Every quarter, the Bank of Portugal publishes a forecast report. This is the bleak picture painted by the institution: in 2003, the Portuguese economy contracted by 1,1%. Private consumption suffered an unprecedented drop, as families, burdened by debt since the 90s, with no real wage increases and fearful of rising unemployment, had to tighten their belts even further. The budget deficit also increased, and without the support of extraordinary revenues, it now exceeds 5% of GDP.
Investment, on the other hand, fell to 10% and was the trigger for chaos in the economy, even though family savings have been channeled to pay off debts to commercial banks.
Vitor Constãncio, Governor of the Bank of Portugal, highlights the inadequacy of tax revenue, not forgetting general expenses; and the economy did not contract further due to a slight increase in exports, along with the expansion of the State Stock Exchange's reserves mid-year, thus increasing public consumption.
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