Portugal GDP 'will shrink this year'

22 March 2011

Portugal's gross domestic product (GDP) will shrink this year, the country's government has forecast.

Officials claimed a drop in investment coupled with cuts in spending to narrow the budget deficit will be the triggers for such a move, Bloomberg reports.

According to the stability and growth programme, GDP will contract 0.9 per cent in 2011, following an increase of 1.4 per cent witnessed last year.

Aiming to curb its debt and narrow its budget gap to avoid a bailout similar to that used to assist the Greek debt crisis, Portugal is implementing deep spending cuts and upping taxes.

The country's prime minister Jose Socrates claimed he will speak to opposition parties in an effort to swerve a bailout package and avert a political crisis.

Last week, Portugal's debt rating was downgraded from A1 to A3 by Moody's Investors Service, following concerns over risks to the government's deficit-reduction plans and a weaker outlook for economic growth.

By Asim Shah

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