Portugal Travel

While the number of unemployed in OECD countries will sky-rocket by about eight million over the next two years as the most serious recession since the early 1980s takes its toll on world economies, the stability of the Portuguese economy appears to be the foundation for less-than-expected turbulence.

While the economy here has seldom shown marked expansion in recent years compared with most of its European neighbours, Portugal also appears to record lower negative growth when judged alongside these countries in times of turmoil.

Next year is also forecast by the OECD to be the first in seven years that the Portuguese economy will converge with the Euro Zone, where economies are anticipated to fall by an average of 0.6 percent, 0.4 percent more than the drop expected here.

Besides Spain, Ireland and Britain where the recession will hit economies hardest in 2009, other major nations such as Germany and France will record recessionary economic movements of 0.8 percent and 0.4 percent, respectively.

With an improved economic state versus its major trading partners, Portugal’s trade deficit is expected to drop from 10.9 percent of GDP this year, to 10.2 percent in 2009 and down to 10.1 percent a year later.

Meanwhile, the OECD stressed that uncertainty still prevails when it comes to making projections for the coming years.

“Uncertainties surrounding the projections are exceptionally high,” OECD Chief Economist Klaus Schmidt-Hebbel warned. “Much will depend on how quickly the financial crisis - the main driver of the downturn - is overcome”.

The OECD reports that Euro area activity is also expected to fall over the next six months as consumption and investment declines. A gradual recovery should then take hold in the wake of interest rate cuts and the easing of financial market turbulence. Euro area GDP is forecast to fall 0.6 percent in 2009 and climb 1.2 percent in 2010, the OECD further explains.

The downturn is expected to be severe in economies most vulnerable to the financial crisis, or to sharp falls in house pricing. These include Hungary, Iceland, Ireland, Luxembourg, Spain, Turkey and the UK, while Portugal can look forward to mild growth or in the worst case scenario, possible stagnation in house prices.