Portugal’s central bank has revised this year’s growth estimates downwards, and forecasts for inflation upwards, as a result of the turmoil unleashed by the conflict in the Middle East.
With no real end in sight, the possibility is that this current revision (in the March economic bulletin) will require further revision – very possibly revisions.
As reports are explaining, in December, the bank was pointing to an annual growth for the country of 2.3%. This was in line with the government’s own projections. But these all came before the devastation caused by the winter carousel of storms (which damaged, and in some cases destroyed, multiple businesses) and before the ‘Epic Fury’ military operation which has not just seen the Middle East under daily bombardments, but stymied the free passage of oil to many countries that need it.
As the bank’s text explains, the March revision mirrors “the deterioration of the international context, as a result of the conflict in the Middle East, which has caused a rise in the price of energy and expectations that financing conditions would worsen.”
The bulletin also hazards a forecast for growth in 2027 (1.6%) – which is again lower than it was predicting in December – increasing to 1.8% in 2028.
According to the bank’s previsions, the next two years will be marked by a “deceleration of job offers, and a reduction in European funds.”
As for the increase in the rate of inflation, this was always to be expected. The bank explains that the “dissipation of the impact of the energy shock on prices and the maintenance of anchored long-term inflation expectations are expected to contribute to a reduction in inflation to 2% by 2028”.
Unless, of course, that ‘something else happens’…
Source material: RTP/ Lusa
