Central bank lifts Portugal’s 2014 growth path to 1.2%
The Portuguese central bank signalled on Wednesday that Portugal is winning its battle to emerge from a debt crisis and deep recession, sharply upgrading the outlook for growth.
The bank said that growth was set to be 1.2 percent this year instead of 0.8 percent estimated previously.
The latest figure is a new sign that countries rescued at the height of the eurozone debt crisis are seeing the rewards of radical restructuring and deeply unpopular austerity.
It comes at a critical moment for Portugal which is preparing to emerge from its bailout programme on May 17 and to return to financing itself with loans from the sovereign bond market.
The country has been regaining the confidence of financial markets and the interest rate it has to offer to attract 10-year loans has fallen to below 4.2 percent, the lowest rate since March 2010.
– Export-led recovery –
The central bank said that growth next year would rise further to 1.4 percent compared with a forecast in December of 1.3 percent.
In 2016, the economy would grow by 1.7 percent, the central bank said in its spring report.
The bank said that the recovery of the Portuguese economy this year would be pulled by an upturn in household spending and particularly by exports.
This latest estimate for this year is in line with a forecast from the government which upgraded its outlook at the end of February to 1.2-percent growth.
Last year, the economy contracted by 1.4 percent, which was better than the central bank had expected.
The economy returned to growth in the second quarter of last year, when output rose by 1.1 percent, ending two and a half years of recession set against cuts in government spending which hit wages and pensions.
The International Monetary Fund and European Union rescued Portugal from the threat of bankruptcy in May 2011 with loans of 78 billion euros ($108 billion). But this help was tied to a programme of tough structural reforms which weighed heavily on economic activity and household spending.
In common with other bailed-out eurozone countries — notably Greece and Ireland — Portugal is working not only to correct its public finances but also to raise efficiency so as to boost exports and achieve an export-led recovery.
Ireland is achieving this, and Greece has also made progress.
The Portuguese central bank said that exports should rise by 5.3 percent this year and by 5.1 percent in 2015 after a rise of 6.1 percent last year.
The unemployment rate would gradually fall, it said. In the last quarter of last year, the rate fell to 15.3 percent from a high point of 17.7 percent in the first quarter.
In February, Portugal passed an audit by the IMF and EU and was rewarded with approval for a 2.5-billion-euro loan instalment.
But it still has to present the IMF, EU and European Central Bank with new measures to reduce the public deficit to 2.5 percent of output in 2015, after a target of 4.0 percent for this year.