Wednesday 30 March 2011

Income Account vs Trade Account: a dramatic milestone for Portugal

This is a figure from the latest Banco de Portugal's Economic Bulletin - Spring 2011: Projections for the Portuguese economy: 2011-2012, published yesterday.

A dramatic consequence of the increasingly negative Portuguese net international investment position as well as of the rise of our external credit interest rates: Banco de Portugal predicts that in 2011 the income account deficit will surpass the trade deficit (which never happened in the past, to the best of my recollections); and that in 2012 the income account deficit will amount to 7 percent of GDP.

In other words, a substancial part of our domestic income will be subtracted from national income, and therefore the nation's disposable income, in the foreseable future.
Even though we may get the (irrealistic, from my point of view) forecasted growth in net external demand that would avoid an even higher drop in GDP, a lot of that GDP will not be ours to consume or save.

A dramatic milestone for this country.

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