Forecasts for the Portuguese economy down another step – publico

 
         

                 

                         
                     

                 

 
 

Since last February, the Government presented a state budget based on growth of 1.8%, a succession of forecasts of national and international institutions to descend, step by step, expectations for performance for the economy this year. Thursday, combining the results recorded in exports and investment since last year with the threat posed by “Brexit”, the International Monetary Fund (IMF) has also decided to go down one more step. The economy will grow only 1%, it said, warning that the impact on public accounts that braking in the economy force the government to take additional austerity measures.

The new IMF projections appear in the statement made by the technicians were present in Portugal in recent weeks to carry out the fourth review post adjustment program and the annual consultation under Article 4 of the Fund.

a little over two months, the Fund provided that Portugal grew 1 4% in 2016. Now – after its technicians have been present in Portugal in recent weeks to carry out the fourth review post adjustment program and the annual consultation under Article 4 – became the most pessimistic institution for Portugal with its growth forecast of 1% to fall below the 1.2% that was projected by the OECD in early June.

There are three main reasons given for the new forecast. First, the IMF notes that already has been observed since the middle of last year, the time from which the economy began to slow, with more negative results both at the level of investment and exports.

Then, the IMF does not believe that the Portuguese economy can accelerate rapidly in the near future, due to “persistent structural rigidities and excessive private debt that remains unresolved.” It is mainly for this reason that the Fund also revised its growth forecast for 2017 downwards from 1.3% to 1.1%.

Finally, there is the effect “Brexit”. This IMF forecast is the first after the British decision and the Fund is keen to point out that “greater uncertainty in the markets can, in the context of increased risk aversion following the referendum in the UK, persist for a longer period “.

the government, which has not moved in the growth forecast of 1.8% to 2016 performed when presented the budget in February, it has already recognized that a downward revision is becoming unavoidable. In an interview with Publico published on Tuesday, the Minister of Finance assumed that economic growth this year is likely to be lower than the 1.8% forecast in the state budget, leaving open a review of the forecast when you see the OE proposal in 2017.

However, between the Government and the IMF remains a big difference. While the Executive thinks that the impact on budgetary implementation of this weaker performance in the economy will be reduced (because relaxation does not happen in consumption), the Fund is concerned that the budgetary targets are being placed even more under threat.

the IMF staff to begin by congratulating the Government for having recently reaffirmed its commitment to the defined fiscal targets. But alert immediately afterwards that, with the economy to bring bad news, budget implementation may not run as expected. “The expense has been contained so far, but there are risks to revenue collection in a lower growth environment and there may be pressures on spending in the second half of the year,” says the Fund.

It is that warns: “additional measures to support restrictions on spending will likely be needed to ensure that the target of 2.2% deficit this year is reached.” According to the calculations of the Fund, without additional measures, the deficit in Portugal would be “close to 3% of GDP”.

In the note published Thursday, the IMF still repeats the recommendations it has made from the exit of the country’s troika in 2014. it says that “more reforms are essential to increase growth prospects in the medium term,” calls for “further steps to strengthen the balance sheets of banks,” criticizes the retreat undertaken by this Government on some measures fiscal restraint and argues that the structural deficit should be reduced (at a rate of 0.5 points per year) through the “rationalization of public sector wages and pensions.”