Boston, MA -- (SBWire) -- 05/18/2013 --Core Views
We maintain our view that the centre-right coalition government in Portugal will hold onto its mandate in the face of high public discontent and increasing unease with official austerity measures amongst members of the coalition. This is predicated on a strong parliamentary majority and a lack of credible alternatives for the electorate, given it was the opposition Socialist Party that first requested the bailout.
We are forecasting a real GDP contraction of 2.4% in 2013, as the austerity-driven recession continues and the economy rebalances away from domestic consumption. We see modest growth of 0.3% in 2014, but even that mainly reflects a continued deterioration in imports, rather than a tangible improvement in domestic demand.
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Weaker than expected growth will undermine the government's revenue raising ability. Although the government is likely to implement further spending cuts, we continue to expect Portugal to restructure its debt in the coming years.
Forecast Changes
Our forecast of a real GDP contraction of 2.4% in 2013 represents a downgrade from our previous -1.9% forecast.
Risks To Outlook
Downside Risks To Growth Forecast: The biggest immediate danger for Portugal is a deepening of the sovereign debt crisis, either for its own government or in another eurozone country, which would depress domestic confidence and external demand.
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Now Available: Portugal Business Forecast Report Q2 2013
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