The Bank of Portugal recently upgraded the country's economic outlook for 2013-2014, but simultaneously warned that a return to normal market financing activities after the country exits the international aid program in mid-2014 requires a long-term political consensus.
In its winter economic report, the Bank of Portugal stated that compared to the estimates made in October, it now believes that the contraction of Portugal's Gross Domestic Product (GDP) in 2013 will narrow by 0.1 percentage points to 1.5%, while the government estimates a contraction of 1.8%; compared to the estimates made in July, the GDP growth forecast for 2014 has been upgraded by 0.5 percentage points to 0.8%, aligning it with the government's forecast; and it is expected that the growth rate will expand to 1.3% in 2015.
The Bank of Portugal pointed out that the above economic expectations include a gradual recovery of internal demand and indicate that exports will grow strongly in the face of a significant contraction in market share, with expected export growth rates of 5.9%, 5.5%, and 5.4% for 2013-2015, respectively; although internal demand in Portugal is expected to decline by 2.7% in 2013, it should grow by 0.1% and 0.9% in the next two years, respectively.
The Bank of Portugal believes that the latest estimates confirm the prospect of gradual economic recovery in the country after a significant contraction of about 6% from 2011 to 2013.
The Bank of Portugal stated that the fiscal and economic adjustment process initiated under the aid program "has essentially become permanent (in nature)"; therefore, it will continue to reduce the budget deficit and public debt. The return of Portugal to a stable financing market is a process that the country desires, which requires strict adherence to previous commitments, and establishing credible long-term commitments regarding deepening social cohesion and institutional consensus within Portugal is a fundamental requirement. Currently, Portugal is beginning to emerge from the worst economic recession since the 1970s.
