Portugal pulled out of recession for the first time in over two years in the second quarter on the back of a surge in exports and an improvement in domestic demand.
According to figures released Friday by the National Statistics Institute (INE), GDP in the period April-June jumped a surprising 1.1 percent from the previous three months, the biggest increase in the euro zone, which also emerged from recession at the same time. On a quarterly basis, output in the first quarter had contracted 0.4 percent. The figures confirm a flash estimate released by the INE on August 14.
On an annual basis, growth remained negative in the latest quarter but to a lesser extent than at the start of the year as the decline in GDP eased to 2.1 percent from 4.1 percent. The negative contribution of domestic demand slowed to 2.6 percentage points from 6.1 points in the first quarter, mainly due to a less pronounced contraction in investment of 2.3 percent, compared with 15.9 percent the previous quarter. The fall in household spending eased to 2.6 percent from 4.0 percent, while the extent of the fall in outlays by the government narrowed to 2.8 percent from 3.7 percent.
The positive contribution of net external demand – exports minus imports – slowed to 0.4 percentage points from 1.9 in the first quarter as imports increased 6.3 percent after declining 4.2 percent. Growth in exports accelerated sharply to 7.3 percent from 0.7 percent as a result of higher shipments of goods and services to the European Union, which accounts for about 80 percent of Portugal’s exports, as well as to Angola, Brazil, Algeria, Morocco and China, among others.
Domestic demand made a positive contribution to quarterly GDP growth of 0.8 percentage points with both investment and consumer spending recording positive rates of growth. The positive contribution of net trade eased to 0.3 points from 1.7 points in the first three months of the year as imports increased, while exports rose 5.2 percent.
Total employment in the second quarter declined 4.1 percent after a fall of 5.2 percent in the first quarter. The INE had earlier reported that the jobless rate in the second quarter eased to 16.4 percent from 17.7 percent in the first quarter.
A team of experts from the IMF, the European Union and the European Central Bank, known as the troika, is due to visit Portugal on September 16 to discuss further fiscal adjustment with the center-right government of Prime Minister Pedro Passos Coelho as part of its 78-billion-euro bailout.
The Passos Coelho administration has committed itself to generating further budget savings of 4.7 billion euros, with spending at ministries in terms of goods and services to be cut 10 percent.
According to the Portuguese press, the government wants to renegotiate the fiscal deficit target for this year of 4.0 percent in order not to dampen the economic recovery. However, the opposition fears that Passos Coelho is waiting until after municipal elections are held on September 29 to announce further austerity measures.