Portugal’s economy shrank for a seventh quarter in the three months through June while unemployment rose to a euro-era record as the government cut spending and increased taxes to narrow its budget deficit.
Gross domestic product contracted 1.2 percent from the first quarter, when it fell 0.1 percent, the Lisbon-based National Statistics Institute, or INE, said in a preliminary report today. Economists predicted a decline of 0.7 percent, the median of nine estimates in a Bloomberg survey showed. GDP dropped 3.3 percent from a year earlier, the most since the second quarter of 2009.
Portugal’s jobless rate rose to 15 percent in the three months through June from 14.9 percent in the first quarter and 12.1 percent in the second quarter of 2011, the INE said today in a separate e-mailed statement.
Prime Minister Pedro Passos Coelho is battling rising joblessness and a deepening recession as he seeks to meet the terms of a 78 billion-euro ($96 billion) aid plan from the European Union and the International Monetary Fund. As the country’s borrowing costs surged, Portugal last year followed Greece and Ireland in needing a bailout.
Portuguese economic growth has averaged less than 1 percent a year for the past decade, placing it among Europe’s weakest performers. The government predicts the economy will shrink 3 percent this year before expanding 0.2 percent in 2013.
Data on Portugal’s economy was “negative, highlighting an aggravation of the internal demand situation,” Filipe Garcia, an economist at Oporto-based financial consulting company IMF-Informacao de Mercados Financeiros said in a research note today.
The government forecasts the unemployment rate will rise to 15.9 percent in 2013 from 15.5 percent this year as it carries out austerity measures to trim the budget deficit to 4.5 percent of GDP this year and 3 percent in 2013.
Debt was 107.8 percent of GDP in 2011 and the government forecasts it will reach 114.4 percent in 2012 and peak at 118.6 percent in 2013.
Portuguese car sales may decline 18.5 percent this year from 2011, according to a forecast by the Portuguese Automobile Association. An estimated 2,600 companies in the auto industry may close this year, representing a loss of 21,000 jobs, ACAP said.
Brisa-Auto Estradas de Portugal SA, Portugal’s biggest toll-road operator, said on July 27 that first-half toll revenue declined 10 percent.
Portugal’s construction sector is on the “verge of collapse” and in need of an emergency program to help restructure debt, the biggest industry group said in June. Building companies owe banks about 25 billion euros and insolvency risks are rising as institutions cut back on loans, according to Ricardo Pedrosa Gomes, president of the Public Works and Construction Association.