INE confirms growth of 4.9% in 2021, the highest since 1990

The Portuguese economy grew by 4.9% last year, the highest value since 1990, after the unprecedented drop of 8.4% in 2020, due to the covid-19 pandemic. Similar to the fourth quarter of last year, gross domestic product (GDP) grew 5.8% year-on-year, compared to 4.4% growth in the previous quarter. The figures were published on Monday by the National Institute of Statistics (INE) and confirm those already put forward by the national statistical authority in the rapid estimate put forward at the end of January.

This is stronger growth than anticipated by economists surveyed by the Express – in January indicated, on average, growth of 4.7% in the fourth quarter of 2021 and 4.4% over the whole of last year – and that what had been projected by the main national and international organizations – projections for 2021 ranged from 4.4% for the International Monetary Fund to 4.8% for the government, Banco de Portugal and the Organization for Economic Co-operation and Development.

Analyzing last year as a whole, the INE points out that “domestic demand made a significant positive contribution to the evolution of GDP, after being significantly negative in 2020, with a recovery in private consumption and investment”. At the same time, “the contribution of net external demand was much less negative in 2021, with significant growth in imports and exports of goods and services”, indicates the INE.

Indeed, data from the national statistical authority indicate a growth in domestic demand of 5% in real terms in 2021, to be compared with a drop of 5.6% in 2020. Thus, the contribution of domestic demand to annual change in GDP went from -5.5 percentage points (pp) in 2020 to 5.2 pp in 2021.

Disaggregating domestic demand, “private consumption (final consumption expenditure by resident households and non-profit institutions serving households) rose 4.4% in real terms, partially recovering from the 7.1 % recorded in 2020”, underlines the INE. And he points out that this development “mainly reflected the behavior of private consumption of current non-food goods and services, which went from a decline of 10.4% in 2020 to an increase of 5.4%”.

Different behavior had the food component, which had risen sharply in 2020, a consequence of the confinement to stop the covid-19 pandemic. The INE reports a slowdown in this component, from growth of 4.8% in 2020 to 1.5% in 2021. The durable goods component increased by 4.6% in 2021 (down 7.7% in 2020), with a slight growth in the automotive component, after the historic decline of the previous year, and a
acceleration of spending on other durable goods.

As for public consumption (final consumption expenditure of general government), the INE indicates that it “has accelerated significantly in real terms” in 2021, with growth of 5% (0.4% the previous year ). But, he recalls that “in 2020, there was a negative impact of the containment measures on the non-market production of this institutional sector, due to the closure of several public services, in particular in the second quarter”.

Finally, investment increased by 7.2% in real terms in 2021, recovering from the 5.7% decline in 2020. According to INE, gross fixed capital formation (GFCF, the key indicator for analyze the evolution of investment) increased by 6.1% (-2.7% in 2020). At the same time, the change in inventories made a positive contribution of 0.2 pp to the annual change in GDP (-0.5 pp in 2020).

A highlight for GFCF in other machinery and equipment, which recorded a significant increase of 11.5% in 2021 (-6.3% the previous year), and for GFCF in transport equipment, “which increased from a significant drop of 27.5% in 2020 to a growth of 2.4% in 2021”, underlines the INE. In the same vein, GFCF in construction accelerated in 2021 to reach a growth rate of 3.5% (1.6% in 2020) and GFCF in intellectual property products increased by 8, 2% (3% the previous year).

On the external front, net foreign demand contributed -0.2 pp to the annual change in GDP in 2021. Although still negative, this value compares favorably to the -2.9 pp contribution in 2020 .

Exports and imports of goods and services increased by 13% and 12.8% respectively in 2021, after the sharp declines recorded in 2020 (-18.6% for exports and -12.1% for imports). The recovery was not limited to goods and extended to services. Exports of goods in volume increased by 11.1% in 2021 (-11.4% in 2020), while exports of services recorded a rate of change of 18.6% (-34% in 2020). In the case of services, “this result reflects the significant increase in the tourism component (variation of 25.5%) after the strong contraction observed in 2020”, indicates the INE, drawing attention, however, that around 50% below the level observed in 2019 .

Exports accelerate in the fourth quarter

Regarding the fourth quarter of 2021, the INE points out that “the contribution of net external demand to the annual change in GDP was positive, unlike the previous quarter, due to the acceleration in the volume of exports of goods and services “. He adds that “there was also a positive contribution from domestic demand, slightly higher than that observed in the third quarter”.

INE figures indicate that in the fourth quarter of last year, net foreign demand made a positive contribution of 0.9 pp to the annual change in GDP, compared to -0.3 pp in the previous quarter. It is the result of an acceleration in exports of goods and services, which went from a variation over one year of 11.9% in real terms, in the third quarter, to 15.8%, while imports of goods and services went from a rate of 12.1% to 12.8%.

As for domestic demand, the positive contribution to the annual change in real GDP was 4.9 pp in the 4th quarter, ie 0.1 pp more than in the previous quarter. By components of domestic demand, in real terms, private consumption accelerated to reach a year-on-year change of 5.2% (3.9% in Q3 2021), public consumption increased by 3.1 % in the 4th quarter (4.4% in the previous quarter) and investment slowed to 5.1% (7.8% growth in the previous quarter).

The National Statistical Authority also draws attention to the fact that “in the fourth quarter of 2021 there was a significant loss in the terms of trade, more intense than in the previous two quarters, due to the pronounced growth of the import deflator, namely energy goods”. and materials. -cousins”.

As for the quarterly evolution of GDP in the fourth quarter of 2021, i.e. compared to the previous quarter, GDP increased by 1.6% in volume, compared with quarterly growth of 2.8% in the third quarter of 2021, “with a decrease in the positive contribution of net external demand to the evolution of GDP”, notes the INE.

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