Portugal: IMF-Staff Concluding Statement of the Sixth Post-Program Monitoring Mission

Portugal’s near-term outlook remains favorable, supported by a pick-up in investment and continued growth in exports and private consumption. Fiscal targets for 2017 and 2018 appear within reach and bond spreads have narrowed substantially, while stability and confidence in the banking system have improved as banks have raised more capital. Sustained strong growth is central to lowering the vulnerabilities from high public and private debt, and requires continued efforts to address structural rigidities. Current favorable conditions provide an opportunity for more ambitious structural fiscal consolidation and an even faster reduction in public debt.


1. Economic activity strengthened in 2017, boosted by a significant pickup in investment and continued growth in exports and private consumption. Investment rose 10 percent during January-September (year-on-year) compared with 1.6 percent in 2016, supported by a marked rebound in construction. Construction has been strongly driven by tourism-related projects, as the expansion of the tourist sector has continued in 2017. Household consumption has also remained a key driver of growth as the labor market continues to improve, with the unemployment rate falling to 8.5 percent in the third quarter from 10.5 percent a year ago, and domestic confidence indicators are at their highest level in over a decade.

2. Prospects for growth in the baseline scenario are positive, and risks appear broadly balanced in the near term. Growth is holding up well amid the cyclical deceleration in the two most recent quarters. At the same time, economic conditions in some of Portugal’s main European partners appear better than anticipated. As a result, real GDP growth is now projected to reach 2.6 percent in 2017 and 2.2 percent in 2018, and then to moderate over the medium term. The potential threats to this baseline scenario could come from a repricing of risk in global markets, prolonged uncertainty in Spain, and insufficient progress on reforms; while a stronger cyclical momentum in euro zone economies could surprise on the positive side. Medium-term risks include a rise in volatility in European bond markets as monetary accommodation is gradually reduced in the euro zone, and structurally weak growth in key trading partners.

3. Strong growth, together with continued efforts to contain spending, should allow headline fiscal deficit targets for 2017 and 2018 to be achieved comfortably. Fiscal performance is benefitting from the continued decline in interest costs, as improved market sentiment towards Portugal has contributed to a sharp narrowing in sovereign debt spreads during 2017. Based on the latest data, staff projects a headline fiscal deficit of 1.4 percent of GDP in 2017 (excluding costs associated with the recapitalization of CGD, whose classification in the fiscal accounts is still under review); the 2018 budget targets a further decline to 1.1 percent of GDP. This would imply a small loosening of the primary structural balance in both years. The ratio of public debt to GDP is projected to decline to 126 percent of GDP at the end of 2017, and to continue declining over the medium term.

4. Favorable borrowing conditions and the economic upswing provide an auspicious opportunity for an even faster reduction of public debt. High public debt remains a vulnerability over the medium term, as it constrains the government’s ability to respond to adverse shocks that might arise down the road. While strong growth and lower interest costs are presently supporting the reduction in indebtedness, these tailwinds are likely to moderate over time as real GDP growth eases back to its medium-term potential and as the stimulus from monetary policy is eventually reduced. Structural consolidation in the primary fiscal balance therefore remains essential to keep public debt on a firmly downward trajectory over the medium-term, and the current cyclical conditions offer an opportunity to make faster progress in this direction. An adjustment focused on durable expenditure reform is likely to prove more sustainable and supportive of growth. The authorities should be cautious about permanent increases in spending that would reduce the flexibility of public expenditure when cyclical conditions change. Such caution is especially important in relation to decisions that may affect the trajectory of the government wage bill in coming years.


5. Together with the recent increases in capital, Portuguese banks have increased their liquidity and continue to make progress on cleaning up bad loans. Banks’ capital ratios have improved, with the common equity tier 1 ratio increasing by 1.8 percentage points since end- 2016 to 13.2 percent in June, and the completion of the Novo Banco sale further contributed to reducing uncertainty. Nonperforming loans (NPLs) declined to 15.5 percent of gross loans from 17.2 percent at end-2016, and the NPL coverage ratio improved marginally to 45.9 percent in June. Banks also returned to modest profitability in the first half of the year after a negative outturn in 2016, owing to an increase in net interest margins and a decline in provisioning.

