{
  "title": "Portugal: IMF Executive Board Concludes 2012 Article IV Consultation",
  "publication": "IMF News, January 18, 2013",
  "sourceUrl": "https://www.imf.org/en/news/articles/2015/09/28/04/53/pn1307",
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  "summary": "Each Public Information Notice contains a background section, a table of selected economic indicators, and an Executive Board assessment.",
  "publishDate": "2013-01-18",
  "sections": [
    {
      "heading": "Background and crisis origins",
      "content": "- Since the last Article IV consultation in early 2010, Portugal faced mounting funding pressures leading to an acute economic crisis and a request for financial support from the European Union and the IMF in May 2011.\n- Real GDP contracted by close to 5 percent during 2011–12.\n- Unemployment edged up to about 16¼ percent in recent months.\n- Roots of the crisis:\n  - Failure to adapt to the rigors of monetary union amid a rapidly changing and more competitive international environment.\n  - Accumulation of economic and financial imbalances: eroding competitiveness of the tradable sector, muted policy responses.\n  - Counter-cyclical fiscal policy during the 2008–09 crisis led to ballooning government deficits and debt.\n  - Banks lost access to the wholesale funding market in mid-2010; in the first half of 2011, Portugal’s government was shut out from financial markets."
    },
    {
      "heading": "Portugal’s program and adjustment outcomes",
      "content": "- Portugal launched a comprehensive economic and financial program with key elements:\n  - Front-loaded fiscal adjustment to restore fiscal credibility and jump-start external adjustment.\n  - Financial sector measures to keep banks well capitalized and liquid while facilitating orderly deleveraging.\n  - Implementation of a number of important structural reforms.\n- Fiscal and external adjustment progress:\n  - Underlying fiscal adjustment advanced markedly—by an estimated 6 percent of GDP in primary structural terms over 2011–12.\n  - External account adjustment: the 12-month rolling deficit reached 2½ percent of GDP in September—an adjustment of 10 percentage points from the low point in late 2008.\n  - Significant decline in sovereign spreads from the heights of early 2012.\n- Outlook:\n  - Near-term outlook remains negative—with the economy likely to be in recession in 2013 and growth in trading partners slowing.\n  - Growth expected to gradually pick up over time.\n  - With fiscal adjustment proceeding as per the authorities’ program, debt would peak at about 122 percent of GDP in 2013–14."
    },
    {
      "heading": "Executive Board assessment — main findings and policy guidance",
      "content": "- Directors’ appraisal:\n  - Welcomed the authorities’ impressive policy effort to gradually reverse imbalances and prevent future crises.\n  - Noted considerable progress in fiscal and external adjustment, and in implementing structural reforms.\n  - Welcomed the significant narrowing in sovereign spreads and improvements in euro-area crisis management.\n- Risks and challenges:\n  - Near-term outlook uncertain; sizable medium-term economic challenges remain.\n  - Need to sustain efforts to make the tradable sector more competitive, boost long-term growth, and further advance fiscal consolidation.\n- Fiscal policy guidance:\n  - Considered the authorities’ fiscal objectives appropriate provided economic developments remain as expected.\n  - Emphasized striking the right balance between fiscal consolidation and measures supportive of economic growth.\n  - Called for a public debate on how to best share the burden of the remaining adjustment.\n  - Noted a strong case for focusing on expenditure savings going forward, given the current high level of taxation.\n  - Welcomed the ongoing public expenditure review to help rebalance the adjustment mix.\n  - Stressed the need to build broad consensus given spending is concentrated on sensitive outlays such as social transfers and public wages.\n- Tax policy and administration:\n  - While reducing the overall tax burden may be difficult in coming years, a broader tax base and strengthened compliance could generate space for lower income tax rates.\n  - Welcomed planned corporate income tax reform to foster investment and competitiveness.\n  - Encouraged follow-through on measures to fight tax evasion.\n  - Stressed continued strong implementation of the fiscal structural reform agenda to underpin durable consolidation.\n- Financial sector and credit conditions:\n  - Welcomed authorities’ strong track record in preserving financial stability, but urged continued vigilant risk monitoring.\n  - Encouraged improved credit conditions to facilitate economic recovery and orderly deleveraging by highly indebted firms.\n- Structural reforms:\n  - Encouraged vigorous pursuit of structural reforms targeting growth bottlenecks, reducing production costs, and compressing excessive profit mark-ups in the non-tradable sector.\n- External support and euro-area policies:\n  - Noted success also depends critically on continued external support and successful crisis policies at the euro area level.\n  - Observed that support from the Eurosystem is important to contain credit market segmentation and restore appropriate monetary policy transmission."
