OECD’s eight warnings for Portugal

  • ECO News
  • 23 May 2019

These are the top warning and conclusions that you should follow closely on Portugal over this and the next year.

OECD foresees a positively stable economic growth for Portugal at 1.8 – 1.9% over next year. Not without the usual heads-up though. These are the top warning and conclusions that you should follow closely on Portugal over this and the next year.

  1. “Public debt reduction should continue to be prioritised” after forecasting that public debt will be at 118.9% in 2019 and 115.7% of GDP, which contradicts the Portuguese Government’s initial projection in just a few decimals above (118.4% for 2019 and 115% for 2020).
  2. If imports are robustly growing, exports have been slowing down, however, for external factors. The “weakening economic activity” of Portugal’s major commercial partners, such as Germany, the United Kingdom, and Spain, is impacting on the country’s exporting performance.
  3.  The need for implementing “new productivity-enhancing policy changes” is an OECD’s long-standing concern for Portugal. Turning fiscal policies more friendly to people and businesses might not be enough to incentivise productivity. Reforming some sectors’ strict labour regulation is suggested to help businesses, for instance, “to reduce the costs of intermediate inputs”.
  4. Portugal is also advised to pursue important reforms in its judiciary system, following the recent controversy between the Portuguese Government and the OECD over a report that showed concerns for the country’s ineffective anti-corruption policies and procedures.
  5. Urging deep reforms of the vocational education and training system was also a cornerstone of the latest OECD’s report. The organisation fears that the Government is not providing enough learning opportunities for low-qualified workers throughout their lives as well as it is not investing in widening training schemes for a bigger number of unskilled people.
  6. Alongside with a friendlier financial environment for investment (essentially Tourism-related), a partial reversion of previous austerity measures and the consequent improvement of general labour conditions are also showing positive results. Not only is driving an expansion in private consumption but also it is increasing “industrial and consumer confidence”, having reached its highest level relative to the period between 2014-2016.
  7. Concession contracts at ports are described to be as “often excessive in their duration”, which makes difficult for new market entrants to come and to improve quality service to Portuguese enterprises. This warning comes after serious concerns over the last November and December’s strike at the Port of Setubal that negatively impacted automotive exports.
  8. Focusing on public investment should be other serious commitment of the Portuguese Government as the population is aging and productivity is still “sluggish”. Nevertheless, the report predicts a sincere attempt to comply with these pieces of advice as global public investment is expected to be at 6% this 2019, boosted by “an increased absorption of EU funds”. A tendency that is to be continued “over the next few years”.