Portugal: Consumer confidence continues to plummet while business confidence improves
October 27, 2011
According to the final statement of the 27 October Eurozone summit, Portugal is making good progress with its bailout package programme and is determined to continue undertaking measures to underpin fiscal sustainability and improve competitiveness. However, the Portuguese economy remains deeply mired in recession, with both the Central Bank and the government downgrading their 2012 outlook and consumer confidence dipping to record-low levels. Moreover, the government included further additional austerity measures in its 2012 budget, which weigh on further investment and consumption. That said, the government expects the budget balance to improve and moderate from a shortfall of 5.9% of GDP this year to a deficit of 4.5% in 2012, which is in line with the terms of the bailout. In October, consumer confidence plummeted from minus 53.9 points in September to minus 55.8 points in October, an all-time record low. The October reading reflected a deterioration in virtually all components of the survey, in particular the perspectives on the evolution of the country's economic situation. Simultaneously, business confidence improved from minus 20.7 points in September to minus 18.9 in October. Nevertheless, the 3-month moving average of the economic climate indicator continued its downward trend in place since July 2010, falling from minus 2.7 points in September to minus 2.9 points in October. The October reading is hovering close to the lowest of the series, which were recorded in March and April 2009. The Central Bank expects the economy to contract 1.9% this year (July: -2.0% year-on-year) and 2.2% in 2012 (July: -1.8% yoy). Meanwhile, the government is less upbeat and sees economy contracting 1.9% this year (July: -1.8% yoy). In 2012, the government projects that GDP will decline 2.8% (July: -2.3% yoy).