. . .

— MANAGEMENT REPORT

4

Satisfying criteria of quality and safety, guaranteeing the uninterrupted supply of energy and maintaining a balance between energy supply and demand are daily tasks which reflect an attitude of commitment to the future.

4.1.1 ›

ECONOMIC ENVIRONMENT

WORLD ECONOMY1

The world economy is expected to grow +3.0% (vs. 3.1% in 2015), continuing the recovery trend in the last years. Underlying this recovery are different growth rates among developed and emerging economies.

Developed economies are forecasted to grow +1.7% in 2016 (vs. +2.2% in 2015), slowing down the growth recorded in the last years. Contributing to this performance was the deceleration in the European Union, where growth is expected to reach +1.8% in 2016 (vs. +2.2% in 2015). Despite the slowdown seen in most EU countries, these performances are counterbalanced with some increases in economic growth, as is the case with Germany (+1.9% in 2016 vs. +1.7% in 2015). Outside the EU, the USA is also expected to decelerate its economic recovery (growth rate of +1.6% in 2016 vs. +2.6% in 2015). This resulted from a drop in investment in several different sectors, notably the energy sector, the continued strength of the dollar and weak external demand. In Japan, a slight increase is expected in the growth rate (+0.7% in 2016 vs. +0,5 in 2015), sustained by the recovery in internal demand and the implementation of macro-economic development policies.

In contrast to developed economies, emerging economies are expected to accelerate its growth (+4.0% in 2016 vs. +3.8% in 2015). However, individual growth performances varied greatly. The increase in commodity prices provided the basis for the development of most exporting countries, including Russia (-1.0% in 2016 vs. -3.7% in 2015) and Brazil (-3.1% in 2016 vs. -3.8% in 2015), where some normalisation of the political situation also contributed to a growth improvement. Furthermore, many emerging countries benefited from a positive outlook by investors, recovery in capital input, an increase in the price of shares and stronger exchange rates. At the same time, in some regions, notably the Middle East and Northern Africa (+2.6% in 2016 vs. +2.2% in 2015) and in Sub-Saharan Africa (+2.1% in 2016 vs. +3.5% in 2015), a slowdown in growth was a result of the deterioration in internal and geopolitical problems, including armed conflicts and extensive budget consolidation in order to offset the steep drop in oil income.

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WORLD ECONOMY

GROWING

Emerging and developed economies are recovering at different rates

Emerging economies experienced an improvement in the rate of growth of +4% in 2016.

Developed economies are forecast to grow +1.7% in 2016 (vs. +2.2% in 2015), slowing down the growth recorded in recent years. Contributing to this performance was the deceleration in the European

Union, where growth is expected to reach +1.8% in 2016 (vs. +2.2% in 2015). Despite the slowdown seen in most EU countries, these performances are counterbalanced with some increases in economic growth, as is the case with Germany (+1.9% in 2016 vs. +1.7% in 2015). Outside the EU, the USA is also expected to decelerate its economic recovery (growth rate of +1.6% in 2016 vs. +2.6% in 2015). This resulted from a drop in investment in several diFFerent sectors, notably the energy sector, the continued strength of the dollar and weak external demand. In Japan, a slight increase is expected in the growth rate (+0.7% in 2016 vs. +0.5 in 2015), sustained by the recovery in internal demand and the implementation of macro-economic development policies.

In contrast to developed economies, emerging economies are expected to accelerate growth (+4.0% in 2016 vs. +3.8% in 2015). However, individual growth performances varied greatly. The increase in commodity prices provided the basis for the development of most exporting countries, including Russia (-1.0% in 2016 vs. -3.7% in 2015) and Brazil (-3.1% in 2016 vs. -3.8% in 2015), where some normalisation of the political situation also contributed to an improvement in growth. Furthermore, many emerging countries benefited from a positive outlook by investors, recovery in capital input, an increase in the price of shares and stronger exchange rates. At the same time, in some regions, notably the Middle East and Northern Africa (+2.6% in 2016 vs. +2.2% in 2015) and in Sub-Saharan Africa (+2.1% in 2016 vs. +3.5% in 2015), slowdown in growth was a result of the deterioration in internal and geopolitical problems, including armed conflicts and extensive budget consolidation in order to o set the steep drop in oil income.

