Portugal Business Forecast Report Q4 2012 - new country guide report published
2012-11-15 00:20:56 - Portugal Business Forecast Report Q4 2012 - a new country guide report on companiesandmarkets.com
Cracks are beginning to show in Portugal´s centre-right coalition government as the government imposes further fiscal austerity measures to meet the Troika´s targets. While we do not expect that governmental collapse is imminent, it is important to note that public antipathy for the measures is becoming increasingly fraught. Moreover, we reiterate our caution that a comfortable majority in parliament does
not guarantee political stability, in particular as the junior coalition members grow increasingly uncomfortable with the austerity drive.
The country´s aggressive fiscal consolidation drive as part of its EUR78bn IMF/EU bailout package will keep domestic demand under significant pressure in the coming years. The only positive contributor to economic growth will emanate from the net exports component of GDP by expenditure. We also highlight balanced risks to our economic growth forecasts in Portugal. We maintain our forecast that the Portuguese government will miss the Troika´s fiscal deficit targets in 2012 and 2013; however, we also expect that the international lenders will ease the official bailout targets, potentially following the country´s fifth IMF review.
Major Forecast Changes
We have modestly revised down our forecast for real GDP growth from -3.3% to -3.4% as we expect third quarter growth to show continued acceleration of the economic downturn. 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.
Upside Risks To Economic Outlook: At present, we do not envisage long-term real GDP growth rising much above 1.7% in the latter part of our long-term forecasts to 2021. However, we would upgrade our forecasts upon evidence that the government´s structural economic reform package is making headway. Furthermore, in the event that the Troika eases deficit targets, there is scope for a moderate boost to economic growth.
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