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In a nutshell, external data in December, was on the weak side, namely Travel surplus went down 1.5%YoY, the first negative growth since the Covid years (March 2021), while the Services account surplus is adjusting, at a faster pace, -8.1%YoY. Meanwhile, domestic consumption remains strong, so the deficit at Balance of Goods remains high, at 9.6% of GDP. Current Account is still positive, roughly 1.2% of GDP, however, at this pace, it should turn negative in the coming quarters, as the positive contribution from Services, namely Travelling is abating.            

The Bank of Portugal has just released December’s External Balance data.     

The main highlights are the following:

1 – Current Account Balance, in percentage of GDP, last 12 months: 1.2%. Compares with the 12MMA (12 months moving average): +1.4% and 3MMA: +1.2%;

2 – Balance of Goods (just goods, net), deficit: -9.6% of GDP (last 12M) vs. 12MMA: -9.5% and 3MMA: -9.7%;

3 – Balance of Goods, deficit, in December, went down 7.2%YoY vs. 12MMA: +17.9% and 3MMA: -2.6%;

4 – Balance of Services (just services, net; includes Travel Account Balance) surplus: +10.8% of GDP (last 12M) vs. 12MMA: 11.0% and 3MMA: 10.9%;

5 – Balance of Services, Surplus, in December, went down -8.1%YoY vs. 12MMA: 3.8% and 3MMA: -0.7%;    

4 – Travel Account Balance (just tourism revenues, net; a subcomponent of Services Account Balance) surplus is at +7.2% of GDP (last 12M) vs. 12MMA: +7.2% and 3MMA: +7.2%;

5 – Travel Account surplus, in December went down 1.5%YoY vs. 12MMA: +4.7% and 3MMA: +2.0%.

Our comments: The external position of the Portuguese economy starts to deteriorate (please see graphs below). Despite the Current Account Balance remains positive, the Services Account Balance is slightly coming down, mainly because Services, namely Travel (consolidates in Services) are underperforming, surplus in December went down 8.1%YoY and 1.5%YoY, Services and Travel, respectively. Meanwhile, Goods deficit is consolidating below 10%.  

Source: INE, BoP, AS Independent Research