Deteriorating Portuguese Current Account
Portugal’s Current Account continues in negative territory and there appears to be some trouble in determining final numbers as the latest figures due for the month of June have been postponed three times so far. It is speculated that when they are published they will confirm that the upward trend in the finances of this recovering Eurozone economy appears to have faltered. The latest numbers from May revealed a Current Account deficit of -€1.225Bn, and estimates for the delayed June release range from a deficit of just -€205m to -€1.4Bn.
Portugal’s monthly Current Account reading has been in surplus just three times in the last two years and only four times over the last decade. Over the same ten years the country’s public debt levels have risen substantially, in 2004 the debt to GDP ratio stood at approximately 60%, today this figure is at a peak of 129%. Trade balances remain persistently negative and unemployment is clearly above the Eurozone average at 13.9%.
There is however light at the end of the tunnel for this perhiphery Eurozone economy. Portugal’s overall budget deficit is likely to come in at 4% for the full year, according to ratings agency Fitch. Although this technically breaches the EU mandated 3% deficit rule it is a clear improvement on the 2013 deficit of 2014. Much of this is thanks to the structural reforms that the country was able to implement during the recent economic crises. Portugal is only the second country, after Ireland, to successfully exit the EU / IMF bail out program and it was under the tenure of these external agencies that the country’s reform program could be pushed through. This has enable a recent return to growth for this recovering economy, the latest quarterly GDP reading showed 0.6% expansion and forecasts for the full year are running in the range of between 0.8% and 1.2%, this is an obvious improvement on last years -1.2% economic contraction.
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