    },
    {
      "heading": "Portugal: Selected Economic Indicators (Percent of GDP, unless otherwise stated)",
      "content": "- Gross Domestic Product (percent change):\n  - 2009: -2.9\n  - 2010: 1.4\n  - 2011: -1.6\n  - 2012 Est.: -3.0\n  - 2013 Proj.: -1.0\n  - 2014 Proj.: 0.8\n- Consumer Price Index (percent change):\n  - 2009: -0.9\n  - 2010: 3.6\n  - 2011: 2.8\n  - 2012 Est.: 1.2\n- Unemployment (percent) 1/:\n  - 2009: 9.5\n  - 2010: 10.8\n  - 2011: 12.7\n  - 2012 Est.: 15.5\n  - 2013 Proj.: 16.4\n  - 2014 Proj.: 15.9\n- Current Account balance:\n  - 2009: -10.9\n  - 2010: -10.0\n  - 2011: -6.5\n  - 2012 Est.: -2.5\n  - 2013 Proj.: -1.1\n- Government balance:\n  - 2009: -10.2\n  - 2010: -9.8\n  - 2011: -4.4\n  - 2012 Est.: -5.0\n  - 2013 Proj.: -4.5\n- Government debt:\n  - 2009: 83.1\n  - 2010: 93.3\n  - 2011: 108.1\n  - 2012 Est.: 120.0\n  - 2013 Proj.: 122.2\n  - 2014 Proj.: 122.3\n- Source: Authorities and IMF staff calculations\n- Note: 1/ Structural break in 2011.\n\nPublic Information Notice No. 13/07, January 18, 2013.\n\n---\n\n Content in this bundle\n\n- Country Report (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\n References\n\n- Portugal and the IMF\n- Public Information Notices\n- Adobe Acrobat Reader\n- http://www.imf.org/external/np/sec/misc/qualifiers.htm\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2015/09/28/04/53/pn1307"
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    "Published: January 18, 2013",
    "Since the last Article IV consultation in early 2010, Portugal faced mounting funding pressures leading to an acute economic crisis and a request for financial support from the European Union and the IMF in May 2011.",
    "Real GDP contracted by close to 5 percent during 2011–12.",
    "Unemployment edged up to about 16¼ percent in recent months.",
    "Roots of the crisis:",
    "Portugal launched a comprehensive economic and financial program with key elements:",
    "Fiscal and external adjustment progress:",
    "Outlook:",
    "Directors’ appraisal:",
    "Risks and challenges:",
    "Fiscal policy guidance:",
    "Tax policy and administration:",
    "Financial sector and credit conditions:",
    "Structural reforms:",
    "External support and euro-area policies:",
    "Gross Domestic Product (percent change):",
    "Consumer Price Index (percent change):",
    "Unemployment (percent) 1/:",
    "Current Account balance:",
    "Government balance:",
    "Government debt:",
    "Source: Authorities and IMF staff calculations",
    "Note: 1/ Structural break in 2011.",
    "[Country Report (PDF)](/external/pubs/ft/scr/2013/cr1318.pdf){rel=\"external\" type=\"application/pdf\"}",
    "[Portugal and the IMF](http://www.imf.org/external/country/PRT/index.htm)",
    "[Public Information Notices](https://www.imf.org/en/news/searchnews)",
    "[Adobe Acrobat Reader](https://www.imf.org/adobe)",
    "[http://www.imf.org/external/np/sec/misc/qualifiers.htm](https://www.imf.org/external/np/sec/misc/qualifiers.htm)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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