Portugal: GDP contracts in Q1 as domestic demand plummets
June 9, 2011
In the first quarter, GDP plunged a seasonally adjusted 0.6% over the previous quarter, according to the National Statistics Office (INE, Instituto Nacional de Estadistica). The reading matched the 0.6% contraction recorded in Q4 and came in slightly above market expectations of a 0.7% decline. On an annual basis, the economy fell 0.6% over the same quarter the year before (Q4: +1.0% year-on-year). The contraction in the first quarter reflected a 3.4% plunge in final consumption (Q4: +0.7% quarter-on-quarter) as both sub-components household spending (Q1: -2.8% qoq) and public expenditure (Q1: -5.4% qoq) dived due to new austerity measures. Meanwhile, investment declined 3.9% over the previous quarter (Q4: -1.2% qoq). Exports of goods and services improved slightly compared to the previous quarter, expanding 0.2% (Q4: -0.9% qoq), while imports declined 7.5% (Q4: +1.8% qoq). As a result, the net contribution from the external sector to overall economic growth swung from minus 0.1 percentage points in Q4 to plus 0.3 percentage points in the first quarter of the year. Going forward, analysts expect the economy will contract further as the austerity measures associated with the fresh bailout from the European Union and the IMF to the tune of EUR 78 billion will further drag public consumption and private spending.