Bloomberg News

Portuguese Economy Contracts for Eighth Straight Quarter

December 07, 2012

Portugal’s economy shrank for an eighth quarter in the three months through September as the government and consumers reduced spending.

Gross domestic product declined 0.9 percent from the second quarter, when it fell 1 percent, the Lisbon-based National Statistics Institute said in an e-mailed statement today. The institute had said in a preliminary report on Nov. 14 that GDP dropped 0.8 percent from the second quarter. GDP fell 3.5 percent from a year earlier.

Prime Minister Pedro Passos Coelho is battling rising joblessness and a deepening recession as he cuts spending and raises taxes to meet the terms of a 78 billion-euro ($101 billion) aid plan from the euro area and the International Monetary Fund. Portugal has already been given more time to narrow its budget shortfall after tax revenue missed forecasts. The economy is headed for a third year of contraction in 2013.

Exports fell 0.2 percent in the third quarter from the previous three months, today’s report showed. Household spending slipped 0.3 percent and government spending decreased 1.9 percent in the period.

The recession is hurting tax receipts, and the government’s revenue from tax and social-security contributions this year will be about 3.3 billion euros less than planned in the budget, Finance Minister Vitor Gaspar said on Oct. 3.

Deficit Targets

Portugal aims to reach a deficit of 5 percent of GDP in 2012 and 4.5 percent in 2013. It will only cut the deficit below the EU’s 3 percent limit in 2014, when it targets a 2.5 percent gap. The government forecasts debt will rise to 120 percent of gross domestic product this year before peaking at 122.3 percent of GDP in 2014.

Gaspar on Oct. 3 said the government will implement an “enormous” increase in taxes on wages and other income to meet deficit targets in 2013. The government also plans to cut spending by about 4 billion euros in the two years through 2014.

The government projects GDP will shrink 1 percent in 2013 after contracting 3 percent this year. Economic growth has averaged less than 1 percent a year for the past decade, placing Portugal among Europe’s weakest performers. The government predicts the unemployment rate will rise to 16.4 percent in 2013 from 15.5 percent this year.

Brisa-Auto Estradas de Portugal SA, Portugal’s biggest highway operator, said on Oct. 31 that toll revenue declined 9.8 percent in the first nine months of the year. Portuguese light- vehicle sales fell 40 percent in the 11 months through November compared with the same period in 2011, the Portuguese Automobile Association said on Dec. 3.

The number of Portuguese building companies that declared insolvency rose 49 percent in the first nine months of the year, a trade group said on Oct. 29. The contraction was caused by an “unprecedented” decline in new projects in the country, the Fepicop group said in a report. Cement consumption declined 26 percent in the nine months through September, it said.

To contact the reporter on this story: Joao Lima in Lisbon at jlima1@bloomberg.net

To contact the editor responsible for this story: Stephen Foxwell at sfoxwell@bloomberg.net


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