Bank of Portugal announces recession

The Bank of Portugal officially announced that Portugal has entered a recession on Tuesday.

According to forecasts issued by the BoP’s Governor, Vítor Constâncio, the country will suffer negative growth for 2009 and probably much of 2010.

The reasons given were the general cooling of economies within the euro zone as a consequence of the credit crunch and overall financial crisis which began in August 2007.

Portugal has failed to escape the recession despite considerable reserves and good financial management because 70 per cent of her exports go to European Union countries.

According to the latest predictions issued by the European Commission and European Central Bank, the vast majority of euro zone countries will suffer negative growth in the region of 0.5 per cent in 2009, with Germany at -0.8 per cent and Spain -0.9 per cent, both countries being Portugal’s main export clients.

According to a report from the German Ministry of the Economy, the German economy could shrink by as much as three per cent, far worse than the International Monetary Fund and OECD had anticipated.

However, the Bank of Portugal continues to hold out hopes that the Portuguese economy could, despite everything, show a better performance than the core 15 euro zone countries for two reasons: a sustained internal demand because of falling fuel prices, raw materials and interest rates and considerable public investment in public works projects which should support the national economy in the construction and related services industries.

Therefore, Bank of Portugal predictions for the country should hover between 0 per cent growth and -0.5 per cent in 2009, with a possible increase to 1.3 per cent growth in 2010.

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