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Portuguese central bank forecasts deeper 2012 recession

Portugal’s central bank said on Thursday the country’s economy will shrink by 3.4 percent this year, worse than expected, as the government implements austerity measures as part of its international bailout.

The Bank of Portugal had previously forecast a 3.1-percent contraction this year, while the government forecasts a 3.3 percent drop.

The central bank lowered its forecast for next year to zero growth, from 0.3 percent.

Portugal is a member of the eurozone, and its economy contracted 1.6 percent last year as the government began to cut spending and raise taxes as required under its 78-billion-euro ($104 billion) bailout from the European Union and International Monetary Fund.

Owing to the lowered forecasts the government may need to adoptadditional austerity measures to meet its commitments under the bailout programme, the central bank noted.