Portugal Slump to Deepen on Austerity, Central Bank Says

Portugal’s economy will shrink more than forecast this year and contract in 2012 as the austerity measures that were required for an international bailout take hold, the country’s central bank said.

Gross domestic product will shrink 2 percent this year and 1.8 percent in 2012 after expanding 1.3 percent in 2010, the Bank of Portugal said in its summer economic bulletin today. The new forecasts are more in line with those included in the rescue plan approved in May, which saw GDP shrinking 2.2 percent this year and 1.8 percent in 2012. In March, the bank predicted a 1.4 percent contraction this year and 0.3 percent growth in 2012.