Just that something will go wrong 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, alert this Thursday to the International Monetary Fund (IMF) in a further report in which he asks the Government to further cuts in public spending and structural reforms and maintains the forecast of a slow economic growth in the coming years, and a deficit of 3% in 2016.
The report of the fourth assessment post-programme Portugal repeats the criticisms and the recommendations that the Fund has launched in Portugal since the troika left the country. The technicians who visited the country in June say that the economy was the slowdown started from the second half of 2015, argue that without new measures the deficit targets may not be achieved and warn that economic growth will not return to the country if they are not applied more structural reforms. The report now published confirms the forecast of a growth of 1% this year, with the government deficit estimated at 3% of GDP.
what the IMF does in this new assessment is to climb up the tone of the alerts in relation to what you think you can go wrong to the country if the policies that have been followed are not modified. The technicians of the Fund speak in particular of the risk of Portugal to stay with a very difficult situation to control if you do encounter any unforeseen problems.
"Portugal faces a multitude of vulnerabilities that mutually reinforce each other," says the entity led by Christine Lagarde, 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 the rating agencies. "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 even if they could deteriorate.
finally, in the economy, there are several risks highlighted. The IMF says 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". In this scenario, any external shock that may suffer the economy may mean a return to recession with negative effects obvious in public finances and in the banks.
it Is for this reason 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, leaving 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 issued a press release in which it responds to criticism by ensuring 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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