‘Romania wants to grow, we want other things’

By Daniela Soares Ferreira and Sonia Perez Pinto

2024 is still a year away, but until then, Romania may overtake Portugal in the European Commission’s rankings. In question is the wealth each country can generate per citizen: in this comparison, Portugal has been losing points since 2000 and could even fall five places. For now, the Portuguese government devalues ​​this data, but there is the issue of inflation and war, which could confound the accounts. If this comes to pass, Portugal will position itself more and more at the tail end of Europe.

“Romania wants to grow, we want other things,” says economist João Cesar das Neves fervently.

Henrik Dom, an analyst at XTB, sees this data with concern. But, on the other hand, he says, “the news is a warning that if we do, our country is heading for a disastrous economic situation in the medium and long term.” Economist Ricardo Pius Mamede doesn’t hesitate either: “Romania surpasses Portugal in GDP per capita measured in purchasing power parity. Yes, very few taxes are paid in that country. Anyone who wants to – and a few – can stay here. Or more poverty in Romania (23% vs. 18%). , you can consider the lowest average life expectancy (73 vs. 81 years), more murders per 100,000 citizens (1.5 vs. 0.9) and what the country has lost. Almost 1/5 of the population in the last 30 years, Portugal has grown by 5%,” he asserted on Facebook.

This concern, which is not new, deepened in the week when the National Institute of Statistics released more information on the state of the Portuguese economy. The economy grew 4.9% in the third quarter and inflation eased to 9.9% in November. Good news that did not surprise economists contacted by our newspaper.

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According to João César das Neves, this rise in gross domestic product (GDP) was “expected”, despite registering a small contribution to domestic demand growth during the period, as households consumed less and investment also fell. 3.5% in the second quarter, a contraction of 0.4%. The numbers lead the economist to say, “The environment is getting darker, so growth should slow down” and therefore guarantee that the trend will “probably” continue.

Comment shared by Henrik Dom. The XTB analyst admits that “next quarter values ​​should be revised downwards, because inflation is high in Portugal and should have an impact on economic activity”, “The effects of inflation are beginning, together with the increase in interest. Having an impact on the purchasing power of households, which is already beginning to be represented in economic indicators». And he doesn’t hesitate: “This trend will continue and worsen in the coming quarters”.

Paulo Rosa, an economist at Banco Carregosa, notes that “when an economic recession develops, i.e. penalized by a decrease in disposable income, consumption and investment contribute less and less to GDP growth.” In the latter part of the year, private consumption should reduce its contribution, and fourth-quarter GDP is estimated to decelerate from the current strong performance. Ricardo Evangelista, an analyst at ActivTrades, highlights the latest estimates of the European Commission for the performance of the Portuguese economy in 2023, which indicate a slowdown in economic activity in our country. The forecast points to 0.7% GDP growth next year, a significant slowdown, which will reflect lower consumption and investment.

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Inflation eases slightly

The INE also reported that the year-on-year change in the consumer price index was 9.9% in November, compared with 10.1% in October, a slight retreat. Economist Panco Carregosa explains, “The increase in the prices of fossil fuels, raw materials and agricultural products increased inflation up the value chain, putting pressure on all the prices of goods and services at the bottom, generalizing inflation, and more and more persistence ». But, “relief in the price of fossil fuels is A fact and may dictate the peak of inflation somewhere in this fourth quarter,” he argues, is necessary to take into account.

César das Neves admits that the climate is very uncertain and the inflationary trend continues, advises “to be careful”, and although he recognizes that “we cannot expect large increases in inflation”, he believes that “it will”. Don’t go down too soon ».

The data from the Statistics Office came as the head of the European Central Bank (ECB) warned that inflation had not yet peaked. However, Ricardo Evangelista said the published figures “were lower than expectations because energy costs suffered an unexpected drop.” On the other hand, he refers to the so-called “inflationary spiral, in which rising prices increase wages and lead to further price increases, a process that is still unfolding”, arguing that the best way to control this spiral. through restrictive monetary policies.

Also optimistic was Henrik Dom. “We are already at a moment of transition (much talked about in 2020) regarding inflation,” the analyst opined, adding that in Europe “there is expected to be a slight delay in the numbers, however, in the last two months we have seen strong downward corrections in the prices of various raw materials, such as energy, as well as constraints on supply chains have improved are coming».

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And interest?

With inflation at uncertain levels, will the ECB continue to raise interest rates? César das Neves argues that because the ECB rate is so far below the inflation rate, “it will rise and rise a lot.” In turn, according to Henrik Dom, although inflation appears to be showing signs of slowing in Europe, “it is still too early to move forward with the idea that we have already reached the peak” and therefore believes that “these”. The data will not yet influence the European Central Bank’s decision to raise interest rates.

After the slowdown in inflation data in Germany, “the money market expects an increase of 50 basis points, the probability of which is 75%, and the probability of an increase of 75 points drops to 25%,” says an economist at Banco Carregosa.

Finally, Ricardo Evangelista argues that the ECB should cut interest rates. “Despite the slowdown in inflation in the Eurozone, mainly due to the fall in energy costs, the next rise in interest rates will be lower than the previous one, at 0.5%,” he predicted.

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