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External Environment

The analysis of the macroeconomic environment and its impact on SATA is performed taking into consideration the different markets where SATA operates: international - with particular focus on the American, Canadian, and European markets -, national, and regional (in Portugal).


International National (Portugal) The Azores

International Environment

In 2012, the world’s macroeconomic environment was characterised by moderate recovery in comparison to 2011 - as shown on the table below – in line with the economic trends observed within the last two years. According to forecasts from the IMF - International Monetary Fund, the world’s GDP – Gross Domestic Product was 3.3% in 2012, which was less 0.5 p.p. than in 2010. The economy mainly slowed down due to the high levels of uncertainty that manifested themselves in terms of volatility in financial markets and loss of trust in economic agents, who then put off making decisions on consumption and investment, thus slowing down the recovery of world economy. However, it is important to mention that this high level of uncertainty has affected in many different ways each country’s performance, being particularly unfortunate in situations where they are trying to adjust to internal and external macroeconomic imbalances, as is the case in economic interventions. It was also possible to observe in emerging economies an economic downturn particularly accentuated in Central and Eastern Europe, which is more exposed to the Euro Zone risks by means of financial and commercial relations, but also China and Brazil. Nonetheless, IMF estimates an accentuated GDP growth in these economies – 5.3% in 2012 in comparison to 6.2% in 2011 -, thus contributing positively towards world economic dynamism.

 GDP | growth rate in % 2010 2011 2012 2013 P
World economy 5,1 3,8 3,3 3,6
Advanced economies 3 1,6 13 1,5
USA 2,4 1,8 2,2 12,1
Canada 3,2 2,4 1,9 2
Euro Zone 2 1,4 -0,4 0,2
United Kingdom 1,8 0,8 -0,4 1,1
Emerging and developing market economies, out of which: 7,4 6,2 5,3 5,6
China 10,4 9,2 7,8 8,2
Brazil 7,5 2,7 1,5 4
Source: FMI, World Economic Outlook, October 2012
United States and Canada
The United States have shown a growth tendency superior to that registered in 2011 - 2.2% in 2012 in comparison to 1.8% in 2011 -, in virtue of property market stabilisation, private credit expansion, and lower unemployment rate. However, it must be mentioned that the high level of uncertainty that is also present within this economy is mostly related to the need for fiscal consolidation. We have witnessed an increasingly robust recovery in Canada reflecting the effects of more favourable financing conditions, less pressure from fiscal consolidation, and commodity boom. Meanwhile, this economic growth was restricted because of modest recovery of the American economy, a result of the strict financial and economic connection between these two countries. The IMF forecasts for 2013 indicate a potential growth of both economies around 2%, in line with those values shown in 2012.

Euro Zone
For the Euro Zone, 2012 became known for a decline in the economy with a negative GDP growth rate around 0.4 p.p. The uncertainty regarding the capacity of some countries, particularly those in the periphery, to carry out the required fiscal and structural changes contributed to that outcome, as well as the willingness of national authorities to implement proper policies for fighting the sovereign debt crisis, weakened external demand, and high price of commodities. The adoption of contracting fiscal policies by most countries in the Euro Zone have enabled a deficit decrease in one percentage point, which is around 3.2% Euro Zone GDP. However, maintenance of market fragility caused by the sovereign debt crisis contributed towards the high interest rates in treasury bonds for some countries within the Euro Zone. The uncertainty that is experienced within this area has contributed towards growth in unemployment rates up to 11.5% in 2012. In turn, the tendency of price level has been to decrease, where it was registered around 2.5% in 2012. Part of this decrease is explained in the downturn of the economic activity on a worldwide scale causing the price of non-energy commodities to decrease. The price of fuel has had great volatility throughout the year with disturbances on the supply-side motivated by the geopolitical tensions in the Middle East. We have witnessed an annual growth in the price of the barrel of Brent, which surrounded 108.5 US Dollars at the end of 2012. The IMF foresees a reversal of this trend in 2013. In 2012, we have witnessed a depreciation of the Euro’s nominal exchange rate in light of the main currencies within the international exchange markets, thus contributing towards greater competitiveness within the Euro Zone, which has then boosted exports outside of this area.

National Environment (Portugal)

The year 2012 was known for continuing the processes for correcting internal and external imbalances within the Portuguese economy in the context of Troika’s financial and economic aid (European Union, European Central Bank, and IMF). The budgetary consolidation process, the maintenance of unfavourable financial conditions, and deterioration in the confidence of economic agents, have conditioned the country’s performance leading to a public deficit of 5% and a contraction of the economy around 3%. We are witnessing a contraction in private consumption reaching -5.8%, in line with the economic evolution. This trend reflects the reaction of consumers and many occurrences, particularly in terms of available income and level of uncertainty. The group of adopted fiscal measures – suspension of subsidies, increase in taxes, etc. -, increase in the price of certain services, structural deterioration of the labour situation, and credit access restrictions, have led to less consumption and an increase in savings as a precaution for Portuguese families. We have equally witnessed an increase in unemployment rates reaching a total of 15.8% at the end of the year. Inflation rate has in its turn reached 3.3%, which is higher than that witnessed in the Euro Zone. Unlike most indicators, the export sector has shown a growing tendency, although at a slower pace that that observed in 2011 (6.3% in 2012, in comparison to the 7.5% observed in 2011). The downturn in export growth was based on the deteriorating economy within the Euro Zone and United Kingdom, which together represent approximately 75% of exports.

GDP | growth rate in % 2007 2008 2009 2010 2011 2012
PIB 2,4 0 -2,9 1,4 -1,7 -3
Private consumption 2,5 1,3 -2,3 2,1 -4 -5,8
Public consumption 0,5 0,3 4,7 0,9 -3,8 -3,9
Gross Fixed Capital Formation 2,1 -0,1 -13,3 -3,6 -13,9 -14
Exports 7,5 -0,1 -10,9 8,8 -7,5 6,3
Imports 5,5 2,3 -10 5,4 -5,3 -4,7
Source: Banco de Portugal, Boletim Económico, Fall 2012

Regional Environment (Portugal)

According to data from the last quarter of 2012, the Azores suffered an economy boom mainly due to agricultural profits as observed in milk delivered to dairy factories (increase in 1.8% from the previous year) and drinking milk (increase in 1% from the previous year). On the contrary, the secondary and tertiary sectors were developed negatively as observed in the decrease of production of electrical energy, poor performance of the construction sector - decrease in the number of licensed buildings and cement sales -, tourism, and fall in new vehicle sales. With a particular analysis on the tourist activity, we witnessed in 2012 a decrease in the number of nights spent in the Hotels of the isles, which surrounded 7.4%. This is the main cause for an accentuated decrease in the number of nights spent by residents in Portugal (decrease of 15.7% in comparison to 2011) and foreign residents (decrease of 0.5% in comparison to 2011). As a result, 2012 registered a fall of 10.1% in profits from the tourism sector in comparison to 2011, totalling 28.6 million Euros.