Portugal’s central bank has cut its forecast for economic growth in the coming years and issued a warning to leaders to that austerity measures will need to be increased in order to meet deficit-reduction goals, according to The Wall Street Journal. On Tuesday, the Bank of Portugal released its Spring Economic Bulletin in which the central bank lowered its forecast for a contraction of gross domestic product in the country during 2011 to 1.4% from a 1.3% reduction previously forecast. The bank also lowered its outlook for 2012, cutting its GDP growth expectations to 0.3% form 0.6% previously.
The bank also used the report to warn that “substantial” new austerity measures would be necessary if the country were to meet deficit goals for 2011 and 2012 of 4.6% of GDP and 3% of GDP respectively, from about 7% in 2010. Additional measures were recently blocked by parliament, triggering the resignation of Prime Minister José Socrates and casting doubt on the ability of the country to avoid an international bailout. The GDP forecasts do not account for additional austerity measures, and the bank cautioned that there are “implementation risks” for cutting the budget deficit further.