Portugal Business Forecast Report Q3 2012

Executive Summary
Core Views
Key Forecast Changes
Risks To Outlook
Chapter 1: Political Outlook
SWOT Analysis
BMI Political Risk Ratings
Domestic Politics
Politics Unlikely To Derail Bailout Programme
While Portugal is unlikely to experience the same degree of social and political dislocation currently afflicting other bailout countries
Greece and Spain, we maintain that the country's political risk profile will continue to gradually deteriorate over the coming years Driving
this degradation will be an increasingly disillusioned populace and inter-party wrangling over the degree to which IMF/EU-mandated
austerity and reform measures should be implemented However, given broad-based support for the bailout package across all political
parties, we see little scope for politics to derail Portugal's bailout programme
TABLE: POLITICAL OVERVIEW
Chapter 2: Economic Outlook
SWOT Analysis
BMI Economic Risk Ratings
Economic Activity
Another Two Years Of Contraction Expected
We forecast Portugal's economy will experience a second year of contraction in 2012, with real GDP set to contract by 3 5%
Troika-imposed austerity measures, part of the country's EUR78bn bailout programme, will see to it that government and household
consumption and investment spending are negative drags on economic growth While the continued collapse in import growth will mean
a still-positive contribution to real growth from net exports, the persistently weakening external environment presents a key downside
risk to our forecast
TABLE: ECONOMIC ACTIVITY
FX Forecast
Euro Speculation Reaching Fever Pitch
Balance Of Payments
Economic Re-Balancing On Track
We expect the re-balancing of the Portuguese economy to continue over the coming years as IMF/EU imposed structural reforms shift
the economy onto a more sustainable growth trajectory In turn, we forecast the current account deficit to continue narrowing as the
collapse in domestic demand moderates the merchandise trade deficit while the services surplus continues to expand for the same
reason While we see little scope for foreign direct investment to pick up this year, beyond 2013 we believe that the government's
privatisation drive, which has thus far garnered great interest, will bear fruit, thereby easing deficit financing dependence on the
European Central Bank
TABLE: CURRENT ACCOUNT
A Perfect Storm Brewing
Although the European Central Bank (ECB) did not adjust monetary policy at its June meeting, pressure is rising on the central bank
to intervene and counter the lack of progress on economic reform from Europe's politicians Ultimately, we expect a further expansion
of the ECB's long-term refinancing operations and the Securities Market Program, although both are time saving measures that are
becoming increasingly toothless in light of the plunging confidence in the ability of policymakers to save the eurozone
Industry Analysis
Banking Sector: Hitting Turbulence
The eurozone banking system is facing tremendous stress at the disaggregated level, despite appearing more robust from a top-down
perspective The growing disparity between core and periphery banking sectors will force the ECB to expand its balance sheet further
and continue to intervene heavily in order to stabilise the financial system Assuming the eurozone is stabilised, banks will see slower
growth, tighter regulation and a full-blown banking union over the longer term
Chapter 3: 10-Year Forecast
The Portuguese Economy To 2021
The near-term outlook for Portugal will be shaped heavily by the measures its government must undertake to corral the fiscal deficit
and bring national debt levels under control But beyond the immediate term, Portugal will have to grapple with improving its growth
prospects if it is to escape from the debt trap We are forecasting an economy more reliant on external demand and investment, and
less on private consumption, over the coming decade, but the future will depend in large part on the government's reform programme
bearing fruit
PORTUGAL – LONG-TERM MACROECONOMIC FORECASTS
Chapter 4: Business Environment
SWOT Analysis
BMI Business Environment Risk Ratings
Chapter 5: Key Sectors
Telecommunications
TABLE: TELECOMS SECTOR – MOBILE – HISTORICAL DATA & FORECASTS
TABLE: TELECOMS SECTOR – FIXED LINE – HISTORICAL DATA & FORECASTS
TABLE: TELECOMS SECTOR – MOBILE ARPU – HISTORICAL DATA & FORECASTS (EUR)
TABLE: PORTUGAL TELECOMS SECTOR – INTERNET – HISTORICAL DATA & FORECASTS
Other Key Sectors
TABLE: PHARMA SECTOR KEY INDICATORS
TABLE: TELECOMS SECTOR KEY INDICATORS
Chapter 6: BMI Global Assumptions
Global Outlook
World Slows As Euro Crisis Simmers
TABLE: GLOBAL ASSUMPTIONS
TABLE: DEVELOPED STATES REAL GDP GROWTH FORECAST
TABLE: REAL GDP GROWTH CONSENSUS FORECASTS
TABLE: EMERGING MARKETS REAL GDP GROWTH FORECAST 33