Portugal’s prime minister has begun the year under scrutiny as a slowdown in exports in the last months of 2012 has led him to consider revising down his economic forecasts for this year.
Prime Minister Passos Coelho has said a slowdown in exports in the last quarter of 2012 has led him to consider revising down his economic forecasts for this year.
“We are willing to revise this year’s forecasts,” Passos Coelho said this Friday.
Portugal’s economy contracted more than expected last year, with official figures released Thursday revealing a contraction of 3.2% in 2012. The government now says it is looking to revise its forecasts with officials from the so-called troika of international lenders (European Commission, European Central Bank and International Monetary Fund) who will be arriving in Lisbon next week for the seventh assessment of the country’s bailout programme.
Portugal is plunged in its deepest recession since 1975, according to figures released by the National Institute of Statistics (INE), as the country has been enacting a series of harsh austerity measures under its €78bn bailout programme.
Passos Coelho admitted the economy had contracted 3.2% and not 3% as forecast by the government and said the official prevision for a recession of 1% this year would be altered due to a slowdown in exports.
The Portuguese government had forecast the economy would contract around 1% this year, which economists and the central bank said was too optimistic, especially after further tax hikes were enacted last month.
João César das Neves, professor at Católica Lisbon School of Business & Economics told newspaper i the figures are worrying and by no means “favourable.” Economists foresee a much sharper GDP slump of 2% and the Bank of Portugal forecasts it will be 1.8%.
“The most worrying figure is the monthly evolution (comparing with the previous quarter) showing a worse performance than in previous months. I mean, we are seeing an acceleration of the recession,” IMF economist Filipe Garcia told i.
But economists say they will not be changing their forecasts before further figures relating to the start of 2013 are revised, though they expect the country’s stringent bailout conditions will be eased.
“Given the figures, it is possible that the troika will ease their demands and that they will improve the country’s conditions,” Paula Carvalho, economist at bank BPI, told newspaper i.
Minister of the Economy blames eurozone
Minister of the Economy Álvaro Santos Pereira said the GDP fall was down to the financial crisis in Europe and said the country was doing well in terms of foreign demand.
“Because Europe is in crisis and many European countries are suffering a recession, and over 70% of Portuguese exports go to Europe, it’s natural that there was a significant impact,” he said on Thursday on the sidelines of the presentation of a state-sponsored programme to boost employment, according to financial daily Diário Económico.
Santos Pereira also pointed out that in terms of foreign demand Portugal’s performance was “pretty good” and that exports had risen by 20%, though also admitting that more foreign demand had an impact on the country’s unemployment, which hit a record 16.9% in the last quarter of 2012.
“There is a direct link between economic performance and creation of jobs. When a country is in recession it destroys more jobs than those it creates, which is what’s happening in Portugal,” the minister said.
The government had expected the economy would shrink 1% quarter-on-quarter but in the fourth quarter of 2012 the gross domestic product (GDP) fell -3.8% from a year earlier, compared with -3.5% in the previous quarter. Comparing with the previous quarter, the Portuguese GDP slumped 1.8%.