6. Continued progress on reducing still-elevated NPL ratios and costs in the banking system are essential to support more effective intermediation of savings to productive investment. Financial stability has improved over the past year, but the high level of NPLs limits banks’ internal capacity to generate stronger returns and increase their capital. Also, some upcoming regulatory changes in the euro area, although aiming to boost resilience, could affect some banks’ funding structure and costs. Banks’ improved financial results this year are encouraging, as is the ongoing implementation of ECB guidance to banks on NPLs. Continued efforts in this area, including by improving business models and cost efficiency, so banks can generate new capital from their own profits, are necessary to ensure that they remain resilient and better support the real economy. New initiatives to support the reorganization of viable debtors in distress and the recovery of collateral, including through proposed out-of-court mechanisms, need to be implemented and closely monitored.

7. Raising the economy’s growth potential and resilience to shocks will also require further structural reforms and higher investment and productivity. A flexible labor market is key for the economy’s capacity to absorb negative shocks and adapt to new opportunities that arise with structural change. Wages that are well aligned with productivity would help Portugal take fuller advantage of higher-skilled entrants to the labor force while safeguarding competitiveness. Investment also needs to increase substantially to raise the economy’s medium-term growth potential; preserving external balance along the way requires strengthening national saving rates as well. Ongoing initiatives in a number of areas already mentioned should help, but structural reforms should also focus on other factors that continue to influence investors’ perceptions of the business environment.

INFARMED – Deslocação provinciana, bacoca, papalva e patética

 

O nosso 1º ministro já nos habituou a brindar-nos com ideias bacocas e provincianas e com decisões anacrónicas, tudo demonstrativo de uma ausência total de competência para dirigir o nosso país.

Na linha do que anteriormente foi referenciado, brindou-nos ontem com mais uma das suas “pérolas”, deslocando o INFARMED para o norte, no início de 2019, alegadamente porque a localidade do norte que concorreu à captação da Agência Europeia do Medicamento, não ter conseguido tal desidrato. E assim, á boa maneira provinciana e papalva – “não conseguiste, pois tens aqui a troca”.

Mas temos que colocar as coisas como elas são e no seu devido lugar.

Á boa maneira portuguesa, é extremamente difícil reconhecer-se o mérito dos nossos concorrentes e o nosso demérito.

Quando se soube da decisão, logo vieram os populistas e provincianos arautos do bota abaixo, dizer que houve um “complot” entre outros países europeus, presumivelmente com maior poder decisório, que atiraram a AEM para outra cidade.

Nada de mais patético!

A única cidade portuguesa que teria condições (de todo o género) para competir com outras cidades europeias concorrentes, era Lisboa. Doa a quem doer, particularmente aos provincianos.

Não há volta a dar.

Soube-se, aliás, um pouco mais cedo, que os próprios trabalhadores da AEM confrontados com a possibilidade da Agência se deslocar para o norte do país, manifestaram de imediato a sua grande preocupação e descontentamento.

Portanto, foi perdida e bem perdida. Há que reconhecer mérito a quem ganhou e ponto final, deixando-se de quixotescas apreciações sobre o desenrolar de todo o processo, que aliás, só vem confirmar a falta de arcaboiço para receber esta instituição.

Perda consumada, eis que surge o inteligente 1º ministro, á laia de compensação, e á força bruta, a “dar” o INFARMED á localidade do norte de Portugal.

Acaso o 1º ministro quis ouvir as opiniões dos que lá trabalham?

Certamente que não morarão na Avenida do Brasil, mas 100% morarão em Lisboa ou na Grande Lisboa.

