Portugal's economic growth surprises on the upside

Portugal posted unexpectedly strong economic growth in the third quarter led by the export sector, offsetting weak domestic demand due to the government's austerity drive.

According to a flash estimate released Friday by the National Statistics Institute (INE), GDP climbed 0.4 percent in the period July-September and was up 1.5 percent from a year earlier after annual growth of 1.4 percent in the second quarter and 1.7 percent in the first.

The INE said exports registered a "strong increase." The contribution to overall growth by net trade - exports minus imports - was positive, while domestic demand detracted from the advance, a reverse of the situation seen in the previous three months. The INE highlighted a downturn in investment in the quarter.

"The bulk of the increase is due to a positive contribution of net exports, while there was a drop in fixed investment," Bloomberg quoted Tullia Bucco, an economist at UniCredit in Milan, as saying. "While the news today is positive, it's an indication that austerity measures are beginning to take a toll on economic growth."

Full-year growth may beat government forecast

The INE said earlier this week that exports in the third quarter climbed an annual 14.6 percent, far outstripping growth in imports of only 4.0 percent.

The statistics office is due to release a breakdown of the GDP figures on December 9.

Commenting on the figures, Prime Minister José Sócrates said: "This is good news and confirms the pace of the recovery of the Portuguese economy.

The government predicts GDP will rise 1.3 percent this year, but Economy Minister José António Fonseca Vieira da Silva on Friday said that even in the unlikely event of a weak performance in the third quarter, output is now expected to surpass that figure.

"The simple arithmetic average of growth that we already have is close to 1.5 percent," Vieira da Silva said. "Accumulated growth is already higher than the government's last estimate."

UniCredit's Bucco said net trade is likely to continue making a positive contribution to GDP. "This is typical of countries undergoing fiscal adjustment."

Portugal is aiming to lower next year's budget deficit to 4.6 percent of GDP from a projected 7.3 percent this year.

According to figures also released Friday by the European Union's statistics office Eurostat, Portugal matched quarter-on-quarter growth in the euro zone of 0.4 percent. Annual growth was 1.9 percent.

The Spanish economy stagnated in the third quarter, but posted annual growth for the first time in two years.