Portugal’s economy shrinks 0.2% quarter-on-quarter

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LISBON (Reuters) – Portugal’s economy shrank 0.2% in the third quarter from the previous three-month period, when it grew a revised 0.1%, due to a fall in net exports amid a wider European decline in activity, official data showed on Tuesday.

The National Statistics Institute (INE) also said in its flash estimate that the country’s GDP growth slowed to 1.9% from a year earlier after 2.6% in April-June.

The contribution of net exports to the quarter-on-quarter GDP turned negative after being positive in the second quarter, “reflecting the reduction of exports of both components, goods and services, including tourism”. The contribution of domestic private demand – consumption and investment – to GDP moved from negative to positive.

Filipe Garcia, head of Informacao de Mercados Financeiros consultants, said “these are the clear signs of the slowdown in the global and European economies reaching Portugal”.

“This is evident above all in the contraction in exports of goods and in the recent reduction in consumer confidence resulting from the pressure of inflation on the disposable income of families,” he said.

The European Union’s statistics office Eurostat said on Tuesday that GDP in the 20 countries sharing the euro fell 0.1% quarter-on-quarter in the July-September period.

Portugal’s government expects GDP to grow 2.2% this year, compared with 6.8% in 2022 – its strongest pace in 35 years.

Garcia said that “there are risks on the horizon, namely the recent conflict in the Middle East, but the government’s annual growth target could still be achieved”.

In a separate release, INE said inflation in Portugal slowed down to 2.1% year-on-year in October, after a 3.6% increase in the previous month, while on a monthly basis, consumer prices slipped 0.2%.

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