The Portuguese Economy October 2017 Carlos Andrade Chief Economist, Novo Banco ,
The Portuguese economy, with a nominal GDP close to EUR 192 billion, has its activity mainly (but not exclusively) focused on services. GDP per capita and GDP per person employed GDP per capita and GDP per person employed Gross Value Added by sector, 2016 (%). (PPS, EU average = 100). 85 79.4 80 78.9 75 Agriculture, Agriculture GDP GDP per capita it forestry and 70 fisheries Industry 65 2% 14% 60 Other services activities 55 30% 30% Energy, water and 50 GDP per person employed sanitation 5% 45 40 Construction 4% 35 1960 1960 1968 1968 1976 1976 1984 1984 1992 1992 2000 2000 2008 2008 2016 2016 Global well being index (2004 =100). Distribution and vehicle repairs; 140 Quality of life accomodation and 131.5 Financial services, Financialservices restaurants restaurants 130 130 (h (health, education, work-life l h d i k lif insurance and real 20% balance, happiness, etc.) 120 estate 17% 110 Transport and 100 warehousing; information 90 90 87 6 87.6 M t Material well being i l ll b i services and communications 80 ( income, poverty, employment, 8% Indebtedness, etc.) 70 60 50 50 40 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Sources: INE, PORDATA, AMECO, NB Economic Research. 1
A sustained recovery is under way. GDP increased 3% YoY in Q2 2017, with strong YoY growth in exports and fixed investment. Economic Sentiment Indicator vs. GDP growth g GDP growth (% QoQ and YoY) GDP growth (% QoQ and YoY) . (points and % YoY) . 4 120 QoQ YoY GDP (LHS) 3 115 Q3'16 Q4'16 Q1'17 Q2'17 Q3'16 Q4'16 Q1'17 Q2'17 2 2 110 110 Private Consumption 0.4 1.1 0.9 -0.5 1.9 3.0 2.3 2.1 1 105 0 100 Public Consumption -0.8 0.1 0.0 0.0 0.2 0.0 -0.4 -0.9 -1 95 Investment -2.8 6.1 0.0 4.5 -1.8 3.6 7.7 9.3 -2 2 90 90 Exports 2.5 2.7 2.9 -0.1 5.5 6.6 9.5 8.2 ESI (RHS) -3 85 Imports -0.1 4.8 1.9 0.1 3.9 7.7 8.8 7.5 -4 80 -5 75 GDP 0.8 0.8 1.0 0.3 1.7 2.0 2.8 3.0 2006 2006 2008 2008 2010 2010 2012 2012 2014 2014 2016 2016 Consumer confidence (net balances) and private Business confidence indicators (net balances) . consumption coincident indicator (% YoY) . 4 10 40 Coincidentindicator (LHS) 3 3 Manufacturing Manufacturing 0 Services 20 2 1 -10 0 0 -20 -1 -20 -2 2 -30 -3 -40 -40 -4 -5 -60 Construction -50 -6 Consumer confidence (RHS) Cons merconfidence(RHS) -80 -7 -60 2008 2010 2012 2014 2016 2001 2003 2005 2007 2009 2011 2013 2015 2017 Sources: INE, European Commission, Bank of Portugal, NB Economic Research. 2
Private consumption growth supported by rising disposable income (with higher wages and lower unemployment). Household disposable income vs. consumption Unemployment rate (% of labour force monthly data) Unemployment rate (% of labour force, monthly data). (EUR billion and % change, nominal values) . 20 135 Q2 2017: 18 Disposable Income +3.0% YoY 130 +0.9% QoQ 16 125 14 Aug 12 2017: 120 8.9% 10 Q1 2017: 115 8 +3.4% YoY +0.9% QoQ 0.9% QoQ 6 6 110 Consumption 4 105 2 0 100 2000 2002 2004 2006 2008 2010 2012 2014 2016 2006 2008 2010 2012 2014 2016 Consumer Survey Employment expectations in manufacturing and services Major purchases over the next 12 months (net balances) . (net balances). 10 20 September 10 5 Manufacturing 0 0 -10 -5 -20 -10 -30 -15 Services -40 -20 -50 -25 -60 2008 2010 2012 2014 2016 1990 1994 1998 2002 2006 2010 2014 Sources: INE, GPEARI, European Commission, NB Economic Research. 3
Business fixed investment is supporting the ongoing recovery. Industrial production and services turnover Production and imports of investment goods (% YoY) Production and imports of investment goods (% YoY) . (% YoY, 3m MA) . 10 25 7.0 Industrial Production Imports of capital goods 20 (August) 5.7 5 (August ) 15 15.2 15 2 0 10 8.0 5 -5 0 -10 10 -5 5 Services Turnover S i T Investment goods (August) -10 production (August) -15 -15 -20 -20 2010 2011 2012 2013 2014 2015 2016 2017 2006 2008 2010 2012 2014 2016 Construction activity indicator and cement sales Gross fixed capital formation (% YoY) . (% YoY, 3m MA ) . 30 10 Q2 Q3 Q4 Q1 Q2 Cement (RHS) Cement (RHS) 2016 2016 2016 2016 2016 2016 2017 2017 2017 2017 20 5 September GFCF -2.2 -0.1 5.2 9.6 10.3 10 - Of which: - -5 Transportation -10 3.4 3 4 0 6 0.6 14 6 14.6 10 6 10.6 33 1 33.1 equipment -10 -20 Machinery & -2.4 7.0 12.3 17.6 12.7 -15 equipment -30 Construction (LHS) -20 -40 Construction -3.9 -3.4 1.5 8.6 9.5 August -50 -25 Intelectual -0.3 -1.8 1.4 0.3 -2.3 2011 2012 2013 2014 2015 2016 2017 property Sources: INE, GPEARI, European Commission, NB Economic Research. 4
