Bloomberg News

Portugal Sees Economy Shrinking More Than Forecast in 2012

September 28, 2011

(Updates with comments from prime minister starting in second paragraph.)

Sept. 28 (Bloomberg) -- The Portuguese economy may shrink more than projected in 2012 because of slower external demand, the government said.

The revision is “strictly” due to “external reasons,” Prime Minister Pedro Passos Coelho said in parliament today, citing a “softening of external demand.” The government will revise its forecast to a contraction of between 2.2 percent to 2.3 percent from its previous forecast of 1.8 percent, he said. The new forecast will be included in the 2012 budget proposal to be presented next month.

The International Monetary Fund cut its projection for global growth on Sept. 20 and predicted “severe” repercussions if Europe fails to contain its debt crisis or U.S. policy makers remain deadlocked over a fiscal plan. European Commission President Jose Barroso said today that forecasts point to a “strong slowdown” of the European economy.

The government still expects the economy to return to growth in 2013, Passos Coelho said.

Portugal followed Greece and Ireland in April in seeking a bailout. Like his Irish and Greek counterparts, Passos Coelho is cutting spending and raising taxes to meet the terms of a 78 billion-euro ($106 billion) aid plan from the European Union and the IMF.

--With assistance from Henrique Almeida in Lisbon. Editors: Jennifer M. Freedman, Simone Meier

To contact the reporter on this story: Anabela Reis in Lisbon at areis1@bloomberg.net.

To contact the editor responsible for this story: Angela Cullen at acullen8@bloomberg.net


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