Portugal: Selected Issues
IMF Staff Country Reports, June 30, 2022
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- Portugal: Selected Issues
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Bibliographic details
- Published: June 30, 2022
- Series: IMF Staff Country Reports
- DOI: https://doi.org/10.5089/9798400215070.002
Overview
- Focus: How the coronavirus disease 2019 pandemic could affect firm productivity and the speed of the recovery.
- Central concern: The pandemic eroded equity positions of Portuguese firms with varying impacts across firms’ size and sectors.
Key findings
- The authorities’ swift policy response mitigated immediate liquidity shortages.
- The pandemic left a large share of Portuguese corporates with a debt overhang and at risk of insolvency.
- Estimated change in zombie firms: share rose from about 1 percent prior to the pandemic to 4 percent.
- Banco Portuguese de Fomento managed recapitalization scheme—Strategic Recapitalization and Consolidar Programs—has many promising features but may need augmentation and enhanced incentive structures.
- Past crisis recoveries indicate zombie firms reduce aggregate productivity irrespective of the performance of non-zombie incumbents, thereby congesting reallocation.
Policy recommendations and implications
- Augment and enhance incentive structures of recapitalization schemes to improve effectiveness.
- Implement broad-based economic recovery policies underpinned by structural reforms to:
- Spur firm dynamism.
- Raise productivity growth.
- Strengthen financial health metrics.
- Maintain continued strong growth to bolster the operational environment across the corporate spectrum and help reduce balance-sheet vulnerabilities.
- Strengthen restructuring and insolvency regimes to:
- Facilitate effective reorganization and exit of businesses.
- Optimize resource reallocation without overwhelming the financial system.
Source: Portugal: Selected Issues (IMF Staff Country Report, June 30, 2022).
Content in this bundle
- Portugal: Selected Issues; IMF Country Report No. 22/204; June 7, 2022