Portuguese economy contracted 1.5 per cent in 2011

Feb 14, 2012, 12:46 GMT

Lisbon - Portugal's economy contracted 1.5 per cent in 2011, slightly less than previously estimated, according to preliminary figures issued by the National Statistics Institute (INE) on Tuesday.

The Bank of Portugal and the government of Prime Minister Pedro Passos Coelho had expected a contraction in gross domestic product of 1.6 per cent.

The economy experienced a strong deterioration towards the end of the year, shrinking 1.3 per cent in the last quarter alone.

The institute attributed the contraction largely to a fall in domestic demand. The government and the central bank expect GDP to shrink by about 3 per cent this year.

INE issued the statistics following a decision by the ratings agency Moody's to downgrade Portugal's credit rating to Ba3 from Ba2 with a negative outlook.

The European Union and the International Monetary Fund have granted Lisbon a bailout worth 78 billion euros (100 billion dollars). Portugal's deepening recession and 13 per cent unemployment rate have aroused concern that it could follow Greece in seeking more rescue funds.