Institutions who visited Portugal during the last two weeks continue to doubt the possibility of the country meet the budgetary targets without applying new austerity measures, identifying the existence of “a weakening of the consolidation effort.”
At the end of the second evaluation to post-program Portugal, the European Commission and the ECB on the one hand, and the International Monetary Fund, on the other, issued on Friday reported on repeating the two main concerns about what has happened in the country since the departure of troika : the application of measures deemed insufficient to meet the objectives set for the deficit this year and next and a reduction in the pace of implementation of reforms, which can result in rates lower economic growth in the medium term.
Regarding the budget, the European Commission and the ECB continue to predict a deficit of 3.1% for this year, which means doubt that the goal of 2.7% presented by the Government to be fulfilled by placing Portugal out of the excessive deficit procedure. “Although the aim of nominal deficit under the Stability and Growth Pact (SGP) is close to being reached, the adjustment of the underlying structural deficit in 2015 (and in subsequent years) will probably fall short of the SGP requirements,” he says the statement of the European institutions, which points out that this reflects “a consolidation effort weakened” by the Portuguese authorities.
From the IMF, concerns over the budget are the same. The institution based in Washington says that “there is a tangible risk that the target of 2.7% for the budget deficit in 2015 will not be fulfilled without spending additional restrictions.
The Fund recognizes that Data tax revenue have been experiencing improvements this year, but notes that “remains a significant uncertainty about the extent to which this is not a reflection of technical factors that can be reversed in the coming months.”
The IMF, which provides for already a deficit of 3.2% this year, says you have to wait for more data from IRS and IRC to better assess progress on tax revenues.
The concern over the fiscal performance is not however by 2015. The Fund remains dissatisfied with the announcement by the Government of progressive reversal in the years measures such as wage cut in the public sector and the IRS surcharge. And warns that it is necessary to compensate them in some way. “The reversal proposed several measures introduced in revenues during the adjustment program should not be viable without very determined efforts to contain the wage bill in the public sector and the pension expenditure,” says the statement of the IMF.
As regards structural reforms, the troika again requested a renewed effort by the Portuguese authorities. The European Commission and the ECB say that “the pace of implementation of structural reforms remains moderate.”
With specific regard to the labor market, while claiming that the impact of reforms “is increasingly visible” the two institutions say that “continues to stricter monitoring of the effectiveness of these measures and other newer essential being.”
Most critics are still structural reforms in sectors such as energy. “Efforts to reduce excessive rents in network industries is progressing at a slow pace. The competition in these sectors should therefore be further strengthened, “advocate.
From the IMF, is repeated the warning that issues such as the high indebtedness of the State and enterprises and the very high unemployment can weigh the prospects for medium and long term for the economy. The Fund forecasts that the economy, after growing 1.6% this year, start to slow down soon afterwards, asking, why, in addition to budgetary consolidation, more efforts to solve the problem of private sector debt and more structural reforms.
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