FX.co ★ Portugal GDP Contracts the Most in 4 Years

In the first quarter of 2025, Portugal's economy experienced a contraction of 0.5% compared to the previous quarter, marking the largest decline in four years. This downturn follows a 1.4% growth in the preceding period and aligns with earlier estimates. The reversal in net external demand significantly impacted this contraction, as it shifted from a contribution of +0.7 percentage points to -0.7 percentage points. This shift is attributed to a 0.4% drop in the exports of goods and services, along with a 1% rise in imports. Meanwhile, the positive effect of domestic demand lessened to 0.1 percentage points from 0.7 in the prior quarter, primarily due to a 1.1% reduction in private consumption. Nevertheless, investment surged by 3.8%, buoyed by gains in inventories triggered by a restocking effect. Year-on-year, the Portuguese economy grew by 1.6% in the first quarter of 2025, a deceleration from the 2.8% expansion recorded in the last quarter of 2024, in accordance with preliminary reports.