The International Monetary Fund said today that the economic recovery has slowed in Portugal over the last six months and that the country's growth is being hampered by the inability of the government to push through the agreed reform agenda.
The IMF’s report is the first since the bailout funding period ended and looks at the monitoring period during which agreed reforms have slowed now the pressure is off and all of the bailout money safely drawn down.
The two main IMF conclusions will be ignored and explained away by the government as it prepares for the forthcoming election.
The IMF could not be clearer in its criticism, stating that "the timing of reforms and of the fiscal adjustment seems to have weakened in the last six months" and, despite the measures taken during the Economic and Financial Assistance Program, "the number of reforms on the agenda are substantially unfinished," with a depressing rating of 36%.
The IMF has found it necessary to revise Portugal’s growth prospects downwards, mainly due to the ‘long pause’ in reforms.
The Government expects the Portuguese economy to grow 1.5% this year and 1.7% next year according to the State Budget and the Fiscal Strategy Document.
The less optimistic view of the IMF predicts that Portugal’s Gross Domestic Product will grow by just 1.2% and 1.3% in 2015 and 2016.
The IMF said that the Portuguese economic recovery is being driven by private consumption and that unemployment, the debt burden and weak external competitiveness of businesses will all "continue to limit economic growth."
The government led by Pedro Passos Coelho "admits to difficulty in implementing structural reforms, while agreeing that they are essential to promote employment and growth," reads the report which in this one sentence identifies the key problem but offers no solution.
Portugal's National Institute of Statistics said today that Portugal’s businesses have put the brakes on investment for 2015. This is according to intentions expressed in its Monthly Investment Survey for October 2014.
The main limiting factor in business investment identified by companies was the deterioration of sales prospects, followed by uncertainty about the return on investment.
This is notable among export driven manufacturers where investment dropped by over 3% last year and will fall further in 2015.
Due to a moribund banking sector, self-financing remains the main source of funding for investment by the companies surveyed, with nearly 70% using reserves rather than bank finance.
As the government sets out to persuade the electorate that all is well, the crucial reforms needed to make Portugal competitive simply have not happened and with this opportunity wasted, whoever wins the next election will face much the same problem that Passos Coelho has failed to tackle.
Comments
As appallingly corrupt as the Portuguese political class is the Troika is not much better.
One inspector after another comes through, demanding this or that be changed, another form filed [available through an inaccessible website], another fine paid.
Taxes we can understand; but if the middle level bureaucracy insists on preventing, harassing, and obstructing every single vestige of commercial activity, no one can work.
It also does not give any comment on the sheer uselessness and self centredness of so many public servants. (Using the northern Europe meaning of Public Servant)
Which continues to hold Portugal back.
Consider the discussion linked to below. Portuguese courts seize property, money and goods from errant tax payers and sell it on. Lawyers then are needed to legitimise the changes of ownership. The guy running the scheme is done for theft. A couple of dozen lawyers dismissed likewise.
Then we read of thousands of landlords not declaring their tenants rents ! Caught out, as presumably with the court seizures, when the tax declarations of the 'seized' and 'tenants' are cross referenced back to .....NOTHING !
Do any Portuguese connect this depressing routine of dishonesty, theft, fraud, corruption etc with any sense of failure? Of Failing the European Union ?
http://www.expatfocus.com/Forums/viewtopic/t=40611/start=21/
Both the Portuguese Communists and the 'right wing' of Paulo Portas sniffing an opportunity to do 'a Greek' on the Troika. The latter to avoid oblivion at the polls and a re-opened submarines enquiry.
So Portas giving us a stirring Churchillian speech (by him more reptillian) about not being trodden on by the Troika.
However - why is he calling the re-opener of the subs enquiry a 'compulsive liar' ? Is that a mark of respect ? In a more developed society that would be the opposite; an insult - not a commendation.
This modus operandi has each party repeatedly failing to achieve the same goal, before handing over again to the other party on a rotating basis.
Portugal desperately needs a third alternative, such as the Greeks have found.
Just as in Greece ...the root cause is a desperately backward society with an elite strata entirely disconnected from everyday life.
Portugal going further in bundling in a distorted view of the countries historical importance in the world - unlike Greece's obvious contribution - and a consequential racism against the major EU economies.