Portugal's anti-austerity effort brings little growth

AP News
Posted: Aug 31, 2016 7:29 AM

LISBON, Portugal (AP) — Portugal's economy is growing only half as quickly as the anti-austerity government had hoped, as its key policy of driving domestic demand comes up short.

Portugal's economy grew at an annual rate of 0.9 percent in the second quarter, the national statistics agency said Wednesday. That is far short of the government's goal of 1.8 percent for 2016 and places the country among the eurozone's weakest economies.

Though Portugal is one of the eurozone's smaller members, its finances are closely watched after it needed a 78 billion-euro ($87 billion) bailout in 2011 and deepened the bloc's financial crisis.

The center-left Socialist government, with the support of the Communist Party and radical Left Bloc, lowered some taxes, reversed government worker pay cuts and raised the lowest pensions as it rolled back austerity measures taken after Portugal's bailout.

The government said after taking power in November that those steps would spur growth and help resolve Portugal's economic problems, including a huge debt load.

Stephen Moore

But domestic consumption contributed 0.2 percent to quarterly growth, down from 0.6 percent in the first quarter.

Analysts say Portuguese growth is being slowed by economic downturns in Brazil and Angola, its major export markets. They also blame the after-effects of the financial crisis — low company investment due to high corporate debt, and low foreign investment caused by lingering investor wariness about Portugal.