Contraction in Portuguese economy doubled last year

Portugal’s recession deepened at the end of last year as the contribution of net trade – exports minus imports – weakened due to the downturn in the country’s main trading partners in Europe.

According to flash estimates released Thursday by the National Statistics Institute (INE), GDP contracted 1.8 percent on a quarterly basis in the fourth quarter after a decline of 0.9 percent in the previous three months. On an annual basis the drop in output accelerated to 3.8 percent from 3.5 percent in the third quarter.

For the whole of last year the contraction in the economy doubled to 3.2 percent from 1.6 percent. That was slightly worse than the Bank of Portugal’s estimated 3.0-percent decline.

The INE said the slowdown in the pace of export growth in the fourth quarter was partially offset by a less negative contribution from domestic demand due to a slight improvement in investment.

The INE reported Wednesday that the unemployment rate jumped to a new euro-era record high of 16.9 percent in the fourth quarter of 2012, from 15.8 percent in the previous three months and from 14.0 percent in the same period a year earlier.

The Portuguese economy is still reeling from the impact of a draconian austerity drive by the government as part of its commitments in exchange for a 78-billion-euro bailout from the IMF and the EU.

The INE’s report coincided with initial figures released by the European Union’s statistics office Eurostat, which showed that the contraction in activity in the euro zone accelerated to 0.6 percent on a quarterly basis from 0.1 percent the previous three months. On an annual basis, output in the single-currency zone declined 0.9 percent after a fall of 0.6 percent in the third quarter.

In the EU as a whole, activity shrank 0.5 percent quarter-on-quarter after growth of 0.1 percent the previous three months. The decline in output on a year-on-year basis accelerated slightly to 0.6 percent from 0.4 percent.

The Spanish economy declined 0.7 percent on a quarterly basis at the end of last year after shrinking 0.3 percent in the third quarter, while the annual fall in activity rose to 1.8 percent from 1.6 percent. The Germany economy shrank 0.6 percent quarter-on-quarter in the fourth quarter after growth of 0.2 percent the previous three months.