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Post-recession Portugal posts slower growth

Published on 14/11/2013

Bailed-out Portugal revealed Thursday a sharp slowdown in economic growth just three months after shaking off a two-and-a-half-year recession.

Total economic output grew by 0.2 percent in the third quarter of 2013 after an expansion of 1.1 percent in the second quarter when the country broke out of the long downturn, the National Statistics Institute said in a preliminary report.

The eurozone member is forecasting timid 0.8-percent growth for 2014, but its unemployment rate remains painfully high and is forecast to be at least 17.7 percent next year.

Portugal secured a 78-billion-euro ($104 million) economic bailout by the International Monetary Fund and European Union in May 2011.

As a condition of the rescue, Lisbon has had to enact a series of austerity reforms to get its finances in check.

The scale of the reforms and the painful impact of the recession sparked mass street protests, however, and provoked a political crisis over the summer that nearly brought down Prime Minister Pedro Passos Coelho’s coalition government.

Further cuts lie ahead.

The 2014 budget aims to save another 3.9 billion euros ($5.3 billion), partly through cutting public sector salaries and pensions.

Portugal hopes the budget squeeze will bear fruit, however, by allowing it to complete its debt-rescue programme in mid-2014, returning fully to borrowing on the bond market.

In Europe, all bailed-out countries, as well as Spain, Italy and France and some countries in central Europe, are struggling to get a much bigger contribution from exports to support growth and finance public deficits.

Portugal’s official statistics office said the economy benefited from a slower decline in household consumption in the third quarter. Exports also helped, it said, but the impact was lessened by a rise in imports.

Despite the quarter-on-quarter rise in economic activity, Portugal’s gross domestic product in the third quarter actually fell 1.0 percent when compared to the same period last year, after a 2.0-percent year-on-year drop in the second quarter, the office said.