{
  "title": "Portugal: Completing the Job",
  "publication": "IMF Blog, February 19, 2014",
  "sourceUrl": "https://www.imf.org/en/blogs/articles/2014/02/19/portugal-completing-the-job",
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  "summary": "IMF released a report on Portugal’s progress under the country’s Economic Adjustment Program.",
  "sections": [
    {
      "heading": "Assessment and progress",
      "content": "- IMF released a report on Portugal’s progress under the country’s Economic Adjustment Program.\n- \"There is no doubt that Portugal has made remarkable progress over the past three years.\"\n- Official financing from Portugal’s European partners and the IMF provided a window of opportunity to address root weaknesses and regain market confidence.\n- Authorities made substantial progress in fiscal adjustment and frontloaded it to establish fiscal policy credibility.\n- \"All told, about two-thirds of the structural fiscal effort necessary to comply with the European Fiscal Compact’s medium-term objectives has now been completed.\"\n- Wide-ranging structural reforms enacted to improve functioning of labor and product markets and the business environment.\n- External adjustment has exceeded expectations, reducing need for overseas borrowing.\n- Financial stability has been preserved; \"sovereign yields recently dipped to their lowest level since April-2010.\""
    },
    {
      "heading": "Remaining risks and debt challenges",
      "content": "- \"Risks persist; unemployment remains high\" — unemployment remains elevated, especially for youth and long-term job seekers.\n- Public debt and private sector debt levels:\n  - public debt \"close to 129 percent of GDP\"\n  - non-financial private sector debt \"255 percent of GDP\"\n- Negative investment position vis-à-vis the rest of the world:\n  - \"currently above 110 percent of GDP\" and \"tilted toward debt\"\n- Policy implications from debt position:\n  - Further fiscal consolidation and private sector deleveraging will be necessary.\n  - External borrowing \"is not an option for the foreseeable future.\"\n  - The economy needs to generate external surpluses; investment must be geared toward tradable sectors; \"growth and employment have to be driven by exports.\""
    },
    {
      "heading": "Competitiveness and labor costs",
      "content": "- Without exchange rate flexibility, improving competitiveness requires lowering unit labor and other input costs, raising productivity, and enhancing firms' ability to adjust to shocks.\n- Progress noted in lowering unit labor costs in the private sector, aided by reforms softening employment protection and encouraging more flexible work arrangements.\n- Reforms to collective bargaining helped better align wages and productivity.\n- Relative significance of labor costs:\n  - \"labor costs make up only about 30 percent of operational costs.\"\n- Need to balance adjustment so burden does not fall excessively on labor; reduce other production costs.\n- Priority product market reforms:\n  - increase competition and reduce rents in the nontradable sector\n  - identify remaining impediments to price flexibility and steps to boost productivity\n  - ensure new laws and regulations translate into effective change and lower input prices for exporters"
    },
    {
      "heading": "Policy recommendations and next steps",
      "content": "- Persist with ambitious reforms to:\n  - \"bring ongoing fiscal adjustment to term\"\n  - \"facilitate private sector deleveraging\"\n  - \"boost competitiveness\"\n- Avoid returning to the pre-crisis economic model of borrowing for consumption or unproductive investment.\n- Sustain efforts to raise competitiveness as the only viable path forward.\n- Recognize achievements to date and continue reforms \"over coming years\" irrespective of political leadership; build \"as broad a consensus as possible.\"\n\nIMF blog post by Subir Lall, February 19, 2014\n\n---\n\n Content in this bundle\n\n- Portugal: Concluindo o trabalho; 18 de fevereiro de 2014\n  - Portugal: Concluindo o trabalho; 18 de fevereiro de 2014 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Portugal: Concluindo o trabalho; 18 de fevereiro de 2014 (PDF){rel=\"external\" type=\"application/pdf\"}\n- Country Report\n  - Country Report (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Country Report (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/blogs/articles/2014/02/19/portugal-completing-the-job"
    }
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    "Authors: Subir Lall",
    "Published: February 19, 2014",
    "IMF released a report on Portugal’s progress under the country’s Economic Adjustment Program.",
    "\"There is no doubt that Portugal has made remarkable progress over the past three years.\"",
    "Official financing from Portugal’s European partners and the IMF provided a window of opportunity to address root weaknesses and regain market confidence.",
    "Authorities made substantial progress in fiscal adjustment and frontloaded it to establish fiscal policy credibility.",
    "\"All told, about two-thirds of the structural fiscal effort necessary to comply with the European Fiscal Compact’s medium-term objectives has now been completed.\"",
    "Wide-ranging structural reforms enacted to improve functioning of labor and product markets and the business environment.",
    "External adjustment has exceeded expectations, reducing need for overseas borrowing.",
    "Financial stability has been preserved; \"sovereign yields recently dipped to their lowest level since April-2010.\"",
    "\"Risks persist; unemployment remains high\" — unemployment remains elevated, especially for youth and long-term job seekers.",
    "Public debt and private sector debt levels:",
    "Negative investment position vis-à-vis the rest of the world:",
    "Policy implications from debt position:",
    "Without exchange rate flexibility, improving competitiveness requires lowering unit labor and other input costs, raising productivity, and enhancing firms' ability to adjust to shocks.",
    "Progress noted in lowering unit labor costs in the private sector, aided by reforms softening employment protection and encouraging more flexible work arrangements.",
    "Reforms to collective bargaining helped better align wages and productivity.",
    "Relative significance of labor costs:",
    "Need to balance adjustment so burden does not fall excessively on labor; reduce other production costs.",
    "Priority product market reforms:",
    "Persist with ambitious reforms to:",
    "Avoid returning to the pre-crisis economic model of borrowing for consumption or unproductive investment.",
    "Sustain efforts to raise competitiveness as the only viable path forward.",
    "Recognize achievements to date and continue reforms \"over coming years\" irrespective of political leadership; build \"as broad a consensus as possible.\"",
    "**Portugal: Concluindo o trabalho; 18 de fevereiro de 2014**",
    "**Country Report**"
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