World Economy

Portugal’s Anti-Austerity Effort Brings Little Growth

Portugal’s Anti-Austerity Effort Brings Little GrowthPortugal’s Anti-Austerity Effort Brings Little Growth

Portugal’s economy is growing only half as quickly as the anti-austerity government had hoped, as its key policy of driving domestic demand comes up short.

Portugal’s economy grew at an annual rate of 0.9% in the second quarter, the national statistics agency said Wednesday. That is far short of the government’s goal of 1.8% for 2016 and places the country among the eurozone’s weakest economies, AP reported.

Though Portugal is one of the eurozone’s smaller members, its finances are closely watched after it needed a €78 billion ($87 billion) bailout in 2011 and deepened the bloc’s financial crisis.

The center-left Socialist government, with the support of the Communist Party and radical Left Bloc, lowered some taxes, reversed government worker pay cuts and raised the lowest pensions as it rolled back austerity measures taken after Portugal’s bailout.

The government said after taking power in November that those steps would spur growth and help resolve Portugal’s economic problems, including a huge debt load.

But domestic consumption contributed 0.2% to quarterly growth, down from 0.6% in the first quarter.

Analysts say Portuguese growth is being slowed by economic downturns in Brazil and Angola, its major export markets. They also blame the after-effects of the financial crisis—low company investment due to high corporate debt, and low foreign investment caused by lingering investor wariness about Portugal.

According to the statistics agency, while exports rose more on quarter, domestic demand grew at a slower pace. On year, GDP mostly got a boost from a sharp slowdown in imports.

Earlier this month and based on flash GDP estimates, ratings agency DBRS Ltd. warned that low growth poses a challenge to the country.