PARIS (MNI) – Portugal’s bailout program is on track, but its
economy is expected to contract more sharply this year because of weak
growth in its main trading partners and poor domestic demand, the
country’s official lenders said on Tuesday.
Officials from the so-called troika — the EU, the European Central
Bank and the IMF — completed their third review of Portugal’s E78
billion bailout, giving their approval for the disbursement of E14.9
billion in additional aid.
“Policies are generally being implemented as planned and economic
adjustment is underway,” the troika said in a press release. “But more
efforts are needed to clear Portugal’s structural reform backlog in the
network and sheltered services sectors.”
Investors have become increasingly skeptical that Portugal will be
able to return to the markets in 2013 when the bailout program is
scheduled to end. But the troika said that “provided the authorities
persevere with strict program implementation, the euro area member
states have declared they stand ready to support Portugal until market
access is regained.”
Portugal’s economy is expected to contract by 3.25% in 2012,
compared with a 1.5% fall in 2011, the troika said. Nevertheless, the
this year’s deficit target of 4.5% of GDP “remains within reach.”
The deficit target “is expected to be met with current policies,
provided that downside risks to the economic outlook do not
materialize,” it said.
A slow recovery should take hold in Portugal in 2013, the troika
said, mainly supported by private investment and exports.
–Paris newsroom, +33142715540; jduffy@marketnews.com
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