Overdue loans held by struggling Portuguese companies rose to record highs in June as credit conditions tightened, suggesting the debt-scarred country's economy will slump further before it recovers. Outstanding corporate borrowing by companies dropped to a 111.6 billion euros at the end of the first half of 2012, from 118.9 billion in June 2011, Bank of Portugal data showed on Wednesday.
Over the same period, overdue loans jumped to 9.2 percent of total funding from 5.3 percent. The data shows a recovery is still likely far away in a country that is under a 78-billion euro EU/IMF bailout and in the grip of its worst recession since the 1970s.
The government expects the economy to contract by 3 percent this year but hopes it will stabilise in 2013. GDP slumped 3.3 percent year on year in the second quarter, when unemployment hit a record 15 percent. Loans to households also fell at end-June, by 4 percent to 146.2 billion euros, the Bank of Portugal said, but overdue loans in that segment rose less than in the business sector, to 4 percent of total credits from 3.4 percent a year earlier. Loans to the manufacturing industry fell 6.4 percent to 14.8 billion euros while loans to the construction sector, which also had the highest rate of bad loans, slumped nearly 9 percent to 22.5 billion.
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