February 14, 2011
LISBON—Portugal's economy expanded in 2010 as exports to Europe increased. However Patricia Kowsmann of the WSJ reports that the country will fall into recesession, due to a fall in domestic spending that will likely start to outpace the rise.
Portugal's National Statistics Institute said Monday that gross domestic product likely grew 1.4% in 2010, as economic growth in its trading partners in Europe boosted exports. On a quarterly basis, however, GDP contracted 0.3% in the fourth quarter from the third, it said in its flash estimate.
The estimate doesn't include a statistical breakdown of growth, but the agency said export volume fell slightly from the third quarter, while domestic spending also slowed.
Filipe Garcia, an economist at Informacao de Mercados Financeiros, said the GDP figure for the fourth quarter was slightly lower than expected.
"Going forward, the budget consolidation will likely continue to depress public consumption," he said. He added that exports could also be hurt by rises in prices for electricity and raw materials.
Final GDP figures will be released March 11.
Portugal is raising taxes, cutting salaries and taking other measures to reduce its spiralling budget deficit, something the Bank of Portugal said will drive the country to a recession this year. Private consumption is expected to fall 2.7% this year, while unemployment should surpass the current 10.9% rate.
A recession will make public finances even more difficult to turn around, at a time when the country is desperately seeking to prove to investors it can tackle its persistent deficit on its own.
To date, the government has met its budget target, cutting the deficit to around 7% of GDP last year, from 9.3% in 2009. It needs to reduce the figure to 4.6% in 2011.
No comments:
Post a Comment