Imaginou o iluminado 1º ministro de Portugal, o transtorno que essa mudança irá causar, no contexto pessoal e familiar, a todos os trabalhadores do INFARMED?

Como de costume, tudo feito em cima do joelho, com o desejo de agradar ao norte, não pensou nas consequências da sua douta decisão.

Este é só mais um episódio, dos muitos que se vêm avolumando demonstrativos da falta de tacto, do provincianismo deste nosso 1º ministro.

Nunca deveria ter existido qualquer tipo de compensação!

Concorreu, perdeu – ponto final!

Não é certamente com esta falta de habilidade que iremos a parte alguma, pelo menos a partes que nos conduzam no caminho do progresso e do reconhecimento, que tanto procuramos atingir.

Uma última palavra para os trabalhadores do INFARMED: lutem com os meios legais que tenham á mão para fazer valer os vossos direitos e sobretudo, pelo respeito que lhes é devido, e que pela forma como o processo se desenrolou (decisão), tudo foi menos no respeito por todos aqueles que trabalham no INFARMED.

 

Bank of Portugal raises economic growth outlook for 2017-19

The Bank of Portugal sharply raised its economic growth outlook for this year to 2.5 percent from 1.8 percent and, although it still expected a slowdown later on, also upped the forecast through 2019 citing strong exports and improving investment.

 In its quarterly economic bulletin, the central bank said the economy, which last year expanded 1.4 percent, should grow 2 percent next year and 1.8 percent in 2019, which compares to its previous assessment in March, at 1.7 percent and 1.6 percent respectively.
“Portugal’s GDP growth will be above that projected the whole of the euro zone, somewhat reversing the negative difference accumulated over the past few years,” it said.

“The GDP forecast is revised upwards for all of the projected period, reflecting the vigorous dynamics of exports and investment,” it said, adding that the government needs to continue to focus on cutting the budget deficit and public debt.

Last year, Portugal reported a budget deficit of 2 percent of GDP - its lowest mark since at least 1975.

It expects the country’s exports to jump almost 10 percent this year, then rise 6.8 percent in 2018 and add another 4.8 percent the following year.

The gross fixed capital formation, which measures investment, slipped 0.1 percent in 2016 but should rise 8.8 percent this year and over 5 percent in each of the following two years.
In another upbeat prediction, the central bank said the unemployment rate should fall below 10 percent this year from last year’s 11.1 percent and keep falling to hit 7 percent in 2019. It expects the jobless rate to end 2017 at 9.4 percent, which would be its lowest level since 2008.

Towards the end of Portugal’s 2011-14 economic and debt crisis, unemployment hit a record of over 17 percent and has been falling steadily since as the economy returned to growth after the worst recession since the 1970s.

My vision (contribute) of United Nations Reform.


Reforming the UN and its multiple Agencies, is to streamline processes of evaluation and decision; is to understand the needs of today's world and to adapt interventions; is knowing how to use the appropriate ways to unlock adverse situations, but above all, to find people who know what to do, how to do and when to do it.

It is to find people, preferably outside the comfort zone of diplomats and other agents of the bureaucracy's corridors, people who have corporate prestige, who have embraced and solved major challenges, with their professional experience in the business environment, to adapt these skills and turn them into real help to the UN.

Overcoming this moment of clear difficulty is not easy. We all know.
Without wanting to make any kind of criticism to those who run Institutions with these characteristics, what happens is that for the most part, the political condition ends up overlapping the economic / financial dimension, with which the resolution of the problems must be faced and this dimension, ends up muddling a line of action very focused on reversing a problem and finding a lasting solution.

I think very clearly that the strategic vision of those who are "outsiders" of the Institution, who have had a solid experience in the financial and economic field, who have proven their ability to approach difficult situations, can make all the difference, - "to do more, with less means", and also, to be able to obtain other means, to help in the accomplishment of objectives.

