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The Competitiveness Forum predicts a recession or "very modest growth" of the Portuguese economy in 2023

🇧🇷[…] the truth is that the fourth quarter presents a certain ambiguity, which will probably disappear in the following quarter”, reads the November economic note from the Forum for Competitiveness, published today, according to which “the 'somewhat surprising development in private consumption' in the third quarter – which accelerated from 0,7% to 1,1% on-chain, despite rising prices and sharply falling wages in real terms – “suggests, to on the one hand, that the savings rate drops and, on the other hand, that it will not be sustainable”.

According to the Forum, “so-called 'soft' indicators, such as confidence, have deteriorated, with only an apparent recovery in November”.

"The few 'hard' indicators are almost all down, with the notable exception of light passenger vehicle sales, noting that private consumption has shown surprising resilience, with consumption of durable goods accelerating by 1,9. 2,1% to XNUMX% in chain, from the second to the third quarter, ”he adds.

In addition to these data, the Forum points to "additional information on the family aid package, delivered in October, which will have distributed around 730 million euros to active people and around 1 billion to retirees" and which may contradict, "in part , the “general slowdown effect” expected for the fourth quarter.

“It seems that most pensioners have realized that this is an advance on next year's increase, in addition to realizing that their pensions will suffer losses, so there is a probability that part of what they receive be saved so that they can meet next year's expenses,” he says.

“All this – he believes – makes the evolution of the fourth quarter uncertain, even if it is almost certain that a deterioration will follow in the following quarters”.

For 2023, the Forum for Competitiveness stresses that "a further fall in real wages is probable, as the rise in nominal wages cannot keep up with the rise in prices", considering that "this fall, associated with an equally probable fall in the employment, should contribute to a major moderation in private consumption, which has shown surprising and unsustainable dynamism”.

“Investment prospects can only be negative, given the expected development of demand, rising interest rates and credit spreads,” he argues.

Regarding exports, the Forum indicates that they are “very conditioned by the weakened external environment and the fact that the recovery of tourism is complete, losing this additional element of growth”.

“In summary, the year 2023 is surrounded by great uncertainty, which can result either in a recession of the Portuguese economy or in very modest growth,” he concludes.

In the current context of sharply rising prices and rising interest rates, the Competitiveness Forum also warns that "delays in the execution of the PRR [Plano de Recuperação e Resiliência] should be particularly damaging", stressing that "the funds are fixed in nominal terms, so the later they are executed, the less investment they will finance”.

Led by businessman Pedro Ferraz da Costa, the Forum for Competitiveness sees itself as “an institution active in promoting increased competitiveness in Portugal, through incentives for the development of productivity in companies”.

PD // EA

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