Investment in health falls by 33%
Fernando Medina Image: António Pedro Santos/ Lusa

GDP growth, 4% May inflation “bode well for rest of year”

Finance minister welcomes “good news for Portuguese economy”

Finance minister Fernando Medina has welcomed the good news coming in today, showing a decline in the rate of inflation for May, and confirming first quarter growth in the Portuguese economy.

Reacting to data released by National Statistics Institute INE, he said the news opens up “good prospects for 2023”.

Growth domestic product (GDP) from January to March showed an increase of  2.5% year-on-year and 1.6% quarter-on-quarter, while the evolution of the Consumer Price Index (CPI) showed a fall from April’s 5.7% to just 4% this month.

Medina explained that the GDP figure stands as  “confirmation of the growth of the Portuguese economy essentially driven by exports”: “Exports of services, especially tourism, but also exports of goods, that is, Portuguese industry showing a very significant capacity to advance in relation to its export markets and, with this, contributing to the increase of wealth in our country”, he told Lusa

With regard to the drop in inflation in May – this is what is known as a ‘ flash estimate’ (to be confirmed later next month). Medina said “inflation has already been falling for several months (…) This reinforces our expectation that we will soon have months with inflation below 3%” and “it is very important for families, as it tends to stabilise their prospects regarding purchasing power and the decisions they have to take.

“What this data indicates is that we are on our way to a situation that is much more stabilised, much more predictable and much less turbulent, from the point of view of price evolution, than the one we experienced over the last year and that is of the utmost importance,” he stressed, adding: “The outlook that we had of having several months throughout this year with inflation below 3% becomes more solid today”.

Portugal’s finance minister also referred toINE data on the labour market, which “shows that not only employment continues to grow (the employed population in the first quarter of this year, compared to last year, continues to grow), but also salaries: remunerations declared to social security in the first quarter of this year are up 8%”.

Thus, he noted, there is “a very important group of Portuguese people (who) are having salary increases that are already above the inflation forecast for this year, which is important to mitigate the loss of purchasing power that they had throughout 2022”.

And finally, to “the evolution of family confidence indicators”, which in May increased to a maximum since February 2022 (when the world economy was battered by Russia’s full-scale invasion of Ukraine). Medina said that he believes improved confidence “ also results from the “important response” that the government has given “regarding support and (cash) transfers to families”.

His actual words were: “I highlight here the importance of budgetary policy and of what was done from the point of view of transfers and support to families, because this support to stabilise incomes and reduce the loss of purchasing power, which obviously the context of inflation brings, was very important in stabilising incomes and family expectations,” he said.

Source material: LUSA