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Portugal Country Risk Report Q2 016

Portugal Country Risk Report Q2 016

Core Views Portugal's recovery will remain on track in 2016, with domestic demand being the main driver of growth, mainly boosted by a fiscal stimulus by the government. However, fading tailwinds from the European Central Bank quantitative easing programme, lower oil prices, stagnating external demand and the precarious condition of the banking sector will cap growth at just 1.7% in 2016, and 1.6% in 2017. The victory of centre-right candidate Marcelo Rebelo de Sousa in Portugal's presidential election on January 24 will boost the country's political stability outlook. Presenting himself as a moderate consensus-builder, he will serve as a counterweight to the Socialistled minority government in relation to its more radical supporters, the Left Bloc and the Communist Party. Forecast Changes Portuguese real GDP growth came in at 1.3% in Q415, taking the full-year outturn to 1.5%, equal to our estimate. Portugal's rebound from its three-year long recession over 2011-2013 will remain broadly in place in 2016, as reflected in our forecast for a 1.6% full-year expansion of real GDP growth. We retain our subdued growth outlook for the country and have not modified our forecasts for 2016.


Executive Summary
Core Views
Forecast Changes
Key Risks
Chapter 1: Economic Outlook
SWOT Analysis
BMI Economic Risk Index
Economic Growth Outlook
Fragile Recovery On Track
Portugal's economic recovery will remain on track in 2016, with domestic demand being the main driver of growth. However, fading
tailwinds from ECB QE, lower oil prices, stagnating external demand and tight credit market conditions will cap growth at just 1.7% in
2016, and 1.6% in 2017.
GDP By Expenditure Outlook
TABLE: GDP GROWTH FORECASTS
TABLE: PRIVATE CONSUMPTION FORECASTS
TABLE: GOVERNMENT CONSUMPTION FORECAST
TABLE: FIXED INVESTMENT FORECASTS
TABLE: NET EXPORTS FORECASTS
Chapter 2: 10-Year Forecast
The Portuguese Economy To 2025
Crisis An Opportunity To Improve Long-Term Growth
The near-term outlook for Portugal will be shaped heavily by the measures its government must undertake to corral the fiscal deficit and
bring national debt levels under control. However, beyond the immediate term, Portugal will have to grapple with improving its growth
prospects if it is to escape from the debt trap.
TABLE: LONG-TERM MACROECONOMIC FORECASTS
Chapter 3: Political Outlook
SWOT Analysis
BMI Political Risk Index
Domestic Politics
Centre-Right Presidential Victory Good For Political Stability
The victory of centre-right candidate Marcelo Rebelo de Sousa in Portugal's presidential election on January 24 will boost the country's
political stability outlook. Presenting himself as a moderate consensus-builder, he will serve as a counterweight to the Socialist-led
minority government in relation to its more radical supporters, the Left Bloc and the Communist Party.
Chapter 4: Operational Risk
SWOT Analysis
Operational Risk Index
Chapter 5: BMI Global Macro Outlook
Global Macro Outlook
Tail Risks Mounting Amid Sub-Par Growth
TABLE: GLOBAL ASSUMPTIONS
TABLE: DEVELOPED STATES, REAL GDP GROWTH, %
TABLE: BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, 2015 AND 2016 (%)
TABLE: EMERGING MARKETS, REAL GDP GROWTH, %
TABLE: MACROECONOMIC DATA & FORECASTS

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