Brussels, 26/07/2012 (Agence Europe) - The recession in Portugal could be deeper that forecast by the government, the Organisation for Economic Cooperation and Development (OECD) said in a report published on Thursday 26 July. It calls on the Portuguese authorities to pull out all the stops in order to meet the budget reduction targets set by the country's creditors, AFP reports.
The Portuguese economy is likely to contract by 3.2% by the end of 2012, with the authorities forecasting a contraction of 3% of GDP, the OECD says. The economy will also probably shrink by 0.9% of GDP in 2013, while the authorities are predicting slight growth of 0.6%.
The OECD says that there is a risk that budgetary targets will not be reached because of lower than predicted growth and the government should take steps to address this immediately. Under the terms of the fiscal adjustment programme implemented in exchange for aid of €78 billion over three years, Lisbon must bring its budgetary deficit down to 4.5% in 2012 and to 3% in 2013. The country is also expected to return to long-term debt markets by September 2013.
In successive assessments, Portugal's creditors in the “troika” (European Commission, ECB and IMF) have always said that the Portuguese programme was going well, regularly hailing the efforts being made by the government to meet the targets set. In a new publication on 17 July, however, the commission flagged up the increased budgetary risks to the country, between lower tax revenue and increased tension in the eurozone.
The OECD also highlighted that Portugal's recovery efforts were being hampered by the unfavourable climate resulting from the growing turmoil caused by the deepening sovereign debt crisis in the eurozone. This context could undermine confidence in the Portugal's prospects, the OECD warns. (SP/transl.rt)