 Obviously, the Entrepreneurial approach is different from the Institutional approach, but what I am advocating is an "approximation" of business methods (management and optimization of resources) to the institution's perspective.

I know and imagine that most of the cadres who work at UN come from the institutions and from their political aspect, lacking the vision of the company, and how to calculate it, the difficulty of management is Herculean. Hence, think that to overcome short / medium term difficulties, only with the help of someone who has a great experience in the financial / economic business área.

UN pursues the achievement of objectives that should be reconcilable, with a far-reaching strategic vision and involving "civil society".
The opening of projects to the participation of other institutions of reference should be multiplied. Attracting private interest to UN objectives should be a priority. The generic reform of UN should be initiated in order to adapt to the new conditions that the world today configures.

All this, will be very difficult to carry out, by someone who has always lived in the Institutional sphere. You will have difficulty understanding. It will be much more difficult to rationalize the whole environment, to transform it. 

 The future is uncertain! Today more than in the past.

But if we do nothing, it will certainly be even more difficult than the present.
UN and it Agencies, must begin as soon as possible to prepare for the future. And to do so, you must first align the present; devise a strategic vision that puts you back where you should have always been.

The lack of funding for UN projects, particularly from the United States, could be captured again. But for this to happen, it is necessary to show a new vision, more appropriate to the present time, that is optimizing its resources, that can show results, without deviating one millimeter from its broad areas of action.

Show rationality in the application of your resources. Probably, cuts will have to be made in delegations, agencies, activities and participation. We must ask for greater participation and commitment of all.

I believe there will be waste that is urgent to eliminate.
Leverage and maximize skills has to be a priority.

Any financier wants to see results!

It does not want to see its money (public money) being spent on initiatives or structures that are set off from a reality, which has become increasingly small, and will continue to be so.
This adjustment requires anyone who knows how to do it. Not only for the survival of the Institution, but also for its prestige and who has its management in charge.

Portugal Economic Outlook

The economy continues to make progress towards restoring the growth momentum seen before the 2008 financial crisis.

In September, the economic activity indicator—published by the EU’s Directorate-General for Economic and Financial Affairs—rose to the highest level since March 2000.

Underpinning the rise was an ongoing expansion in the construction sector, driven by demand from the flourishing tourism sector.

Business confidence also remained high in the month, and latest figures show industrial output growth surged in August.

Consumer confidence, however, deteriorated in September over less favorable perceptions about the general economic situation over the next twelve months.

 On 13 October, the Finance Ministry unveiled key features of the planned 2018 budget.

Notable proposals include reducing the budget deficit to 1.0% of GDP, raising the number of tax brackets from five to seven to ease the tax burden for some earners and introducing higher taxes for certain packaged foods that contain high levels of salt.

Moreover, the government forecasts the debt burden dropping to 123.5% of GDP in 2018.

LISBON - WEBSUMIT 2017 - 6-9 November

https://websummit.com/?gclid=EAIaIQobChMI9Ki-m4eH1wIVoQvTCh3j-glxEAAYASAAEgLuaPD_BwE

As a "Opinion Maker" at Portuguese Television. Opinion of Economics, Finances, Strategy, Politics and Banking Management and Financial Markets.
     

Portugal Economic Growth

The economy will continue with its healthy pace of growth for the remainder of 2017, underpinned by a robust external sector and strong investment. In 2018, the economy should slow as the Eurozone cools after rapid growth in 2017.

Our analysts expect GDP to expand 2.5% in 2017 and 1.9% in 2018, which is unchanged from last month’s estimate.

Portugal Economic Outlook

The economy appears to be on track to record the best yearly performance since before the crisis.

The economic activity indicator, a proxy for GDP, showed another robust increase for fixed investment in July, as well as the strongest growth in the construction sector so far this year.

Construction has been propelled by demand from a vibrant tourism industry, which posted strong revenues throughout the summer. On 15 September, S&P Global Ratings upgraded the country’s credit rating from junk to investment grade, based on improvements in the economy and public finances.

