PORTUGUESE ECONOMY REMAINS BUOYANT DESPITE CRISIS
Portugal's economy, which has been
enjoying one of its most buoyant periods in more than a decade,
may now be strong enough to shrug off the country's latest
government crisis, analysts said.
    But the April 3 ousting of Prime Minister Anibal Cavaco
Silva's government could slow economic reforms and investment
as Portugal continues to adapt to membership in the European
Community, which it joined in January last year, they said.
    Cavaco Silva's minority Social Democratic Party, PSD, was
toppled in a parliamentary censure vote by left-wing parties.
    The centre-right administration had made economic growth
reform a priority in its 17 months in office.
    In 1986, Portugal's economy grew four pct, its current
account surplus swelled to more than one billion dlrs and
inflation fell to 10 pct, from 20 pct in 1985.
    Analysts and businessmen said the prospects of instability
were worrying but they felt the foundations for continued
growth had not been badly shaken.
    "The economy has developed a certain self-confidence that is
now less dependent on the political situation," said Fritz
Haser, economics professor at Universidade Livre, Lisbon.
    "The market doesn't see this as a real crisis yet," economist
Jorge Braga de Macedo told Reuters.
    Businessmen have identified political instability over the
last 13 years as one of the biggest obstacles to lasting
economic progress.
    The PSD administration was the 16th formed since the 1974
revolution.
    Portugal's developing stock markets, however, remain
buoyant. Brokers and unit trust managers said the recent surge
in economic confidence under the PSD rule was still largely
underpinned by continuing optimistic forecasts.
    Investment grew nearly 10 pct in 1986 and a Bank of
Portugal forecast, released on the day the PSD government fell,
predicted the pace of investment and overall economic growth
would remain at similar levels this year.
    But analysts said the crisis interrupted current policies
and could slow economic development.
    Soares, who is expected to announce a decision by the end
of the month, can either call early elections or form a new
government from parties in the existing left wing-dominated
parliament.
    Many businessmen said they strongly favoured quick
elections as the best solution. "There is a good chance that a
majority government could result from early elections,"
Confederation of Portuguese Industry (CIP) president Pedro
Ferraz da Costa said.
    He said they were optimistic this could mean the
continuation in the near future of liberalisation policies
introduced over the last year.
    The left-wing parties favour a parliamentary solution, but
the PSD said it wants an early election in which opinion polls
say they could win an overall majority.
    A PSD majority would also open the way for more
wide-ranging reforms, such as relaxation of labour laws and
possible denationalisation of industry, the analysts said.
    Cavaco Silva has accused the left-wing opposition parties
of blocking key economic reforms.
    The left-wingers said Portugal's positive economic results
were more the product of favourable international conditions
such as cheaper oil and raw material imports, than of PSD
policies.
 REUTER
