PORTUGAL: A RAY OF SUNSHINE IN THE EUROPEAN SKY

The economic upturn of the Portuguese economy is likely to continue in 2019, even growth is likely to have peaked last year. Growth came in at around 2.1% for the year (versus 2.8% in 2017), higher than the Eurozone average. G rowth was + 0.3% QoQ in Q3 18, bolstered by the vigour of private consumption. It was , however , somewhat negatively affected by a slowdown in investment and a negative contribution f rom external trade. The labour market continues to run at full speed , as shown by the unemployment rate of 6 . 8% in Q3 18. Public finances remain relatively solid , and the deficit shrank to -0.7% of GDP in 2018 t hanks to the very positive cyclical situation. Even though the level of public debt remains high (121.2% in 2018) and the Italian episode has led to concern about risks of contagion, the markets’ perception of Portugal is positive. Against this backdrop , we expect the Portuguese economic situation to remain positive in 2019 although a number of external risks could weigh on growth, especially in the area of trade (US-China war, Brexit) and also in the financial area (first ECB rate hike expected in 2019, intensification of the pressures in Italy) .