PORTUGAL STANDS on the brink of a major recession according to the latest bleak figures from the National Statistics Institute.
The Instituto Nacional de Estatística (INE) stated that in the third quarter of the year the economy shrank 0.1 per cent on the same period last year.
If an economy shrinks for three consecutive quarters within one year then that economy is in recession.
According to the INE, the fourth quarter (September to December 2008) will also, according to all indicators, show regression.
The news is a damp squib for the Minister of Finance, Fernando Teixeira dos Santos, who back in the summer predicted that Portugal would probably just about escape the recession hitting more developed and richer countries like Germany, France and the United Kingdom hard.
The bleak economic news throws a further bucket of cold water on the minister who earlier this month was voted the Worst European Union Finance Minister by the UK’s Financial Times.
According to figures released by the INE, economic activity grew 0.6 per cent in the third quarter – 0.1 per cent down on the same period in 2007 – but that any stability could prove an illusion since any registered growth was more due to increased private spending (2.3 per cent) than production and exports.
“This growth rate in consumer spending in the third quarter is likely to have been influenced by the government’s one per cent cut in IVA (VAT) from 21 per cent to 20 per cent in July,” states the INE.
Last week, the Governor of the Bank of Portugal, Vítor Constâncio, denied that the country had technically entered a recession and said that only in January would it be possible to issue a more accurate forecast on the state of the Portuguese economy.
However, the governor did say that that there was a risk that the country could fall into recession by the end of the year with falls in the GNP.
“In the third quarter, we suffered negative growth and it is possible that in the fourth quarter, Portugal will also suffer negative growth,” Vítor Constâncio warned at a Portuguese-Spanish Chamber of Commerce luncheon.
“From a technical point of view, this is a recession along identical lines we are seeing in the rest of Europe, which is a situation that is difficult to avoid for a small country like Portugal,” he added.
Do you have a view on this story? Email: [email protected]
