Economic slowdown predicted until 2009

THE GOVERNOR of the Bank of Portugal admitted last week that Portugal’s economic growth in 2008 was likely to hover around 1.7 per cent.

“2009 could end up being worse than 2008, which could translate into an economic slowdown in the country over the next two years,” said Vítor Constâncio in an address to the Portuguese parliament’s Finance and Budget Committee.

He said that he wasn’t prepared to issue a new forecast for economic growth, which presently stands at 2.0 per cent for 2008.

But he did, according to the news agency Lusa, recognise that the unofficial estimate could be corrected downwards to 1.7 per cent in line with European Commission forecasts.

“Next year could be worse for Europe than 2008 since the effects of the international financial crisis are only just now beginning to affect the economy and will continue to do so next year,” he said.

The Governor accepted that the figures were “not very enthusiastic” after growth rates in Portugal had reached 1.9 per cent in 2007.

Slow growth

However, he did say that Portugal was growing at around the same rate as the core country European Union average of 1.8 per cent, with the new eastern bloc members enjoying much higher growth rates of over four per cent.

Slow economic growth in Europe and the United States is not sufficient however to convince him to recommend or apply “expansionist policies” in the economy, such as increasing public spending or slashing taxes.

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