IMF believes Portugal should bet on structural reforms

  • ECO News
  • 6 April 2018

Jeffrey Franks, IMF's regional director for the European Union, stated, in Lisbon, that Portugal must increase its productivity and bet on structural reforms.

Jeffrey Franks, IMF’s regional director for the European Union, was in Lisbon and stated that Portugal must increase the productivity and bet on structural reforms for all levels of economic growth higher than the Euro Area average. In a conference on the Portuguese university ISEG, Jeffrey Franks recalled that Portugal converged with the Euro Area last year, by growing 2.7%, above the average of the 19 euro countries (2.3%).

In order to assure that convergence is “sustainable in the future”, Portugal must “increase its productivity”, by means of structural reforms that promote developments in investment, education, investigation and other fields, the IMF director stated. In the most recent estimates, IMF foresees the Portuguese economic growth will slow down to 2.2% this year, at the same pace as the 19 Euro Area countries.

In that sense, Jeffrey Franks acknowledged that one of the ways for Portugal to promote the convergence with other Euro Area countries is by means of a budgetary policy, “not by increasing the deficit”, he stated.

The director presented a study from IMF’s European office in which it is stated, among other conclusions, that if several countries move forward with reforms that promote growth, those positive effects would resound in all countries.

When asked about the impact of structural reforms in the Portuguese economic growth — when Spain had a 3.1% economic growth after also going through a crisis and an adjustment programme –, Jeffrey Franks stated it is important to compare what has been done in both countries. “Did Portugal go far enough? Did Spain do more?“, he wondered, recalling that Spain implemented a bailout programme to its banking system.

During the debate, Jeffrey Franks acknowledged the Euro is “blind towards convergence”. “It is not certain that it harms the convergence, but it is also not certain that it promotes it”, he stated.