Portugal | Messy politics will dent 2022 growth
Political turmoil in Portugal will delay the execution of some EU recovery funding and freeze key stimulus measures planned for next year. Consequently, we will lower our 2022 growth outlook to around 4.5% from 5.2%. A large slice of the lost output should be recouped in 2023-2024 after a new government resumes spending the EU money.
What you will learn:
- A key risk is that a new government may decide to depart from the current plan, further hampering, or even putting in jeopardy, disbursement of the recovery funds.
- Although the political crisis is not welcome news for investors, the initial response from markets has been muted.
- Portugal’s 10-year bond yields have risen in recent days, but it doesn’t look like Portugal is being singled-out – the increase is similar to that affecting other countries in the eurozone periphery.
Finland’s growth forecast cut amid weak confidence and soaring inflation
We have lowered our 2022 GDP growth forecast for Finland to 1.5% from 1.7% last month, as weakening confidence further dampens the outlook. We expect inflation to peak higher with a greater passthrough to core prices, squeezing real incomes and denting consumption. Russia has accounted for almost 10% of Finland's goods trade, among the highest in Europe.Find Out More
Why we see eurozone inflation slowing sharply next year
We have revised our 2022 eurozone inflation forecasts sharply higher, to 6.0%, since the start of the Ukraine war, as energy and food prices began to soar and new supply bottlenecks emerged. That said, we still see inflation decelerating sharply to 1.3% in 2023, putting us below consensus. While we recognise significant risks to our views, inflation should slow to below 2% in H2 2023.Find Out More