May 16, 2022
The brighter picture was due to an increase in household spending. In Q2, rising energy prices prompted the government to implement a non-refundable subsidy for businesses that use a lot of gas, which will cover 30% of the rise in their bills. The European Commission has approved a natural gas price ceiling, which would help households and businesses save money on energy costs while also increasing regulatory uncertainty and distorting markets. A fuel tax decrease in April could boost activity even more, but it will increase the fiscal imbalance. In politics, the new government led by Prime Minister Antonio Costa took office on March 31.
This year’s GDP growth should be strong. Lower income taxes are expected to boost household spending, while a rebounding tourism industry and forthcoming EU money will help to strengthen the economy. The risks are weighted to the downside, as Russia’s invasion of Ukraine threatens to exacerbate inflation and disrupt supply lines. GDP is expected to expand 4.6 percent in 2022, according to forecasters, which is down 0.3 percentage points from the previous month’s prediction. GDP is expected to rise 2.5 percent by 2023.
Source: Focus Economics
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