Portugal’s economy shrank for a 10th quarter in the three months through March as the government cut spending and the euro-area recession deepened.
Gross domestic product declined 0.3 percent from the fourth quarter, when it fell 1.8 percent, the Lisbon-based National Statistics Institute said in a preliminary report today. That’s in line with the median of nine estimates in a Bloomberg survey of economists. GDP dropped 3.9 percent from a year earlier, the biggest annual contraction since the first quarter of 2009.
“Internal demand had a more negative contribution to the annual change in GDP as a result of the sharper reduction in investment, in particular investment in construction,” the statistics institute said.
Prime Minister Pedro Passos Coelho is battling rising joblessness and lower demand from European trading partners as he cuts spending and raises taxes to meet the terms of a 78 billion-euro ($101 billion) aid plan from the euro area and the International Monetary Fund.
The euro-zone economy contracted more than economists forecast in the first quarter, extending a recession. GDP in the 17-nation euro region fell 0.2 percent after a 0.6 percent decline in the previous three months, the European Union’s statistics office in Luxembourg said today. The median of 39 estimates in a Bloomberg News survey was for a 0.1 percent contraction.
Portugal’s Coelho on May 3 announced measures intended to generate savings of about 4.8 billion euros through 2015 that include reducing the number of state workers. Government ministries will have to reduce spending on purchases of goods and services by at least 10 percent next year, he said.
The government on March 15 announced less ambitious targets for narrowing its budget deficit as it forecast the economy will shrink twice as much as previously estimated this year. The government projects GDP will contract 2.3 percent in 2013 before growing 0.6 percent next year. The jobless rate will climb to 18.2 percent in this year and 18.5 percent in 2014.
Construction companies are suffering from record-low demand for new projects after their order book fell 44 percent in the last quarter of 2012 from the same period a year earlier, Portugal’s Association of Public Works and Construction, or AECOPS, said in a Feb. 4 statement. Cement consumption dropped 27 percent last year to the lowest level since 1973, AECOPS said.
Banco Espirito Santo SA plans to cut 200 jobs in 2013, Chief Executive Officer Ricardo Salgado said on May 7 as Portugal’s biggest bank by market value posted a first-quarter loss of 62 million euros. The loss was “determined” by the recession in Portugal, he said.