Between 22 May 2012 and 4 June 2012, staff teams from the European Commission, European Central Bank and International Monetary Fund (“IMF”) visited Lisbon to conduct the fourth review (the “Review”) of Portugal’s economic programme (the “Programme”).

A copy of the initial statement can be
downloaded here:http://ec.europa.eu/economy_finance/articles/financial_operations/2012-06-04-portugal_en.htm

And a copy of the full report can be
downloaded here: http://ec.europa.eu/economy_finance/publications/occasional_paper/2012/pdf/ocp111_en.pdf

General Economic Outlook

According to the Review, the Programme remains on track “amidst continued challenges”. The Review notes, however, that
unemployment is on the rise which is of some concern to the Programme and that combining fiscal consolidation with deleveraging private balance sheets while restoring external cost competitiveness remains a difficult balancing act.

According to the Review, growth in Portugal in 2012 may hold up better than expected. Exports have been stronger than expected
which is helping to rebalance the economy and offset weaker domestic demand. GDP in 2012 is now expected to decline by 3% (instead of 3.25%). Positive, albeit slight, growth is expected in 2013. However, the Review notes that continued
tensions in the Eurozone represent a risk clouding the external outlook. The Review deems the ambitious 2012 fiscal deficit target to remain within reach. Portuguese authorities expect to achieve the deficit target of 4.5% of GDP.

The Programme covers funding totalling EUR 78 bn, EUR 52 bn from the European Union and a EUR 26 bn extended fund facility
with the IMF. Approval of the conclusion of the Review will allow the disbursement of the next tranche of funding: EUR 4.1 bn (EUR 2.7 bn by the European Union, and EUR 1.4 bn by the IMF), probably in July this year. The next Programme review is scheduled to take place in September 2012.

The full report of the Review was published in July and will be summarised by PLMJ in the next edition of our Eurozone guide
series.  

For more information on the Programme and our summary of the Third Review of the Programme, please see our guide: 

http://www.plmj.com/xms/files/newsletters/2012/Junho/eurozone_portugalrecovery.pdf