PORTUGAL TRENDS AND DEVELOPMENTS Contributed by: Francisco Lino Dias, Ricardo Reigada Pereira, Sofia Nogueira Leite and Tamara Martins da Fonseca, PLMJ
The Portuguese Economy at a Glance Based on recent estimates, Portugal’s GDP increased by 2.8% (q-o-q) in the final quarter of 2024, after growing by 1.9% in the previous quarter. According to the European Commission’s growth forecasts for 2025, Portugal’s GDP is expected to increase by 1.9% in 2025 – above the 1.5% average growth expected in the EU. Portugal’s economic growth in 2024 was mainly driven by a 4.8% rise in exports (compared to a 4.2% increase in 2023), strongly influenced by a significant recovery in the tourism sector (the number of tourists increased by 4.8%, and tour - ist stays by non-residents increased by 4.6%). Domestic demand grew by 3.1% in the final quarter of 2024 (compared to a growth of 1.7% in the final quarter of 2023), due to the Euro - pean Central Bank’s steady reduction in inter - est rates, which is expected to revive investment and boost private consumption in 2025. Housing loans increased by 9% in 2024 (compared to 2023), representing a total of EUR12.9 billion in loans to individuals. The national inflation rate was 2.4% in 2024 and is expected to be in line with the eurozone inflation forecasts, gradually falling below 2% in 2025. Domestic demand is expected to benefit from a reduction in the inflation rate and less restric - tive credit conditions, as well as from investment boosted by the implementation of European funds. The Portuguese Harmonised Index of Consum - er Prices (HICP) decelerated significantly to a 2024 aggregate of 2.7% (year-on-year, Janu -
ary to December 2024) compared with a 2023 aggregate of 5.3%, and is expected to drop to 2.5% in 2025. Although the Portuguese Parliament and Gov - ernment were elected in March 2024, early elec - tions will be held as early as May 2025, following the rejection by the Parliament of a motion of confidence that led to the Government’s resig - nation in March 2025. Outlook for the Real Estate Market In contrast to the previous year, the 2024 real estate market saw an increase in the number of large transactions. The four largest deals accounted for a third of the total volume invest - ed, with the average value per transaction rising to EUR26 million. During the first half of 2024, commercial prop - erty investment activity remained subdued, with a turnover of EUR690 million, reflecting a slight year-on-year decrease of 6%. However, a recovery trend was set during the second half of the year, where accumulated investment reached EUR2 billion, reflecting an increase of 20% in comparison with the same period of 2023. Foreign capital accounted for 85% of the total investment volume, represent - ing the highest market share in the last five years. Investment in the retail sector accounted for almost 50% of market investment, with sev - eral significant transactions, particularly (i) the acquisition by Lighthouse Properties of Alegro Montijo (EUR178 million) (ii) the acquisition by Castellana Properties Socimi of a portfolio of three shopping centres (Rio Sul, Loures Shop - ping and 8ª Avenida for EUR176 million) and of 50% of Alegro Sintra (EUR90 million), (iii) the sale by LCN Capital Partners to Slate Asset Manage -
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