Portuguese Economy Contracts for a Sixth Straight Quarter

Portugal’s economy shrank for a sixth quarter in the three months through March as the government and consumers reduced spending.

Gross domestic product declined 0.1 percent from the fourth quarter, when it fell 1.3 percent, the Lisbon-based National Statistics Institute said in an e-mailed statement today. That matches a preliminary report on May 15. GDP dropped 2.2 percent from a year earlier.

Prime Minister Pedro Passos Coelho is cutting spending and raising taxes to meet the terms of a 78 billion-euro ($97 billion) aid plan from the European Union and the International Monetary Fund. As the country’s borrowing costs surged, Portugal last year followed Greece and Ireland in seeking a bailout.

Household spending dropped 2.1 percent in the first quarter from the previous three months, while government spending fell 0.6 percent. Exports rose 1.8 percent and imports increased 1.7 percent.

Portuguese economic growth has averaged less than 1 percent a year for the past decade, placing it among Europe’s weakest performers. The economy may contract 3.3 percent this year before expanding 0.3 percent in 2013, the European Commission forecast on May 11. The government predicts GDP will shrink 3 percent this year and expand 0.2 percent in 2013.
Cars, Construction

Car sales may drop 18.5 percent this year from 2011, according to a forecast by ACAP, the Portuguese Automobile Association. An estimated 2,600 companies in the auto industry may close in 2012, with 21,000 job losses, ACAP said.

Portugal’s construction sector is on the “verge of collapse” and needs an emergency program to help restructure debt, the country’s biggest industry group said on June 5. The industry owes banks about 25 billion euros and insolvency risks are rising as banks cut back on loans, Ricardo Pedrosa Gomes, president of the Public Works and Construction Association, said in a statement.

The country’s jobless rate rose to a euro-era record of 14.9 percent in the first quarter. The government forecasts the unemployment rate will climb to 15.9 percent for all of 2013 from 15.5 percent this year.

The government targets a budget deficit of 4.5 percent of GDP in 2012 and 3 percent in 2013. Debt was 107.8 percent of output in 2011 and the government forecasts it will reach 114.4 percent in 2012 and peak at 118.6 percent in 2013.