THE BLEAK economic outlook will continue into 2009, according to predictions by the Bank of Portugal.
Portuguese families will continue to have to make sacrifices says the national bank, which announced a sharp slowdown in consumer consumption in the first half of 2008.
The slowdown has been dictated, to a large measure, by the high level of economic debt which, according to Bank of Portugal (BdP) accounts, shows that the total external debt will reach a record 11.1 per cent of the GNP in 2009.
The institution headed by Governor Vítor Constâncio lowered Portuguese growth expectations to 1.2 per cent, even lower than predictions made by the International Monetary Fund in its report for Portugal in March 2008.
Six months ago, the BdP predicted that growth rates would hover around 2.0 per cent, up on the 1.9 per cent registered at the end of 2007.
The new 1.2 per cent figure is lower than the government’s own estimates for the rest of 2008 and 2009 set at 1.5 per cent.
Behind these depressing results, the BdP points to a “global economic slowdown”, the “turbulence in the international financial markets” and an “increase in raw materials”.
Serious
However, the fact that the country is so in debt to other countries while both Portuguese companies and families are seriously indebted to banks and financial institutions are also factors.
According to the Bank of Portugal, the Portuguese External Deficit against its capital balance is likely to exceed 10 per cent of its GDP this year, something which hasn’t happened since 1995.
Company investment is also falling from 3.2 per cent in 2007 to one per cent this year and 1.2 per cent in 2009 while exports are down from 7.7 per cent in 2007 to 4.4 per cent this year and only four per cent next year.
Portugal’s external deficit stood at -8.6 per cent in 2007, climbing to -10.6 per cent this year and soaring to -11.1 per cent in 2009.
Inflation will continue to be a worry until the end of the year, expected to stand at around three per cent.
Yet, despite the Governor of the Bank of Portugal pointing to external factors causing Portugal’s economic woes, the International Monetary Fund says that Portugal’s main problems are internal.
According to an IMF report issued last week, “the deterioration in the global economic environment is limiting Portugal’s capacity for recovery, but its fundamental economic problems are domestic: high external and consumer deficits, high family debt, high public sector debts, and poor competitiveness against European neighbours are exacerbating the situation.”
Do you have a view on this story? Email: editor@the-resident.com
