Portugal's central bank said today that the country's economy will shrink by 3.4% this year, worse than expected.

Ghis comes as the government implements austerity measures as part of its international bail-out.

The Bank of Portugal had previously forecast a 3.1% contraction this year, while the government forecasts a 3.3% drop.

The central bank has now lowered its forecast for next year to zero growth, from 0.3%.


Portugal is a member of the euro zone, and its economy contracted 1.6% last year as the government began to cut spending and raise taxes as required under its €78 billion bail-out from the European Union and International Monetary Fund.

Owing to the lowered forecasts the government may need to adoptadditional austerity measures to meet its commitments under the bailout programme, the central bank noted.