By CHRIS GRAEME [email protected]
The acute financial and political crisis Portugal was facing a week ago seems to have abated with news that Portuguese exports were up for the third consecutive quarter.
Despite pessimism from some Portuguese economists and international analysts following news last week that interest yields on 10-year Portuguese government bonds had reached 7.5 per cent, it was announced on Friday last week that exports had grown overall by 1.5 per cent on the same three quarters last year.
Some analysts say that if these results, which included a 0.4 per cent increase in exports on the previous quarter, are added to the Christmas consumer rush to beat the rise in VAT from 21 to 23 per cent in January, 2010 might end up being more positive than originally anticipated.
The National Statistics Institute (INE) stated, at the end of last week, that the Portuguese economy grew 0.4 per cent between July and September, compared with 0.2 per cent growth the quarter prior to that and 1.1 per cent in the first quarter of the year.
Statistics from the same entity showed that exports of transactional goods had increased by 15 per cent in nominal terms in the third quarter.
Prime Minister José Sócrates called the numbers “very positive” while even the leader of the PSD opposition, Pedro Passos Coelho, said that the numbers were “good news” but warned that “one swallow didn’t make a summer” and “sustained growth was necessary”.
Chief economist at BPI bank, Cristina Casalinho, told the newspaper Público on Friday that while consumer spending could temporarily rise in the run-up to Christmas, 2011 was likely to see considerable contraction as the effects of the austerity measures began to bite.
This followed positive if non-committed noises from the President of China, Hu Jintão, who shortly before a state visit to Portugal last week suggested his country was prepared to buy up the sovereign debt of European countries.
During his visit to Lisbon, China and Portugal signed bilateral cooperation agreements on trade, economy, telecommunications and culture worth an estimated over 700 million Euros.
And addressing business leaders at the Portuguese-Spanish Chamber of Commerce (CCILE) on Friday, the new Governor of the Bank of Portugal, Carlos Costa, said that Portugal’s past inability to tackle fundamental systemic problems had not done the country any favours in the present crisis and warned that possible “changes in government should not alter” the country’s stand on reducing the deficit.
Carlos Costa said he believed that the international markets had been “within their rights to penalise Portugal” with high financial interest rates.
And at a time when the polls indicated that the PS is losing support and votes, he reminded those present that a change in Government should not mean going back on those budgetary commitments already made.
But Reuters suggested on Thursday last week that Portugal’s situation might ultimately depend on the financial markets’ reaction to Ireland, whose sovereign bond interest yields currently stand at around 9.2 per cent.
If Ireland was forced to go to the International Monetary Fund, the international financial markets could then turn on Portugal, Spain and Italy and hike interest rates on 10-year bonds even higher. Interest rates on Portuguese bonds, in the so-called secondary markets, fell back to 6.8 per cent by the weekend.