Successful reforms have underpinned Portugal economic recovery
The Portuguese economy is gradually recovering from a deep recession thanks to a broad structural reform agenda that has led to rising economic growth, falling unemployment and remarkable progress in export performance. Maintaining momentum for further reforms is crucial to address remaining challenges and bringing about stronger and more inclusive growth, according to a new report from the OECD.
The latest OECD Economic Survey of Portugal also points out the need to bring down high levels of public and private sector indebtedness and address non-performing loans in the banking system, which are hampering investment and holding back growth and productivity.
The Survey, presented in Lisbon by OECD secretary-general Angel Gurría and Portugal’s minister of finance Mário Centeno, identifies three priority areas for future action: reducing the vulnerabilities of the Portuguese economy and making it more inclusive, raising investment and boosting skills.
Angel Gurria, said:
“Reforms to product and labour markets, tax policy, competition and the public sector have underpinned Portugal’s recovery, and are now bearing fruit. While growth and exports are up and the fiscal outlook is encouraging, important challenges remain to building a more prosperous and brighter future for all the Portuguese people, so everyone benefits from the recovery. Further reforms will be critical to reaching this objective.”
The survey points out the need to address financial sector fragility, highlighting the need to reduce the share of non-performing loans in the banking sector, which represent more than 12% of total loans, one of the highest levels among European countries. A comprehensive reform package should include strengthening of current regulatory incentives for the reduction of non-performing loans, the development of a market for distressed corporate debt and streamlined insolvency rules.
Improving the business environment should help boost investment. The Survey proposes enhancing judicial system capacity, lowering electricity costs and rents, easing entry requirements in professional services, boosting port efficiency and revising land use regulations and local government licensing procedures.
Portugal still has one of the most unequal distributions of income in Europe. Recent efforts to step up the guaranteed minimum income scheme are welcome. Portugal needs to overcome the legacy of a low-skilled labour force and improving the skills of all Portuguese will bolster growth, and will be crucial in helping to address inequalities, the survey said. The OECD points out scope for improvements in primary and secondary education, including better teacher training, more evaluation and consolidation of vocational education and training programmes, strengthening the links between the research and business sector, through better incentives for academics to cooperate with industry, raising managerial skills and increased life-long learning for low-skilled workers.
During his visit, the OECD secretary-general also announced the launch of the Action Phase of a project undertaken jointly by the OECD and the Portuguese authorities as part of Portugal’s National Skills Strategy. This effort builds on existing diagnostic work that has helped to identify Portugal’s skills challenges.
An overview of the Economic Survey, with the main conclusions, is accessible at: www.oecd.org/portugal/economic-survey-portugal.htm