Investment and exports boost Portuguese economy

The drop of investment and domestic consumption slowed down during the second quarter of 2013, leading to a more positive performance of the Portuguese economy and putting a stop to the technical recession period that the country had been going through since 2010.

The data released by the National Statistics Institute (INE) on September 6 confirmed the Gross Domestic Product’s (GDP) variation figures, which had been revealed in a quick estimate presented by the INE in August – Portugal’s GDP increased 1.1% in the second quarter of the year compared to the previous quarter.

Compared to the same period last year, there was a slight decrease in the GDP variation, from -2% to -2.1%.

However, the main difference regarding the numbers now released by the INE and those presented earlier is an explanation about which GDP components contributed to the total result. According to the statistics institute, the key factor was domestic demand (the level of investment plus the level of consumption), whose decrease went from 6% in the first quarter of the year to just 2.6% in the second. This means that whilst domestic demand is still on negative ground, the indicator is looking up compared to the first three months of the year.

This trend was most noticeable in the country’s level of investment, which went from a 15.9% drop to a 2.3% decline, mainly due to an increase in investment in the building sector.

Exports were also up by 5.5% in July compared to the same period of 2012, and registered a staggering increase of 9.6% compared to June 2013. Despite the record rise, its effect on the variation of GDP wasn’t as strong, as imports also decreased. Therefore, the contribution of net external demand (the level of exports minus the imports) was smaller, going from 1.9% in the first quarter of the year to just 0.4% in the second.