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ECONOMIC CONTEXT
The evolution of GDP in 2011 indicated a
widespread fall in internal demand (-5.2%),
partly offset by substantial growth in exports
(7.3%) and a major drop in Gross Fixed Capital
Formation (-11.2%).
Losses intensified in the last quarter of the year
due to falling external demand addressed to
the Portuguese economy, weakening exports,
tighter credit in the economy caused by the
process of deleveraging the banking sector, and
the higher direct and indirect taxes which cut
into families’ available income.
Unemployment remained high (12.5%), while
the higher VAT for some administered prices
along with climbing oil prices drove inflation
(3.6%).
Budget consolidation measures in the scope of
the state budget and the expected slowdown of
global economic growth heavily impacted the
Portuguese economy’s performance in 2012,
with GDP estimated to have fallen by about 3.1%,
which will result in the deepest recession since
1975.
Conditions of internal origin will lead to
an unprecedented contraction of private
consumption (-6.0%), due to the joint effect of
the abrupt drop of available income for civil
servants, state business sector employees and
pensioners, salary freezes, higher income tax
via lower earned income allowances and higher
indirect taxes, specifically the VAT reclassification
of many products and services, which shift from
low and intermediate rates to the maximum rate.