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August 14, 2013 1:25 pm
Portugal has emerged from two and a half years of deep recession with economic growth of 1.1 per cent in the second quarter, surpassing expectations with the strongest quarterly growth in the EU after 10 consecutive quarters of contraction.
The first sign of a turnround in the country’s deepest recession for more than 40 years is welcome news for Pedro Passos Coelho, Portugal’s centre-right prime minister, whose coalition government was almost brought down last month by an internal rift over its tough austerity policies.
According to the National Statistics Institute (INE), a 6.3 per cent upturn in exports from April to June compared with the previous three months and an easing in the rate at which investment had been contracting were the main drivers behind the increase in gross domestic product following a contraction of 0.4 per cent in the first quarter.
The jump in growth was significantly higher than most banks and economists had forecast. Analysts said the figures suggested the economy was stabilising after a long period of contraction but said it was too early to characterise the change as a full inversion of the economic cycle.
INE said the economy contracted 2 per cent in the second quarter compared with the same period last year, a significant improvement from a year-on-year contraction of 4.1 per cent in the first quarter.
“This has been a good summer for tourism, and we will need to examine the extent of the seasonal component in the latest figures,” said Daniel Traça, deputy dean of Lisbon’s Nova School of Business and Economics. “But I’m hopeful that this is an indication that the Portuguese economy is hitting the bottom of the cycle and beginning to turn round.”
Prof Traça said the hope in Portugal was that economic growth would help lift tax revenue, enabling the government to ease the spending cuts and tax increases required to comply with the fiscal targets set by international lenders as part of the country’s €78bn bailout.
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