Consumers, exports boost Portugal: official data

Portuguese consumers increased their spending in the last quarter of last year, showing some confidence amid austerity and giving an unexpected boost to the economy, official data showed on Tuesday.

Overall, the bailed-out country appears to be benefiting from an export-led recovery from near bankruptcy and recession.

Portugal is hoping to emerge from its bailout programme totalling 78 billion euros ($108 billion) on May 17.

The latest data, and pick-up for household consumption, will be welcomed in a country still applying tough austerity policies as conditions of the international rescue programme.

The national statistics institute raised its calculation of growth in the quarter, from output in the third quarter, to 0.6 percent instead of 0.5 percent as estimated last month.

But for the whole of 2013, the economy shrank by 1.4 percent, compared with output in 2012 when it contracted by more than twice as much, by 3.2 percent.

In 2011, output shrank by 1.3 percent.

The contraction for the whole of 2013 was a stronger performance than the government had expected.

It was also better than had been forecast by the International Monetary Fund, the European Union and the European Central Bank which are funding the bailout in return for deep reforms of public finances and the economy.

The government revised up its forecasts in February and now expects the economy to grow by 1.2 percent this year.

At Capital Economics in London, economist Ben May commented: “The latest Portuguese GDP (gross domestic product) figures will bolster hopes that the government can follow in Ireland’s footsteps and make a clean break from its bail-out later this year.”

– Export-led recovery –

The firming growth was being matched by rising consumer and business confidence “suggesting that the solid recovery last year is more than just a blip”.

But he added that unless Portugal stages a period of strong and sustained growth in the medium term, deals with rigid practices in the economy and avoids deflation, “concerns about the sustainability of the public finances could eventually resurface.”

The country has just been through two and a half years of recession, from which it emerged in the second quarter of last year.

However, when the level of output in the last quarter of last year is compared with output in the last three months of 2012, the economy grew by 1.7 percent, the institute said, upgrading this figure from 1.6 percent.

In the last quarter, demand from inside Portugal made a positive contribution to the economy, for the first time since the end of 2010.

This reflected a pick-up of household spending which has been hit severely by tax increases, cuts in pensions and pay, and other tough measures to correct the national finances and increase efficiency in the economy.

The figures also supported signs that Portugal is experiencing an export-led recovery.

Portuguese exporters have recently gained new customers in markets outside the European Union such as Morocco, Algeria, China and Brazil.

In the fourth quarter, exports of goods and services increased by 9.4 percent on a 12-month comparison, after an increase of 7.2 percent in the third quarter.

Meanwhile a fall of investment slowed down to show contraction of 1.8 percent — a marked improvement from a fall of 4.4 percent in the third quarter.