 Portugal’s deficit dropped below 3% of GDP earlier this year and is no longer considered excessive by the European Commission.

The credit rating upgrade, an important turning point for the economy, should attract investment, which would improve financing conditions and lower borrowing costs.

 Since the upgrade, 10-year bond yields have been trading at their lowest level since January 2016.

Standard & Poor’s takes the Portuguese debt out of the junk status

The rating agency Standard & Poor’s was the first out of the three largest rating agencies to change their outlook on the Portuguese debt from a junk level (BB+) to BBB-, meaning they upgraded the Portuguese debt status to investment grade.

 

Even after Fitch and Moody’s upgraded the outlook of the Portuguese debt (although continuing to consider it “junk”), it was not expected that Standard & Poor’s would choose to change their opinion on the sovereign debt this soon. Six months ago, the agency had decided not to change the outlook given to the Portuguese debt, meaning they continued to grade the country’s debt at BB+ with a stable outlook. Therefore, five years after first grading the Portuguese debt as junk, this increase to BBB- with a stable outlook was unexpected.

 

This means that Standard & Poor’s now joins DBRS as the only other rating agency acknowledged by the European Commission which considers the Portuguese debt at the investment grade status.

S&P’s report states: “The stable outlook balances our expectation of solid economic growth and further budgetary consolidation, as well as receding external financing risks over the next two years, against the risks of a weakening external growth environment and vulnerabilities emanating from high, albeit falling, private-and public-sector debt”.

The Portuguese Finance ministry has already reacted to S&P’s decision stating that “the Government never doubted” that their effort would be acknowledged by rating agencies.
 In a press release sent to newsrooms, the Finance ministry considers that S&P’s decision “is based on the acknowledgement of a recent structural change in the financial sector, in the comprehensive economic growth, supported by a strong investment and exports dynamic, and in the control of expense and public debt”.

IMF Executive Board Concludes 2017 Article IV Consultation with Portugal


On September 13, 2017, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation  with Portugal.
Portugal has made notable progress over the past year in reducing uncertainty over near-term risks. The exit from the Excessive Deficit Procedure this year, together with a marked improvement in stability and confidence in the banking system, have helped bolster investor confidence and contributed to a sharp narrowing in sovereign debt spreads since mid-March.
The near-term growth outlook has also improved considerably as the ongoing recovery continues to gain momentum, with a pickup in exports and investment alongside the continued growth in private consumption. Tourism remains a key driver of growth, but has also been accompanied by a broad-based pickup in exports of goods in recent quarters, while domestic confidence indicators have strengthened significantly and employment continues to rise.

Executive Board Assessment 
Executive Directors agreed with the thrust of the staff appraisal. They welcomed the authorities’ progress in reducing uncertainty over near term risks. Strong efforts to contain spending and meet last year’s headline fiscal deficit target allowed Portugal to exit the EU Excessive Deficit Procedure in 2017, while stability and confidence in the banking system have improved following successful efforts to raise capital. The recovery has also gained momentum, with a pickup in exports and investment alongside continued growth in private consumption, as well as a rise in employment. Nonetheless, the elevated public debt in the context of a modest medium term growth outlook leaves Portugal vulnerable to shocks. Directors encouraged the authorities to take advantage of the current benign macroeconomic conditions to further improve financial sector resilience, ensure durable fiscal consolidation, and raise potential growth.
Directors welcomed the improvement in financial sector stability after recent capital augmentations. However, they cautioned that the large stock of NPLs could limit banks’ ability to finance productive investment. They called for comprehensive efforts to strengthen bank balance sheets by removing impediments to NPL resolution and boosting internal capital generation to maintain appropriate buffers, including in view of upcoming regulatory hurdles.
Directors commended the authorities’ strong efforts to reduce the headline fiscal deficit in 2016, and noted that this year’s headline target also appears well within reach. They emphasized the importance of keeping public debt on a firmly downward trajectory over the medium term, and encouraged the authorities to take advantage of the favorable cyclical conditions to make progress on more ambitious structural fiscal consolidation. They recommended focusing on durable expenditure reform to improve the efficiency of public spending while protecting public investment.
Directors emphasized that raising Portugal’s productivity and growth potential remains central to reducing the vulnerabilities that weigh on the medium term outlook. Addressing impediments to higher investment is key in this regard. Directors highlighted the need to focus on issues that affect investors’ perceptions of the business environment, including reducing rigidities in the labor market, improving the efficiency of judicial processes, and enhancing the predictability of the regulatory environment. In this context, they welcomed the focus of the authorities’ National Reform Program on developing human capital and fostering innovation.

