Portugal has become one of the strong economic performers among the periphery countries and the economic progress is also reflected in domestic demand.
However, we see room for further positive surprises as the hard negative shock from the crisis has resulted in a large amount of pent-up demand. Survey indicators suggest it will be unleashed soon, which will give a boost to growth.
Both household expenditure of durable goods and car registrations have started to increase, but they are far from previous peaks, leaving room for further increases. Higher growth is further supported by the high saving rate and the increase in real disposable income.
The return of confidence among businesses and demand for goods should imply that postponed investments are initiated as enterprises have adopted a wait-and-see approach for several years.
Portugal's sovereign rating has recently been upgraded by Moody's and we expect the country to regain its investment grade later this year, which is very likely to have a positive market impact.
The progress is also seen in the government bond market, where Portugal has been the top performer this year only surpassed by Greece.
The other euro periphery countries also have a very large amount of pent-up demand and the potential for positive surprises together with higher economic activity going forward.
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