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Portugal Inflation Rate Falls

James Boston
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Portugal Inflation Rate Falls

Signs of a slowing in the Portuguese economy are becoming evident as the latest price growth activity data moderates. This morning’s Consumer Price Index (CPI) for the month of October is pointing to a measurable softening in the rate of inflation. The latest month on month reading has fallen back to 0.3% price expansion compared to a reading of 0.6% just one month ago. The year on year inflation measure however is now reading at a flat 0.0%, this represents an improvement from the -0.4% recorded for this figure last month.

The European Central Bank (ECB) and the European Union (EU) have recently jointly called on Portugal to address the faltering of it’s efforts to introduce structural reform into the economy since the bail out ended and the Troika officially left the country last June. Commenting after a follow up visit to Portugal at the end of October the ECB/EU noted that “progress in structural reforms has lost momentum, with an uneven pace of implementation across policy areas” the delegation further commented that efforts to address the structural budget deficit have also slackened.

The EU/ECB warned that Portugal still faces substantial downside risks, particularly from the slowing global economy. Despite the concerns voiced by the former Troika participants, Standard and Poors (S&P) rating agency opted not to alter the country’s credit rating at it’s recent review. Leaving the country’s rating at BB and projecting an average GDP growth rate of 1.1% over the next two years, S&P noted that it would consider a downgrade if Portugal did not improve it’s efforts to push through the necessary structural reforms. Portugal is facing a general election in 2015 and political positioning ahead of this has encouraged the government to ease up on the unpopular reforms, the Portuguese government is toeing a fine line in balancing domestic and international pressures.

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