Monday, November 14, 2011

Is Portugal Next?

Portugal's economy shrank 0.4 percent in the third quarter from the previous quarter.

Also, the economy shrank by 0.1 percent year-on-quarter in the second quarter.

According to the Portuguese National Statistics Institute (INE), the country's gross domestic product (GDP) shrank by 0.4 percent in the third quarter-quarter basis.

The country’s economy declined by 1.7 percent in the same period of last year in the third quarter. Portugal's GDP declined by 1 percent in the second quarter on an annual basis.

“Portugal, a country of nearly 11 million, is Western Europe’s poorest, with growth that has trailed its neighbors over the past decade, something economists blame on an uncompetitive and rigid labor market. The unemployment rate has risen above 12% this year” (Financialsense, 2011).

Portugal became the third country in the euro zone affected by the debt crisis. After Greece and Ireland, Portugal received 78 billion Euros in foreign aid from the International Monetary Fund (IMF) and the European Union. In return for this help, Portugal had promised to decrease budget deficit as the level of 3 percent in 2013 which it reached year 9.1 percent of the gross domestic product in last year. 

It is not far that the Euro zone debt contagion spread to all Europe. So, the possible domino effect is inevitable. 

As a result, Portugal does not bode well for the economic indicators. Portugal may be the next after Greece. In Italy, Ireland, Spain and Belgium also things did not go well. For the European Union, this situation can be very difficult to carry. Of course, other countries will be affected by the situation. In particular, Europe's two biggest neighbors, Russia and Turkey that seems like unaffected by the financial crisis, but they will be affected by this situation in long-and short-term.

İsa Burak GONCA