Bloomberg News

Portuguese Economy Contracts for Ninth Straight Quarter

February 14, 2013

Portugal’s economy shrank for a ninth straight quarter in the three months through December as export growth slowed with the euro area’s deepening recession.

Gross domestic product dropped 1.8 percent from the third quarter, when it slipped 0.9 percent, the National Statistics Institute in Lisbon said in a preliminary report today. Economists predicted a decline of 1 percent, the median of seven estimates in a Bloomberg survey showed. Fourth-quarter GDP fell 3.8 percent from a year earlier. It was the biggest annual and quarterly contraction since the first quarter of 2009.

“The positive contribution of net external demand declined significantly in the fourth quarter,” the institute said. GDP slid 3.2 percent in 2012 after shrinking 1.6 percent in 2011.

Prime Minister Pedro Passos Coelho is battling rising joblessness and lower demand from European trading partners as he raises taxes to meet the terms of a 78 billion-euro ($104 billion) aid plan from the European Union and the International Monetary Fund. Portugal has already been given more time to narrow its budget gap after tax revenue missed forecasts, and the economy is set to contract for a third year in 2013.

Exports Ease

The government projects the economy will return to growth next year, after shrinking an estimated 1 percent in 2013 and 3 percent in 2012. Economic growth has averaged less than 1 percent annually for the past decade, placing Portugal among Europe’s weakest performers.

The Bank of Portugal on Jan. 15 said the country’s economy will contract 1.9 percent in 2013, more than previously forecast, as export growth slows. Exports will rise 2 percent this year, slowing from estimated growth of 4.1 percent in 2012, the central bank said.

The euro-area recession deepened more than economists predicted as Germany, France and Italy, its three biggest economies, suffered slumping output. GDP fell 0.6 percent in the fourth quarter from the previous three months, the EU’s statistics office in Luxembourg said today. That’s the most since the first quarter of 2009 in the aftermath of the collapse of Lehman Brothers Holdings Inc.

The recession is hurting Portugal’s tax revenue, which dropped 6.1 percent in 2012 as disposable income fell. Portugal aims for a budget deficit of 4.5 percent of GDP in 2013 and will only cut the shortfall below the EU’s 3 percent limit in 2014, when it targets a 2.5 percent gap. The government forecasts debt will peak at 122.3 percent of GDP in 2014 after reaching 122.2 percent in 2013.

Portugal’s jobless rate rose to a new euro-era record of 16.9 percent in the fourth quarter, the statistics institute said yesterday. Unemployment averaged 15.7 percent in 2012, up from 12.7 percent in 2011. The government predicts joblessness of 16.4 percent this year.

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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