Strong growth in exports of tourism services is giving a significant contribution to economic activity. Goods and Services exports (% YoY 3m MA) . Goods and Services exports (% YoY, 3m MA) . Exports of tourism services (% YoY nominal growth) . Exports of tourism services (% YoY, nominal growth) . 1 st Semester 2017 30 Goods (August) 21.0 20 15.4 15 4 13.4% 12.4 10 10.9 8.1% 10.210.7 10.0 7.6 7.5 7.2 7.1 0 5.9 5.6 Services (August) ( g ) -10 10 0.5 0 5 0.1 0 1 -0.5 -20 -4.0 -30 -7.2 2006 2008 2010 2012 2014 2016 2000 2000 2002 2002 2004 2004 2006 2006 2008 2008 2010 2010 2012 2012 2014 2014 2016 2016 Current and Capital Account Balance Tourists arrivals, by plane (% YoY, 3m MA). (% GDP, data for year ending in each quarter). 25 4 20 20 2 2 1% 1% 15 0 10 -2 5 -4 0 -6 -5 -8 -10 -10 -15 -12 -20 -14 2006 2008 2010 2012 2014 2016 2000 2002 2004 2006 2008 2010 2012 2014 2016 Sources: INE, Bank of Portugal, NB Economic Research. 5
Contributions to exports growth have been broad-based, both in terms of geography and sector of activity. Top 5 goods exports (Jan August 2017 % of Top 5 goods exports (Jan-August 2017, % of Portuguese merchandise exports to selected countries. total). Weight merchandise Growth merchandise Transportation Vehicles 11.3 exports, % exports, % Machinery and electrical 9.2 (1.1) Brazil 51.0 1.4 equipment (2.5) 7.8 3.3 Angola 44.4 Common Metals (1.3) (1.3) 1.5 1 5 China China 29 7 29.7 7 3 7.3 Mineral Fuels Mineral Fuels (4.8) 22.9 5.3 USA Agriculture 6.4 (1.4) 1.4 Morocco 13.5 (1 2) (1.2) 1 2 1.2 Poland P l d 12 4 12.4 Top 5 services exports (Jan-August 2017, % of (0.3) 9.3 0.3 Japan total). (26.3) 25.3 Spain 7.2 7.2 Travel and Tourism 50.7 (13.0) 12.5 France Transportation 21.6 (12.0) 11.4 Germany 5.5 (7.2) 6.7 4.6 Other Business Services 14.4 UK Telecommunications, (0.5) 0.3 -19.5 Mozambique 4.8 computer and information Maintenance and repair 1.8 Weight Jan-August 2017 Growth Jan-August services 2017/16 ( ) Jan-August 2016 Sources: INE, NB Research. 6
and sector of activity. Contributions to exports growth have been broad-based, both in terms of geography by sector (p.p.) Main contributions to services exports growth, b by country (p.p.) Main contributions to merchandise exports growth, 9.0 1.89 Tr ravel and T ourism Spain 3.3 Transportation t 1.12 Angola ( Mainte enance and repair 0.4 services 1.10 USA ) T ele communications, 0.4 co omputer and … 0.93 France Roya alties and license 0.3 fees 0.70 Perso onal, cultural and 0.3 Netherlands recre eational services 0.66 Transfo ormation resource 0.2 Germany mater rials services … Insuran nce and pensions 0.1 0.54 Brazil services 0.0 Gove ernment services 0.54 Italy 0.0 Cons struction services Jan-August 2017 Jan-August 2017 0.39 China -0.1 Financial services F 0.33 United -0.8 0 8 Kingdom Other B usiness Services by sector (p.p.) b Main contributions to merchandise exports growth, by sector (p.p.) Main contributions to merchandise imports growth, 2.35 3.66 Mineral Fuels Mineral Fuels t Machinery and 1.41 ( 1.88 electrical Common Metals C Sources: INE, Bank of Portugal, NB Economic Research. equipment ) 1.30 1.35 Ma achinery and Common Metals C electr rical equipment 1.20 1.64 Transportation Agriculture Vehicles 1.06 1.30 Transportation Mac chinery and Vehicles mechan nical appliances 0.62 1.30 Plastics Agriculture Machinery and 0.61 0.77 mechanical Chemicals appliances Optical and 0.53 0.51 Precision Plastics Instruments Jan-August 2017 Jan-August 2017 0.49 0.37 Chemicals Fo ood and Drinks 0.38 0.16 Miscellaneous M F Food and Drinks Fin ished Products 7
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