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Portugal faces deeper downturn: IMF

Portugal may return to growth in 2013 but shrinkage of the economy before then could be deeper than previously thought, the IMF auditor for Portugal told the Jornal de Negocios newspaper on Thursday.

“There is a risk that budgetary adjustments lead to a contraction more deep” than expected, said Abebe Selassie, who represented the International Monetary Fund during the third review of Portuguese finances tied to a rescue worth 78 billion euros ($105 billion).

Portugal passed the review by the European Union, European Central Bank and IMF on Tuesday, although the auditors said challenges remained.

The so-called EU-ECB-IMF “troika” approved the payment of a slab of aid worth 14.9 billion euros, of which 9.7 billion euros were to come from the EU and about 5.2 billion from the IMF.

Portugal faces a difficult economic climate owing to a weakening of activity in the eurozone as a whole, the auditors said.

“Returning to the markets in 2013 will not be easy,” Selassie said adding that the only solution was a “strict execution of the aid programme to show that results were at hand and debt was sustainable”.

“We still see a return to growth next year” of 0.3 percent, he said.