Portugal recently passed its latest bailout review, the sixth to take place. This reviewed its performance and made the country eligible for the next €2.5 billion loan in spite of concerns over continued economic risks within Portugal.
The week-long review found the country to be generally on the right path towards financing itself in debt markets by next year. The economy is still expected to contract by 1% in 2013, and by 3% this year, a prediction that remained unchanged from the previous review in September. Growth is expected to return in 2014, although it will be very modest at just 0.8%.
The next payment means Portugal will have received 87% out of a total of €78 billion bailout, and confidence in the country’s prospects is increasing. However there are concerns that Portugal could be affected by the recession in Spain as this is its largest export market.
Portugal is currently looking at cutting corporate taxes to make it more attractive to foreign investment, and planned spending cuts of €4 billion for 2013 into 2014 will be discussed at its next review.
In 2013 Portugal is due to implement a large increase in taxes as this is necessary for it to meet budget goals, but economists think this could result in the economy contracting much more than expected due to a decline in consumer confidence.
Portugal is also suffering from record unemployment, as levels have reached a high of 15.8%. Unemployment is expected to increase to reach 16.4% by next year, but the EU and IMF considered the reforms as being necessary for sustainable growth and job creation.