Portugal: Portuguese economy sees downturn of 3.5 percent this year

16 April 2009

Lisbon, Portugal, 16 April – The Portuguese economy will suffer a 3.5 percent downturn this year, exports will drop 14.2 percent and investment almost 15 percent, and there will be deflation, according to Banco de Portugal’s Spring Economic Bulletin.

This new forecast of less than 3.5 percent for the evolution of the GDP in 2009 compares to the previous forecast announced in January of less than 0.8 percent.

According to the Banco de Portugal’s long-term information dating back to 1978, there has never been a year in which the GDP has fallen by 3.5 percent.

The central bank’s figures show that in these 31 years, between 1978 and 2008, there were only two years of recession, 1984 and 1993, both having a fall in GDP of around 1 percent.

Given the intensity of the crisis, the governor of the Banco de Portugal outlined what he thinks should be Government’s policy priorities – support the unemployed and make public accounts credible.

Ensuring this social support with State funds, it is important that the Government bears in mind “the need for prudence and rigour in the applying any additional one-off measures,” said the Governor.

“This is because the budget deficit is already high and will increase,” he added.

“The structural deficit of public services was around 4.6 percent of the expected GDP in 2008, with another increase expected in 2009,” said Constâncio.

This figure differs from the 2.6 percent of the GDP reported to Brussels in March because of the adjustment to the effects of the economic cycle and the collection of extraordinary revenues, which, according to Banco de Portugal’s figures, were equivalent to 1.1 percent of the GDP. (macauhub)