Brussels, 15/06/2015 (Agence Europe) - The Portuguese public finance consolidation forecasts for 2015 vary according to whether they are made by the Portuguese government or the country's institutional lenders, which point to a weakening of the structural budget reforms.
The Portuguese government expects a nominal budget deficit of 2.7% of GDP in 2015, while the mission projects 3.1%. In a joint press release, the European Commission and the Portuguese government state: “Although the nominal headline target under the Stability and Growth Pact (SGP) is coming within reach, the adjustment in the underlying structural deficit in 2015 (as well as in later years) is likely to fall short of SGP requirements, reflecting a fading consolidation effort. Savings from lower interest payments, stemming from favourable financing conditions, should be fully used for deficit and debt reduction. The debt-to-GDP ratio, which stood at 130% at the end of 2014, is expected to have peaked and should be on a downward path as of 2015.”
According to the Commission's Spring Economic Forecasts, Portugal's growth should strengthen this year to 1.6% of GDP (from 0.9% in 2014). Despite the “remaining macroeconomic imbalances,” the economy is being driven by exports, which continue to perform well, in line with increasing foreign demand and supported by favourable exchange rate developments, and by domestic demand, which is driven by buoyant private consumption growth, on the back of improving labour market conditions, and more recently by recovering business investment.
Portugal's lenders note: “The pace of structural reform implementation remains moderate. (...)The impact of recent measures on the minimum wage and on collective agreements needs to be carefully assessed.” The lenders stress the importance of boosting competition in network industries to make the Portuguese economy more competitive.
The lenders' third monitoring mission in Portugal will take place in the autumn. (Mathieu Bion)