In 2015, GDP grew for the second consecutive year after three years of recession

According to data released by INE, the Portuguese Gross Domestic Product registered year-on-year (yoy) growth of 1.3% in the fourth quarter of 2015. The GDP growth rate was 1.5% for 2015 as a whole, reaching a total of €179.4bn.

From 2011 to 2013, Portuguese GDP fell by 6.9% in cumulative terms as a result of a significant contraction in domestic demand (a cumulative
decline of 15%), which was partially offset by an improvement in net external demand due to a significant rise in exports (+17.4%) and a reduction in imports (-7.4%). These variations are explained by the adjustment process of the Portuguese economy following the agreement with the European Union, ECB and IMF to implement the Economic and Financial Adjustment Program.

Improvement in consumer confidence and economic sentiment

The positive GDP performance over the last quarters reflects a better trend in the main confidence and economic indicators associated with the Portuguese economy.


Reducing the external imbalance of the Portuguese economy was one priority of the adjustment program. It entailed rebalancing the current and capital accounts, steady reduction of the government deficit and deleveraging of the private sector, including the financial sector, to reduce financing needs. Since the fourth quarter of 2012, the balance of the Portuguese economy’s financing capacity has been positive as a result of the decline in domestic demand (private and public consumption) and in imports, in conjunction with a higher savings rate.

Consumer prices in Portugal for March 2016 registered a yoy variation of +0.4%, with the most significant rise coming in the price of services. The inflation rate in Portugal is higher than in the Euro Zone (+0.4% vs. 0.0% yoy in March) due not only to the fact that the fall in energy prices impacted the Portuguese economy less than the Euro Zone but also to a bigger increase in the price of services.

According to INE data, the unemployment rate for the fourth quarter of 2015 stood at around 12.2%, down from its peak of 17.5% in the first quarter of 2013.

INE data show that the budget deficit for 2015 was 4.4% of GDP, or €7.9bn, incorporating adjustments due to the resolution of Banif. It is estimated that the budget deficit for 2016 will be 2.2% of GDP.

At the end of March, the Bank of Portugal (BdP) lowered its forecast for the Portuguese economy in 2016 to 1.5% GDP growth. A downward revision has been made to both the contribution from domestic demand, which is now expected to rise to 1.4 p.p., and to that of net external demand to GDP, now estimated at 0.6 p.p.. As for domestic demand, private consumption is expected to register growth of 1.8%,
public consumption is expected to rise 1.1% and investment should increase 0.7%. On the other hand, exports should grow 2.2% while the growth rate for imports is now expected to stand at 2.1%.

Generally speaking, projections by the central bank for the Portuguese economy indicate a continuation of moderate growth in economic activity. In this context, the Bank of Portugal anticipates GDP growth of 1.7% in 2017 and 1.6% in 2018. Moreover, the balance of the Current and Capital Accounts should remain positive in the coming years, with an expected figure of 2.3% for 2017 and 2018; this will allow the adjustment process of the external imbalance to continue, notably boosting the financing capacity of the Portuguese economy.

2015 was an intense year in events in financial markets, specifically, the ECB´s quantitative easing program, the instability in currencies markets, the black Monday in China, the threat of interest-rate increases in the United States and the uncertainties due to the fall of oil price.

The European Central Bank (ECB) began the year with the asset purchase program, mainly sovereign debt of €60,000m per month up to September 2016 with the goal to push inflation close to 2%. This measure was expected to benefit all Eur issues but proved to be insufficient and below expectations.

The Federal Reserve (Fed) announced in December an interest rate hike of 25bp. The move followed 11 months of speculation that
produced significant volatility in both global financial and foreign exchange markets, especially EM. The central bank of China was involved as well in some of the most significant market movements during the year. In May the PBoC cut interest rates for the third time in six months and reduced the banking sector reserve requirement ratio. In August it decided to devalue the yuan. This instability in the Chinese economy and markets led to a spike in volatility as investors feared a sharp slowdown in the Chinese economy.

Geopolitical tensions in various regions were also a relevant factor in 2015: the Russia/Ukraine conflict, intensification of conflicts in the Middle East and North Africa, a migrant crisis in Europe and terrorist attacks in France.

In Portugal, the year was marked by the instability caused by October´s elections. The former ruling coalition lost its majority in parliament and was replaced by a socialist party-led government with support from left-wing parties. The uncertainty in the Portuguese financial system dragged along with the delay of sale and increased capital requirements for Novo Banco that resulted in the transfer of approximately €2bn in Novo Banco bonds held by institutional investors to BES. The Banif restructuring process accelerated towards the end of the year, ending in a resolution and forced sale of the “good bank” to Santander.

Notwithstanding, the Portuguese yield curve maintained its descending trajectory of the previous year.


The first months of 2016 were punishing for the Portuguese yield curve due to the negative effect of the new regime of bail-in that came into force in 2016, in which debt holders may be called to share the debt burden. An early case of the impact of this new directive was the aforementioned transfer of Novo Banco five senior debt issues for the designated “bad” bank – a decision announced on December 29, 2015.

Portuguese debt was also under pressure with the threat of rating downgrades by Moody’s, S&P and Fitch. Despite the worse 2015 general government deficit figures and struggle over the 2016 budget, the agencies postponed the decision. Another problem loomed: the possibility of the withdrawal of investment grade notation by DBRS – which would mean bonds issued by Portugal would not be accepted as collateral by the European Central Bank for its loans to Portuguese banks and exclusion of the national debt from the ECB´s asset purchase program which sustains the countries current low yield levels.

Still, in March after the ECB´s announcement of a new package of measures, markets reacted positively with spreads tightening across the peripheral markets, including Portugal.


Due to powerful headwinds, there was a decrease in new issue volume in 2015. Nevertheless markets remained open and fairly firm, not only for the frequent domestic issuers but also for newcomers and for private placements.

  • PGB 2,875% 15/10/2025 – New 10yr Benchmark
  • PGB 4,1% 15/02/2045 – New 30yr Benchmark
  • TAP: PGB 2.875% 15/10/2025 and PGB 4.1% 15/02/2045
  • PGB 2.20% 2022; New 7y Benchmark
  • CXGD 1% 27/01/2022
  • RENEPL 2.500% 12/02/2025
  • NOSPL Frn 28/03/2022
  • ELEPOR 2% 04/22/25
  • BRCORO 1,875% 04/30/25
  • VISAB Floater 07/22/2021
  • HOVION Floater 02/10/2023

And 2016´s:

  • PGB 2⅞ 07/21/26
  • BRCORO 2.00% 03/22/2023
  • MYSINV Float 02/05/23
  • TAP PGB 2.20% 10/17/2022 e PGB 4.10% 02/15/2045

For further information please visit www.caixabi.pt or contact the following individuals:

João Miguel Lourenço
Head of Equity Research

Leonor Canedo
Head of Syndication & Sales


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