Portugal & Spain

Although economic activity in Portugal returned to its pre-COVID level in the early months of 2022, growth slowed with the start of the Ukraine conflict. However, a positive tendency is still to be seen as Portugal’s central bank has forecasted that economic growth will average out at 6.7%, which is 0.4 percentage points higher than previous expectations owing to a significant post-lockdown revival of the tourism industry and increasing individual consumption levels.

Despite the above-mentioned dynamic, a substantial slowdown is anticipated in 2023, and only then will it be possible to evaluate the real impact of the Ukraine conflict on the economy. Portugal’s inflation rate has already reached 9.3% while energy and food prices are continuing to rise.

Meanwhile, the GDP forecast for Spain - which has been revised several times during 2022 - has recently been raised by 0.3 percentage points to 4.6%, mainly because the labour market has remained strong and the tourist season provided sustainable growth for the service industry. Nevertheless, prospects for 2023 are not as positive. The economy has been struggling with lack of investment, resulting in a deceleration of construction projects. The energy crisis and high living costs are causing a rapid decline in consumer demand, although the government is looking to support households with measures such as electricity tax reductions and fuel discounts.

The economy is likely to return to its pre-pandemic level only in 2024. However, there might be a slight improvement in economic activity until the end of 2022 owing to a gradual improvement in supply chains and to EU recovery funds.

The markets in Portugal and Spain face similar problems to all other European countries. Owing to the energy crisis, many companies are either slowing production or stopping purchases. There is not a lot of material on the market; year-end closures influence movements and, for primary aluminium in particular, there is still slow demand. Even if some companies are willing to buy, they are requiring higher discounts than three months ago. There is currently a positive trend in secondary aluminium scrap, with prices rising and better demand than some months ago.