Portugal Raises Forecasts for This Year’s Economic GrowthAnabela Reis and Henrique Almeida
Portugal’s economy is forecast to increase more this year than previously estimated as the country approaches the end of its international bailout program.
Gross domestic product is expected to increase 1.2 percent in 2014 after declining 1.4 percent last year, the government said yesterday. It had previously forecast a growth of 0.8 percent in 2014. The jobless rate will decline to 15.7 percent this year from 16.3 percent in 2013.
“There is today in Portugal a stronger economic growth led by investment and exports,” Paulo Portas, vice-premier told reporters in Lisbon after the country concluded the 11th review of its aid plan. Exports are forecast to increase 5.5 percent this year, he said.
Portugal emerged from its longest recession in at least 25 years in the second quarter and Prime Minister Pedro Passos Coelho is trying to regain full access to debt markets with the end of the country’s 78 billion-euro ($108 billion) bailout approaching in May. Coelho still has to trim spending by 3.2 billion euros in 2014 to meet targets in the European Union-led aid plan after relying mostly on tax increases in 2013.
The country’s jobless rate dropped for a third quarter to 15.3 percent in the three months through December and private spending is picking up. Consumers spent 3.5 percent more on Christmas shopping with credit and debit cards in December than in 2012, according to SIBS SA, the company that manages the country’s cash machines.
Portugal, which pays interest of 3 percent on its bailout loans, has raised 6.25 billion euros selling bonds through banks this year and has started to prefund for 2015, the Portuguese debt agency said earlier this month.
The country plans gross bond issuance of 11 billion euros to 13 billion euros this year, and the debt agency said in January that it expects to reintroduce bond auctions in the first half of this year. It said net funding needs for 2014 are expected to be about 11.8 billion euros, with funding coming from its financial aid program and the market.
Even as Portugal’s aid program is set to end by mid-May, the IMF is only expected to disburse the last tranche to the country in June, Portas said.
While Portugal’s securities are rated below investment grade by Standard & Poor’s, Fitch Ratings and Moody’s Investors Service, Ireland no longer has a junk rating. Ireland in December became the first nation to exit a rescue program since the euro area’s debt crisis began in 2009. That country entered its 67.5 billion-euro bailout in November 2010, six months before Portugal got its package.
Finance Minister Maria Luis Albuquerque on Jan. 24 said it was still too early to decide on the bailout exit strategy and on whether Portugal will opt to request a precautionary program. Portas said yesterday Portugal hadn’t discussed the strategy with the troika and that it would announce how it plans to exit its aid program before the program ends May 17.
The last review of Portugal’s aid program is scheduled to take place in April, Portas said.