Bank of Portugal ups 2010 growth, forecasts stagnation for 2011
16/10/2010
The Bank of Portugal has revised its economic growth forecast for this year up to a figure of 1.2 percent, an increase of 0.3 percent on earlier estimates. These projections follow a report by the International Monetary Fund (IMF) in which it predicts a state of recession for Portugal.
The central bank’s Autumn Economic Bulletin explained the rise from its earlier projection of 0.9 percent growth for 2010 to a greater than expected increase in domestic demand and exports.It also forecast a flat, no-growth scenario for next year.
The bank said its latest forecasts did not take into account the government’s latest austerity policies that were announced on September 29 with in the framework of its proposed belt-tightening budget for 2011.
The IMF had last week also forecast stagnation for 2011, but changed its estimates to predict economic contraction after it had taken into account the government’s string of austerity measures.
The Fund said that the Portuguese economy should contract by 1.4 percent next year, predicting only Greece would record worse economic results in 2011.
In its 238-page World Economic Outlook unveiled on Wednesday by the Fund’s chief economist Olivier Blanchard, the IMF expects Portugal to record negative growth once more, blaming the measures to contain the country’s spiralling budget deficit.
Despite announcing a host of cutbacks for 2011, Prime Minister José Sócrates and his cabinet are still anticipating growth of 0.5 percent for next year.
The IMF, while still predicting gloom for Greece, says Ireland and Spain will recover in 2011, with respective growth figures of 2.3 and 0.7 percent.
Greece will have recovered from its near economic disaster by 2015, with a growth figure of 2.7 percent, more than double that anticipated for Portugal for that year.
Amongst measures contained in the proposed budget are that VAT will be pushed up from 21% to 23%, though this increase will only come into force next year.
Spending cuts affecting civil servants will see wage freezes for all workers earning under €1,500 month.
High earning civil servants, including the Prime Minister, will be forced to take pay cuts from 3.5 percent for those who are paid between €1,500 and €2,000, while politicians and state-employed directors will see their wages progressively decrease until they are earning 10 percent less than they do currently.
( The Portugal News)