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by atitudeX The year 2023
In 2023, Portugal experienced an economic growth of 2.3%, significantly driven by domestic demand, which contributed 1.4 percentage points to the increase in real GDP. Private consumption recorded an increase of 1.6%, partly driven by the recovery of car sales. Gross Fixed Capital Formation (GFCF) saw a growth of 2.4%, highlighted by an increase of 18.7% in transport investment and a growth of 4.2% in machinery and equipment.
Effects of external demand
The contribution of external demand to growth was 0.9 percentage points, resulting from an increase of 4.2% in exports. Services continued to expand at a high rate of 10.6%, while growth in goods exports slowed to 1.1%, reflecting moderate growth in some of the main trading partners. On the other hand, imports grew by 2.2%, with goods imports increasing by 1.6% and service imports by 5.4%. The improvement in terms of trade, benefiting from a 4.0% reduction in the implicit deflator of imports, was a highlight, particularly due to a significant decrease in energy goods prices compared to 2022.
More contained growth
Facing an inflation that returned to a downward trajectory in February, standing at 2.1% after a brief increase in January, the expectation for 2024 points to more contained growth, revised from 1.8% to 1.6%. This is partly due to the impact that disinflation will have on the monetary policy of the European Central Bank, suggesting more moderate growth in the first quarter of the year.
Construction's contribution to the labour market
The labour market maintained its attractiveness in 2023, with employment growth of around 2%, reaching the highest level since 2008. Construction and the hospitality sector led this increase. However, the unemployment rate saw a slight increase, from 6.2% in 2022 to 6.5% in 2023, reflecting a growing challenge in absorbing the expanding active population.
Forecasts and Statistics
A growth of 3% in the Gross Value of Production of the construction sector is estimated for 2024. According to analyses by the Bank of Portugal, these analyses point to a moderate expansion of 1.2% of the GDP in 2024, a growth lower than the 2.1% projected for 2023.
This panorama reflects the prevailing uncertainty in both the national and global economic context. Along with a decrease in external demand, the cumulative impacts of inflation and a more restrictive monetary policy, financing has become more complicated for economic agents.
Perspectives for the Construction Sector
However, the construction sector maintains prospects for sustained development, with the real Gross Value of Production expected to oscillate between 2% and 4% in 2024, aligning with the European Commission's autumn forecasts that foresee a growth of 2.9% in construction investment in Portuguese territory.
This optimism is based on the positive evolution of various sectoral indicators in 2023, namely the creation of approximately 20,000 new jobs by the end of the third quarter, an increase of 2.5% in cement consumption and a jump of 70.9% in public works tenders until November, in an annual comparison.
The Housing Market
In the housing segment, despite a drop of 20.9% in housing transactions in the first nine months of 2023, there was an increase of 7.6% in the housing price index in the third quarter of the year. Furthermore, until October, there was a decrease of 10.3% in the licensing of residential buildings and an increase of 5.6% in new constructions, signaling a growing interest in the erection of multifamily structures. It is important to stress that the housing segment represents the largest share in the RRP, with 269 municipalities approving Local Housing Strategies aligned with the objectives of the 1st Right programme. Thus, considering the evolution of 2023 and the above-mentioned factors, an increase between 1% and 3% in the gross value of production of this market niche is predicted for 2024.
As for non-residential buildings, growth in gross value of production is expected to oscillate between 0% and 2%, reflecting the forecast of an economic slowdown and a decrease of 6.4% in the licensing of non-residential structures until October 2023, contrasting with an increase of 5.7% in the licensed area, on an annual basis.
In the field of civil engineering, 2023 witnessed remarkable growth, driven by European funds, especially through the RRP and Portugal 2030.
Until November, there was an increase of 70.9% in the amounts of public tenders and 30.6% in public works contracts, reinforcing the expectation that this segment will remain the most dynamic in 2024, projecting growth between 3.5% and 5.5% in its gross value of production.
Thus, it is anticipated that the construction sector in Portugal will play a crucial role in the national economic dynamics in 2024, with the total production estimated to grow 3%, reaching about 21.212,9 million euros.
Source:AICCOPN
