Portugal's economy should contract by 3.3% this year, more than the 3% contraction it had previously forecast, the European Commission said in its interim economic forecast released Thursday.
According to the Commission, Portugal's exporting sector, which has been the only source of growth since last year, will be hurt by economic weakness elsewhere in Europe.
Internal demand, as expected, will continue to fall, it added. The Commission's previous forecast was released in the fall of last year.
"Employment is expected to shrink further, in line with the ongoing decline in economic activity, with a concomitant rise in unemployment," the report said.
Portugal's unemployment rate jumped to 14% in the final three month of last year, surprising economists and suggesting that austerity measures being implemented under the country's international bailout are creating a bigger-than-expected dent in the economy.
The government has said the economy should fall 3% this year and start growing again in 2013.
-By Patricia Kowsmann, Dow Jones Newswires, +351 916 466 297;