business plan for 2004 - EDP

Following the sustained rise in 2002, which allowed the
Euro to break through parity with the dollar, the
European currency remained higher than the North
American dollar throughout 2003. The performance of
the euro against the dollar in 2003 was marked by a
sustained increase, driven by the reduction of the Fed
Funds rate in the United States. Following this
appreciation of the euro, an historic exchange rate of
$1.26 was achieved on the last day of 2003.
According to the most recent forecasts, the North
American economy grew by around 3.0% in 2003,
strengthening the signs of recovery seen in 2002 and
underpinned by the success of expansionist fiscal and
monetary policies. A growth of around 4.0% can be
expected for 2004, with the North American economy
continuing to head the recovery of the developed
economies.
The Euro Area has experienced ongoing difficulties in
making a start to the upturn of economic growth and in
accompanying North American dynamism. Following a
growth of 0.9% in 2002, the growth rate of the Euro Area
in 2003 stood at just 0.5%, with a practically zero
contribution by the main economies, France and
Germany. With domestic demand lower than could be
desired, the appreciation of the euro did not help exports,
while the budget restrictions in several countries
prevented expansionist policies. Greater economic
dynamism is now expected in 2004, though significantly
lower than that forecast for the United States.
Japan, which has seen modest economic growth during
the past two years, achieved considerably better
economic performance in 2003, 2.7% according to the
OECD forecasts. The Japanese economy is expected to
perform well in 2004 even though at a more modest
rate than in 2003, together with stabilisation of
unemployment. However, the deflationary tendency
that has marked the evolution of prices in recent years
will continue. An improvement of economic conditions
can be expected in the other Asian countries in 2004, on
a par with the evolution of the North American
economy and after the effects of the Acute Respiratory
Syndrome epidemic have been left behind.
Following a particularly troubled year, economic growth
in Latin America in 2003 was limited by the weak
performance of its leading economies, Mexico and
Brazil, and by the deep recession in Venezuela that was
expected as a result of the political and economic
troubles that marked the beginning the year. On the
contrary, Argentina performed well following a period
of sharp instability. The prospects for 2004 are more
optimistic, suggesting greater stability of the main
economies of this region.
To sum up, following a period of slowing economic
growth exacerbated by the effects of the September 11
attacks, this tendency had been expected to be reversed
in 2002, while 2003 was to have been a year marked by
more sustained growth worldwide. Nevertheless,
several factors, particularly the military intervention in
Iraq, compromised these expectations to some extent,
postponing them to 2004.
>> 2 Iberian Economy
>> 2.1 Portugal
Continuing the tendency of recession begun in 2002, the
Portuguese economy once again diverged from the Euro
Area, declining by about 1.0% in 2003, compared with a
growth of 0.4% in 2002. The Portuguese economy
continued to be affected by the international situation, in
particular by the evolution seen in the Euro Area, with
weaker domestic demand and budget restrictions
preventing expansionist measures. As a result of some
positive signs during the last months of the year, the
most recent predictions suggest an upswing of the
Portuguese economy in 2004, with an end to the
recession and with economic growth, even though
below the European average.
The recession of the Portuguese economy, the decline of
domestic demand in particular, allied to wage
moderation and to the effect of the appreciation of the
euro on imports, has helped to contain price increases.
The Harmonised Index of Consumer Prices (HICP),
which declined to 3.3% in 2003 from 3.7% in 2002, is,
however, significantly higher than the European
average.
While the performance compared with 2002 was
favourable as far as prices are concerned, the same
cannot be said of employment. The unemployment rate
in Portugal, despite the fact that it is one of Europe’s
lowest, stood at 5.1% in 2002, increasing in 2003 to a
figure of around 6.5%. The 2004 forecasts suggest a
slight deterioration of this indicator, though it will
remain below the European average.
>> 2.2 Spain
Following a slight slowdown of the growth of the
Spanish economy in 2002, the leading projections
suggest a growth of between 2.2% and 2.3% in 2003. If
this is confirmed, it will be one of the best performers of
the European economies, significantly above the Euro
Area average and better than seen in 2002, despite the
international context and especially the European
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