Portuguese economy better than expected

While most countries have confirmed their economies suffered heavily at the hands of the global economic slowdown which started last year, Portugal this week learnt, contrary to initial expectations, that its economy had not contracted last year in relation to 2007, as had been widely predicted in provisional estimates.

The National Statistics Office (INE) revealed on Wednesday that the nation’s economy had not wilted as much as had been expected in the face of the credit crunch and had managed to report unchanged growth for 2008.

In nominal terms, the INE said, the gross domestic product (GDP) last year reached 166 billion euros, which was up 1.8 percent in relation to 2007.

Domestic demand also grew last year, up one percent, though it was still 0.6 percent under the figure attained 12 months earlier.

With the economy fairing better than expected, the INE revised predictions for the final quarter in 2008 in which it had estimated a contraction of 2.0 percent from the previous quarter and a 2.1 percent year-on-year drop.

Instead, the INE posted a final quarter figure of -1.6 percent, while revising the year-on-year figure to -1.8 percent.

Exports assisted in assuring a better performance for the national economy, with the year-on-year reduction only -0.5 percent in the final quarter of GDP after hitting a low of 1.2 percent between July and September.

Portugal’s exports are widely looked at in determining the extent the global economic slowdown will have on the country.

Recently, President Cavaco Silva, an economist, said Portugal’s export sector is “the key to the solution” for the country’s troubled economy.

“The export of goods and service is practically the only way we have to fight the explosive growth of external debt and at the same time defend the jobs of Portuguese workers”, he said.

In a related story, and following last week’s interest rate cuts, which has seen the European Central Bank base rate fall to a historic low of 1.5 percent, the Euribor 6-month rate, the main lending index for mortgages in Portugal also fell to a record low of 1.817 percent this week. This represents a reduction of slightly more than half a percent on last week’s rate and which will see mortgage holders reduce their repayments even further, though savers are being increasingly penalised.

Mainstream banks are now offering interest of one percent on short-term deposits, contrary to the 3.5 percent awarded shortly before Christmas.

Source: The PORTUGAL NEWS online