Portuguese recession to be milder than thought: bank

The Portuguese economy is set to shrink by 3.0 percent this year instead of 3.4 percent forecast previously, the national central bank said on Tuesday.

The economy contracted by 0.1 percent in the first quarter of the year, which was less than expected, and the new forecast is in line with estimates by the International Monetary Fund, the European Union and European Central Bank.

Portugal is struggling to correct its public finances and restructure its economy under conditions laid down by the EU and IMF in return for a debt bailout.

The Bank of Portugal, in issuing its revision for output this year, said it was concerned about the risks posed by the eurozone debt crisis and by the possible need for the government to introduce new measures to achieve the target of reducing the public deficit to 4.5 percent of output.

The central bank was less optimistic than the IMF, EU and ECB, the so-called “troika” of creditors, regarding the outlook for 2013.

The three creditors expect Portugal to switch into growth of 0.2 percent but the national central bank expects stagnation.

The central bank warned: “We continue to foresee strong contraction of the economy in 2012 followed by a gradual pick-up in 2013, but this would not be enough to generate growth for the whole of the year.”

The bank said that worsening unemployment and fall of internal demand could mean that the government would have to adopt new measures to cut the public deficit.

Meanwhile, the national statistics institute reported that exports rose sharply in May after a flat period in April.

A trade deficit fell by 43.7 percent in May on a 12-month comparison to 978 million euros.

Eurozone countries in difficulty are focusing on boosting exports and running a trade surplus, since a trade surplus is an important contributor to growth in an economy.

Exports improved to countries outside the European Union and in particular there had been a rise of exports of metals, vehicles and other transportation equipment.

Imports fell by 8.2 percent on a 12-month comparison but increased by 13.6 percent in the month.

In the three months to the end of May, exports rose by 6.5 percent and imports fell by 9.5 percent.