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Portugese central bank forecasts deeper 2013 recession

The Portuguese economy is likely to contract by 1.6 percent next year, according to a new central bank estimate that is more pessimistic than those made by the government or the country’s international creditors.

“In 2012 and 2013, we should see a decline in economic activity of 3.0 percent and 1.6 percent respectively,” the bank said in a statement.

The government and its international creditors, the European Union and the International Monetary Fund, have forecast that gross domestic product would shrink by 3.0 percent this year and by 1.0 percent in 2013.

Portugal is benefitting from a financial rescue package worth 78 billion euros ($99 billion) that it agreed upon with the EU and IMF in May 2011.

But the country has struggled to straighten out its finances, and its economy has also remained stuck in the doldrums.

Meanwhile, the national statistics agency INE said Tuesday that inflation fell to an annualised rate of 2.1 percent in October, from 2.9 percent one month earlier.