Portugal urged to seize on stronger outlook

18 Feb 19

Portugal should use its economic recovery to “shore up its public finances” and build stronger resilience to future shocks, the OECD has urged.

The country has made “tremendous” progress in restoring its economy since the financial crisis in 2008, as unemployment has dropped and tourism has improved, OECD secretary general Angel Gurría said.

Launching the OECD’s Economic Survey of Portugal in Lisbon today, Gurría urged the government to use this upswing to “shore up its public finances” and deal with challenges such as high debt - which stands at 120% of GDP – and fiscal deficits.

“The more Portugal can do to build up resilience while its economy is turning over nicely, the better it will be able to weather any future shock, ensuring the sustainability and inclusiveness of its economic recovery,” he said.

Portugal should work to raise productivity and to return the long-term unemployed into work, which will in turn improve living standards and address high-levels of poverty and inequality, the survey suggested.

Although the country’s debt is falling, it remains among the highest in the OECD. Reducing the debt will require strong public finances and policies to reduce fiscal deficits, the OECD added, as well as measures to deal with the rising cost of an ageing population, such as health spending.

The external risks to Portugal’s outlook include a slowdown in economic activity in major trading partners and future rises in eurozone interest rates, the OECD said.

Portuguese GDP growth is forecast at 2.1% in 2019 and 1.9% in 2020 – pre-crisis levels. Unemployment has declined 10 percentage points since 2013, to just below 7%. This is one of the largest reductions in any OECD country over the past decade.

 

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