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Portugal central bank warns 2013 rebound unlikely

Portugal is to be hit by a three percent contraction in 2012 and will manage growth of 0.3 percent in 2013, far below government and EU forecasts, the country’s central bank said on Tuesday.

In its winter report on the economy, the central bank said it forecasts an “unprecedented” recession this year of 3.1 percent of gross domestic product, in line with forecasts by the Portuguese government and the European Commission of 3.0 percent.

But while the European Commission predicts an economic rebound of 1.1 percent for 2013, the central bank said it expects a contraction in 2011 and 2012 and a “quasi-stagnation in 2013”.

The bank said Portuguese GDP shrank by 1.6 percent in 2011 and that according to data already available the slowdown intensified in the fourth quarter.

Pointing to “great uncertainty” in the global economy, the bank said Portugal will be hit by less dynamic world growth and by the effects of stringent budget measures enacted over the past year.

Portugal is in the midst of a tough austerity drive after it had to be bailed out in May of last year with a 78-billion-euro ($100-billion) rescue package put together by the European Union and the International Monetary Fund.

In November, its parliament adopted a tough austerity budget for 2012 that cut salaries, raised taxes and increased working hours for vast numbers of workers already squeezed by recession.