OECD revised growth and fiscal consolidation forecasts down further

The preliminary OECD Economic Outlook revised down Portuguese forecasts. The document points to a GDP contraction of 2.7% in 2013, 0.4 percentage points further than the Government’s. This is mostly based on the predicted fall of investment again in 2013. The general government financial balance is also seen to slide below the 5.5% target for this year. Forecasts for prices’ change point to zero inflation.

The document advises that while risks remain tilted to the downside, the country is very sensitive to further turbulence in the euro area, which can aggravate the recession and the fiscal deficit. A faster recovery of the banking system, greater use of EU funds and higher gains in cost competitiveness and exports are mentioned as relevant to boost investment.