Portuguese deficit falls to 5.6% in third quarter: INE

Portugal’s public debt dropped to 5.6 percent of the nation’s output at the end of the third quarter from 6.7 percent at the same period a year earlier, data released on Friday by the national statistics institute INE showed.

Portugal has pledged to cut its deficit to 5.0 percent of gross domestic product (GDP) by the end of this year as part of a financial rescue package worth 78 billion euros ($103 billion) provided by the European Union and the International Monetary Fund.

Under terms of that plan, Lisbon has agreed to divest itself of public assets worth 5.5 billion euros, and said on Thursday that it would sell the Portuguese airport operator ANA to the French civil engineering group Vinci, for 3.08 billion euros.

Eurozone countries are bound to maintain public deficits of no more than 3.0 percent of GDP, and are supposed to work towards a balance or even a surplus in times of economic growth.

But the Portuguese recession deepened in the third quarter, when GDP declined by 0.9 percent from the previous three-month period.

The economy has been shrinking since 2011 when it contracted by 1.7 percent. The government, the IMF and the EU expect the economy to contract again, by 1.0 percent, next year.

The bank of Portugal forecasts that the economy will shrink by 1.6 percent in 2013.