Bank of Portugal forecasts 2 percent contraction of economy in 2013

18 July 2013

The Bank of Portugal has marginally revised upward its forecast of the Portuguese economy’s growth in 2013, which should contract by just 2 percent as instead of the previously predicted drop of 2.3 percent, indicates its Summer Bulletin released on Tuesday.

The change is mainly due to export performance, where predicted growth was revised upward from 2.2 percent to 4.7 percent, helped by a lower than expected fall in private consumption and investment.

But in 2014 the scenario is just the opposite. Portugal’s central bank has now announced a forecast of 0.3 percent growth, less than the 1.1 percent upturn announced in the previous Spring Bulletin.

In this case, the explanation is that the Bank of Portugal has now included in its calculations next year’s envisaged austerity measures, in which private consumption, investment and public consumption will be much more unfavourable.

Even though the economy’s contraction is not as much as expected, the job market situation will continue to get worse this year. The Bank of Portugal estimates that employment will fall by 4.8 percent; the Spring Bulletin had indicated it would be 3.3 percent lower.

Although the central bank does not make unemployment rate estimates, the OECD also announced on Tuesday that Portugal’s unemployment rate should be about 18.6 percent this year, a tenth of a percentage point off the government’s prediction. (macauhub)