Institution also lowers growth of the Portuguese economy and admits that probably will need more measures
The IMF revised today’s high forecast for Portugal’s deficit this year from 2.9% to 3.0%, up from 2.2% projected by the government and draw attention to “downside risks”.
“Given these risks are likely to be more precise measures to support the spending restraint to ensure that the budgetary target this year of 2.2% of GDP [gross domestic product] is reached. in the absence of additional steps, the IMF projects a deficit close to 3% of GDP “, reads the statement of completion of the fourth post-program mission and work under Article IV, published today.
the International Monetary Fund (IMF ) welcomes the budget commitment of the Government for this year, which remains a deficit reduction to 2.2%, but warns of risks to revenue raising “in a context of weak growth” considering that “may arise pressures on spending in the second half of the year. “
the team Subir Lall, who heads the Fund’s mission in Portugal, believes that” a credible path of fiscal consolidation in the medium term to put public debt on a trajectory is necessary steady drop, “which” will require realistic goals that are supported by concrete measures “
Stressing that the government of António Costa outlined.” ambitious goals “for the medium term in the stability program for 2016 – – 2020, the IMF said however that “lack specificity” to these measures, “which would permit an assessment of its feasibility” and made a recommendation
a primary structural adjustment [discounting the effect of the cycle. , temporary measures and the burden of public debt] 0.5% of GDP both in 2017 and in 2018 would be a realistic budget appropriately way, “reads the statement.
This target primary structural adjustment must be supported by “permanent savings measures, focusing on rationalization of public wages and pensions”.
“it is unfortunate, therefore, that the total reversal of wage cuts in the public sector not It has been accompanied by a more fundamental reform of the public sector. A review of the expenditure covering all areas of public administration would help identify priority areas to generate public savings, “said the technical mission.
According to the IMF, also” are accurate efforts to deepen the implementation of new Budgetary Framework law, which aims to improve budget management and transparency “.
Another aspect pointed out by the institution led by Christine Lagarde is related to the need for” a more stable and predictable tax system ” that could “help promote confidence and encourage private investment.”
economic growth revised downwards
the IMF is more pessimistic about the Portuguese economy and expects GDP to grow 1.0% this year, lower than anticipated in April and still anticipates the government.
in the same statement, the institution has lowered forecasts economic growth to 1.0%, down 0.4 percentage points to the 1.4% forecast in April on ‘World economic Outlook’.
the institution led by Christine Lagarde justifies this downward revision to the slowdown in the Portuguese economy observed since the middle of last year and increased uncertainty externally.
“Although private consumption will continue to grow robustly, investment and exports weakened, reflecting an increase in uncertainty and a sharp downturn in some markets for Portuguese products. As a result, the GDP [Gross Domestic Product] in real terms fell to 0.9% in the first quarter of 2016 (year on year) and projected to grow 1.0% for the whole year, “said the IMF team.
the Fund staff also revised downwards the forecasts in the medium term and expects the Portuguese economy to grow 1.1% in 2017, when in April estimated that GDP grew 1.3% this year, admitting the picture has changed in the last two months.
“we expect the growth gradually accelerate to close to 1.2%, since the structural rigidity and the debt of the private sector are taking longer to resolve than previously assumed, “he said.
in addition, the IMF admits that” downside risks to the forecast increased due to the decrease in household savings, the timid investor confidence and increased external uncertainty including the outcome of the UK referendum. “
unemployment rate to rise
in a statement released today, the Fund has also revised slightly upwards to unemployment rate this year and next, from 11.6% to 11.8% and from 11.1% to 11.3%, respectively.
also in that sense, the institution based in Washington defends to advance structural reforms “is essential to encourage the convergence of wages and job creation, especially given the growing demographic challenges.”
Whereas Portugal has achieved “significant progress” during the adjustment program , “improving the flexibility and competitiveness of the labor market,” the IMF team argues that “it is important that these developments are taken forward.”
“a change in the direction of the reforms can increase uncertainty that already is harming investment and reduce the prospects for growth, employment and income, “he said.
in this sense, the technicians consider that the reversal of the policies of the previous government may have” adverse effects on competitiveness Portuguese companies. “
in the 2016-2020 stability program submitted to Brussels in late April, the government maintained its estimate of economic growth for this year, 1.8%.
in an interview with Public, released on Wednesday, the finance minister, Mário Centeno, admitted a revision of the forecasts for 2016 in October, when presenting the Budget for 2017 and found that the ‘Brexit’ (UK output the European Union) is a change that has to be considered as “structural in the surrounding of the Portuguese economy” the impact on the European Union and the “strong and direct links” that Portugal has with the country.
on the instead, the head of mission of the International Monetary Fund (IMF) in Portugal, Subir Lall said, also on Wednesday, that the macroeconomic impact of ‘Brexit’ in Portugal is very low, even though the British demand for goods and services slow down.
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