Portugal revises growth forecasts for 2011 and 2012: report

Portugal’s prime minister said Saturday he anticipated better than expected economic performance in 2011, but that the outlook for 2012 was gloomier than previously forecast, Dow Jones Newswires reported.

Pedro Passos Coelho said in an interview that Portugal’s economy would contract by 1.8 percent in 2011, better than the previously estimated -2.2 growth, but that he expected -2.3 percent growth in 2012, a downgrade on the -1.8 percent that had been predicted.

He credited better domestic performace for the upgraded 2011 forecast, but explained that the new 2012 figures were brought on by a worsening global economic outlook.

He said he expected a return to positive growth in 2013, at 1.2 percent.

In April Portugal became the third eurozone country after Greece and Ireland to request an emergency bailout from the EU and the International Monetary Fund to deal with its mountain of debt.

Coelho has promised to abide by reforms demanded by its creditors, and Portugal has already passed a wave of measures including a hike in transport prices, increased taxes on gas and electricity and cutbacks in the public work force.

Moody’s credit rating agency on Friday downgraded by two notches the long-term debt of the Portuguese island of Madeira for failing to declare some 1.6 billion euros in debt.

The agency criticised Madeira’s “poor governance” and said the undeclared debt could complicate the budgetary goals of debt-strapped Portugal, which is under pressure to impose austerity measures as conditions for its EU-IMF bailout.

The agency cut Madeira’s rating from “B1” to “B3” and also placed the island’s debt on negative outlook, meaning that it could cut the rating again after further analysis.

The decision “reflects concerns over the poor governance and management of the region, as well as the weaknesses in implementing the budget,” the agency said in a statement released overnight.

Portugal’s central bank and the national statistics institute last week announced that Madeira, which was granted autonomy after a 1974 revolution that unseated dictator Antonio Salazar, had hidden debts of 1.6 billion euros ($2.17 billion) run up between 2008 and 2011.

Earlier this month, Portugal unveiled plans for a slimmed-down central administration with the axing of 27 percent of directors’ posts as creditors met to ensure the country’s bailout rules were being met.

The plan, which proposes a saving of 100 million euros next year, includes the axing of 1,700 managerial posts from the state administration and 137 public companies.