Portuguese economy should grow a little over 1%

  • ECO News
  • 7 October 2016

António Costa, prime minister of Portugal, acknowledged economy should grow a little over 1% and announced different regulations in indirect taxation and minimum pensions for 2017.

António Costa acknowledged, when interviewed by the Portuguese newspaper Público, that the economy should grow a little over 1%: “I am not confident it can grow more than that”. The economy will not meet the budget’s goal; however, banking will be the main focus of the government policy until the end of the year.

António Costa announced there will be a vehicle to handle non-performing loan, also before the end of this year – even if bankers disagree, he says, shielded by the recommendations of the International Monetary Fund (IMF) and the European Commission (EC). However, he does not promise to comply with the EC’s calendar that established October as the deadline for that goal.

Costa assured that the administration of the Portuguese bank Caixa Geral de Depósitos (CGD) will audit as promised, but last week its new president António Domingues said he did not know of such audit. The prime minister stated recapitalization will not “necessarily” happen right this year, which means there will not be an amending budget, at least not because of CGD.

As for Novo Banco, António Costa referred to the Governor of the Bank of Portugal, Carlos Costa, “that soon will present his solutions strategy to the Government”.

Costa stated that Deloitte’s audit is being discussed in the Resolution Fund, in order to understand “to what extent is the [bank] resolution a more negative solution than the alternative option of liquidation, because that is one of the restrictive guidelines”.

Costa explains the press release sent by the Resolution Fund, in which it is clarified that the Fund will extend the maturities of the state loan amortization.

The prime minister (PM) mentioned there will likely be an increase in indirect taxes next year, but negotiations with the Left Block (BE) and Coalition for Democratic Unit (CDU) are not yet concluded. Costa only confirmed there will be changes in luxury real estate taxation, later to be specified. Answering criticism, he argues that not all taxes are the same, and in spite of not wanting to perform “tax morality”, he says “the country must make choices”.

Also in the interview, Costa stated his wishes to regulate minimum pensions given by Social Security, though it is not in the agenda. Both the Portuguese Communist Party (PCP) and the BE want a generalized real rise of pensions, but the PM has yet decided what will be included in the 2017 State Budget. After the recovery civil service employees’ income, there will not be any wage adjustments in 2017.

The PM recalled that “a few months ago” there was “anguish”, but now – in spite of not wanting to be “annoyingly optimistic” – he believes there is a more positive scenario: “The country must enter 2017 with a stabilized financial system, conducive to financing the economy”.