LISBON, April 3: Portugal is meeting debt-rescue targets and could be strong enough to borrow on financial markets next year but is in a deeper recession than thought, EU and IMF auditors said on Tuesday.

The economy is now set to shrink by 3.25 per cent this year, they said, pointing to a worse recession than expected so far with contraction forecast to be 3.0 per cent.

There is a resurgence of concern on financial markets that Portugal is near a danger zone of possibly needing a second round of rescue help from the EU and IMF, and that Spain is also at risk of needing help.

But the creditors commended the Portuguese government for having cut the budget deficit to 4.2 per cent of GDP, sharper than a 5.9 per cent target. Portugal still faces risks, the experts from the European Union, The European Central Bank and the International Monetary Fund, warned.—AFP