelerate resource reallocation and productivity growth. Territorial development reform would further improve the business climate. Increasing education attainments and skills, including by strengthening the links with the private sector and developing vocational education and training, would boost productivity.

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