Portugal: First Review Under the Extended Arrangement
IMF Staff Country Reports, September 13, 2011
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- Portugal: First Review Under the Extended Arrangement
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Bibliographic details
- Published: September 13, 2011
- Series: IMF Staff Country Reports
- DOI: https://doi.org/10.5089/9781463902971.002
Summary findings
- Macroeconomic imbalances in Portugal are large, and structural problems are deep-rooted.
- The new government’s strong commitment to program implementation is encouraging.
- Fiscal performance to date demonstrates the need to refocus the fiscal strategy on strong expenditure control, as envisaged under the program.
- Preventing an excessively rapid deleveraging of the banking sector is crucial to support activity.
- Ultimately, program success hinges on opening up the economy and improving competitiveness.
- The European Council’s renewed support enhances prospects for the program’s success.
Fiscal assessment and recommendations
- Finding: Fiscal performance so far indicates insufficient emphasis on expenditure control.
- Policy recommendation: Re-focus the fiscal strategy on strong expenditure control, consistent with the program design.
- Risk note: Fiscal risks remain a material concern given large macroeconomic imbalances and deep-rooted structural problems.
Banking sector and financial stability
- Finding: Rapid deleveraging of the banking sector would undermine activity and program objectives.
- Policy recommendation: Implement measures to prevent an excessively rapid deleveraging of the banking sector to support economic activity.
Structural reforms and competitiveness
- Finding: Long-term success requires opening up the economy and improving competitiveness.
- Policy recommendation: Advance structural reforms aimed at reducing barriers to competition and enhancing competitiveness across sectors.
External support and program prospects
- Finding: The European Council’s renewed support enhances prospects for the program’s success.
- Implication: Continued external support is an important complement to domestic policy implementation for program credibility.
Thematic tags (as provided)
- Banking, Credit, Expenditure, Fiscal risks, Money, Public debt, Public financial management (PFM), Revenue administration
- Keywords included: capital plan, CR, Credit, fast-track Emergency Financing Mechanism procedure, Fiscal risks, Global, government, ISCR, plan, Portugal's IMF quota, ruling government, SDR, social security system
Portugal: First Review Under the Extended Arrangement — September 13, 2011