With a vision much more pessimistic than the Government in relation to the capacity of the Portuguese economy to grow, the International Monetary Fund (IMF) is pointing to a value of GDP in 2017, which is 4000 million euros lower than estimated by the Government at the last Program of the Stability and Growth pact (SGP). A value which, not only illustrates the difference abysmal expectations between the two entities, as it represents the main risk factor for the fulfilment of the budget targets for the part of the Executive.
On the report of the fourth assessment post-programme Portugal published this Thursday, the IMF returns to show clearly that he does not believe that the country, under the current conditions, you can increase the speed of your economy. Without further structural reforms, says the Fund, by repeating the forecasts presented already in the past month of June, the Portuguese GDP will not grow in real terms by more than 1% this year and 1.1% next. In the report, it is stated that "the current weakness in investment and the slowdown in exports should probably be maintained for some time", at the same time that "the recovery based on the consumption can stay without fuel in the near future".
from The side of the Government, on the contrary, it is believed mainly to a recovery of investment and exports, which may start already in the last months of 2016. In PEC, the plan of the Executive pointed to an economic growth of 1.8% both this year and in the next.
But the negative scenario outlined by the IMF is not here. When you look at the risks that may still override this base scenario is already bleak, the entity led by Christine Lagarde leaves a warning: just if something goes even worse in the Budget, in growth or in banks and Portugal may be subject to a "spiral effect negative" that would put the economy in a situation of great weakness, putting into question the country access the financing markets.
In comparison with the previous evaluations made following the exit of the troika– who already had a critical tone and also asked for more structural reforms and cuts in public expenditure – note-if in the report now published an ascent of tone alerts in relation to that which can go wrong to the country if the policies that have been followed are not modified. The technicians of the Background talk, in particular, to the risk of Portugal to stay with a very difficult situation to control, if the country is faced with some unforeseen circumstances.
"Portugal faces a multitude of vulnerabilities that mutually reinforce each other," said the entity with headquarters in Washington, noting the existence of "three major areas of weakness: the banking system, public finances and the macroeconomic scenario". "Problems that arise in any of these areas may produce impacts in the other, leading potentially to a spiral effect", warns the report.
In the public finance area in the IMF to ask for a consolidation of the expenditure side and in particular on wages and pensions – the fear is centered on the reaction of the markets and of the agencies of rating. "Any development that worsens the dynamics of public debt can trigger a sudden change in market sentiment," he says, warning of the effect on the economy and on the banks of a rise in interest rates.
from The side of the banks, the more a negative news for a sector which is considered to be fragile might mean more of a negative impact on public finances due to the need to inject capital and an effect of recession in the economy, since the conditions of access to credit could deteriorate.
finally, in the economy, a number of the risks highlighted, which could worsen in the event of the occurrence of an unexpected crisis abroad. A scenario of this nature could mean a return to recession with negative effects obvious in public finances and in the banks.
it Is following this logic that the IMF reinforces its call for a policy change. "Even in the absence of any immediate challenge, the failure to address these weaknesses may put Uk on a path of medium-term unsustainable and leaves the country vulnerable to shocks," he says. And leaves a warning that points clearly to the ghost of a second rescue: “The low growth, public expenditure reform and bank fragile (..) may lead to a loss of market access, even in the face of small shocks.”
In an immediate reaction to the report published by the IMF, the Ministry of Finance has issued a statement responding to the criticism, assuring that “the action of the Government is guided by the accuracy with which has run the State Budget and the vigor with which it has implemented structural reforms, aimed at responding to the challenges of the national economy”. The team led by Mário Centeno reaffirms “the commitment made before the Assembly of the Republic, and the european partners” and argues that “the most recent data on budget execution show that the objective of fiscal consolidation will be reached”.
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