Portuguese economy in official recession, shrinking 0.7%

Portugal slipped back into recession in the first quarter when the economy shrank by 0.7 percent, official statistics showed on Friday, as the country battles a debt crisis.

In the last quarter of last year the economy shrank by an upwardly revised 0.6 percent.

A recession is two quarters running of contraction from output in the previous quarter.

Analysts had widely expected the latest contraction owing to government austerity measures put in place in January in a bid to slash public deficit at 9.1 percent of GDP in 2010 and 10 percent in 2009.

Portugal slipped back into a recession after emerging from a slump in 2009. Lisbon slashed wages and raised taxes in exchange for a EU-IMF 78-billion-euro (111-billion-dollar) bailout over three years that was announced this year.

Finance Minister Fernando Teixeira dos Santos earlier warned that the bailout programme would cause the economy to contract in 2011-2012 before growth picks up in 2013.