Portugal, which is implementing an austerity programme under its EU-IMF bailout, saw its economy stabilise in the second quarter, according to a preliminary estimate released yesterday.

While Portugal’s economy was stable compared to the first three months of the year, it contracted by 0.9 per cent from the second quarter of 2010, the national statistics institute INE reported. Portugal entered recession with a 0.6 per cent drop in gross domestic product (GDP) in the final quarter of last year, followed by another 0.6 per cent drop in the first three months of this year.

The country’s new centre-right government forecasts a 2.3 per cent contraction this year followed by growth in 2013.

Portugal received a €78 billion ($110 billion) from the European Union and International Monetary Fund earlier this year and agreed in return to stringent budget measures to scale back state spending.

It aims to cut the public deficit to 5.9 per cent of the country’s GDP this year from 9.1 per cent last year.