Portugal: Selected Economic Indicators
(Year-on-year percent change, unless otherwise indicated)
				Projections
			2016	2017	2018
Real GDP			1.4	2.5	2.0
Private consumption			2.3	2.2	1.8
Public consumption			0.5	0.6	0.5
Gross fixed capital formation			0.1	6.9	5.7
Exports			4.4	7.6	5.2
Imports			4.5	7.3	5.1
Contribution to growth (Percentage points)
Total domestic demand			1.5	2.6	2.2
Foreign balance			-0.1	-0.1	-0.1
Resource utilization
Employment			1.2	1.6	0.9
Unemployment rate (Percent)			11.1	9.7	9.0
Prices
GDP deflator			1.6	2.2	1.7
Consumer prices (Harmonized index)			0.6	1.6	2.0
Money and credit (End of period, percent change)
Private sector credit			-3.7	-1.5	0.1
Broad money			-0.4	4.3	3.3
Fiscal indicators (Percent of GDP)
General government balance			-2.0	-1.5	-1.4
Primary government balance			2.2	2.6	2.7
Structural primary balance (Percent of potential GDP)			3.0	2.7	2.5
General government debt			130.3	125.7	122.5
Current account balance (Percent of GDP)			0.8	0.6	0.5
Nominal GDP (Billions of euros)			184.9	193.8	201.1
Sources: Bank of Portugal; Ministry of Finance; National Statistics Office (INE); Eurostat; and IMF staff projections.

	VARIAÇÕES HOMÓLOGAS
	HOMOLOGOUS CHANGE
Empréstimos de Outras Instituições Financeiras Monetárias a Particulares
Loans of Other Monetary Financial Institutions to Private Individuals
					Milhões de Euros
					Millions of Euros
Crédito		Concedido		Cobrança Duvidosa
Banking Credit	Installment Credit			Uncertain Collection
Habitação	JUN.16	96.426			2.629
Mortgage	JUN.17	93.767			2.101	-20,08%
Consumo	JUN.16	11.657			967
Consumption	JUN.17	12.718	9,10%		702	-27,40%
Outros Fins	JUN.16	9.278			1.527
Another Finality	JUN.17	8.540	-7,95%		2.028	32,81%
Total	JUN.16	117.361			5.123
Total	JUN.17	115.026	-1,99%		4.831	-5,70%
Fonte: Boletim Estatístico do Banco de Portugal
Source: Portugal Central Bank

	VARIAÇÕES HOMÓLOGAS
	HOMOLOGOUS CHANGE
Empréstimos de Outras Instituições Financeiras Monetárias a Empresas Não Financeiras
Loans of Other Monetary Financial Institutions to Non-Financial Corporations
					Milhões de Euros
					Millions of Euros
	Crédito Concedido				Cobrança Duvidosa
Installment Credit				Uncertain Collection
	JUN.16	80.727			12.879
	JUN.17	75.096	-6,98%		10.618	-17,56%
Fonte: Boletim Estatístico do Banco de Portugal
Source: Portugal Central Bank

"Opinion Maker" at Portuguese Television. Banking, Finances, Strategy and Analisys Risk Management.