%
WORLD ECONOMY GROWTH IN 2016
%
EURO ZONE GROWTH IN 2016

1 Source: European Commission: European Economic Forecast, Autumn 2016.

EURO ZONE2

The Euro Zone continued to grow at a moderate rate in 2016 (+1.7% vs. +2.0% in 2015). Growth in the Euro Zone was grounded on factors such as the fall in the price of commodities, the drop in value of the euro and expansionist monetary policies led by the European Central Bank. However, weak growth in world trade led to a slowdown of the economy in the Euro Zone and a feeling of deep uncertainty persists with regard to the future.

Private consumption continued to grow in 2016 (+1.7% in 2016 vs. +1.8% in 2015), benefiting from the improvement in employment which helped cancel out the negative impact of inflation on the purchasing power of families.

The factors which in recent years have led to post crisis growth in investment continued in 2016 (+3.3% in 2016 vs. +3.2% in 2015) and investment in construction is expected to grow for the first time since the crisis began. For the UK, the fragility of international trade and the decline in exports, together with the drop in value of the pound, are factors limiting exports’ growth (+2.7% in 2016 vs. +6.5% in 2015). Unemployment rates continued to fall (+10.1% in 2016 vs. +10.9% in 2015) and the increase in oil prices led to a slight rise in inflation in the Euro Zone (+0.3% in 2016 vs. 0.0% in 2015).

2 Source: European Commission: European Economic Forecast, Autumn 2016 – Euro Zone.

INTEREST RATES3

The full implementation of monetary policy measures in recent years continued to reduce pressure on bank loans and bond rates. The European Central Bank's asset purchase programme under the CSPP (Corporate Sector Purchases-Programme) started in June 2016 and led to continued improvement in financing conditions for non-financial companies. At the same time, the effects of the ECB deposit interest rate on the money markets and financing conditions were strengthened by the growth in surplus liquidity brought about by asset purchases.

During 2016, the European Central Bank reference rate fell from +0.05% (an historic low going back to September 2014) to 0.00%. Euribor rates for 3, 6 and 12 months stood at -0.319% (vs. -0.131% at the end of 2015), -0.221% (vs. -0.040%) and -0.082% (vs. +0.060%), respectively.

3 Source: ECB reference rates (www.ecb.int).

THE PORTUGUESE ECONOMY4

Economic recovery continued in 2016 (+0.9% vs. +1.6% in 2015), although at a modest rate, driven by private consumption (+1.8% in 2016 vs. +2.6% in 2015) but slowed down by poor investment (-1.4% in 2016 vs. +4.5% in 2015). In fact, the modest growth in private consumption was in line with the more stable consumption of durables, the increase in oil prices and the continued high level of debt among Portuguese families. Although investment in machinery and equipment has improved, investment in construction contracted. 

Domestic demand contributed +1.1 p.p. to growth in GDP, while net exports accounted for -0.2 p.p. Imports increased, although at a slower pace than last year (+3.3% in 2016 vs. +8.2% in 2015), while growth in exports fell by half (+2.8% in 2016 vs. +6.1% in 2015).

With regard to public accounts, efforts continued to reduce the public deficit to below levels allowed by the European Union Stability and Growth Pact (3%). The deficit expected for 2016 is around 2.7% of GDP, a figure which is lower than the 4.4% in 2015. The weight of public debt in GDP is expected to rise slightly over 2015, increasing from 129% in 2015 to 130.3% in 2016. 

The unemployment rate continued to fall, and is expected to drop to 11.1% in 2016 vs. 12.6% in 2015.

 

4 Source: European Commission: European Economic Forecast, Autumn 2016.

PORTUGAL

Continues to recover at a modest rate

%
+1.7% 2016 - GROWTH IN PRIVATE CONSUMPTION
%
+3.0% 2015 - GROWTH OF THE GLOBAL ECONOMY