PM confident of attractive investment climate
Portugal’s Prime Minister Pedro Passos Coelho has delivered a note of hope in an interview at a conference; the message was echoed by the Minister for Regional Development, Miguel Poiares Maduro, at a conference in Madrid.
The Prime Minister said that “at the end of this year Portugal will have reduced its budget deficit to 4% of GDP from 9.8% in 2010. In structural terms – the measure that matters for the EU Budget Treaty – the equivalent figure is 2.6%, incomparably less than the 8.7% recorded in 2010. It means that in 2014 Portugal will record its first primary budget surplus since 1997”.
His Regional development Minister, talking to a group of business leaders said “We have travelled an important road, which is more advanced than we thought we would be at this moment,” suggesting that Portugal’s economy had made more progress than anyone had expected.
Meanwhile Pedro Passos Coelho went on to say that “I am confident economic growth in future will be better than in the last 15 years”, whilst acknowledging that “investment is needed, in particular foreign investment, but Portugal is now in better conditions to make this happen as the economy has been stabilised and the country has become more attractive”.
The official statement as published on the Portuguese government website is as follows:
“WE NEED TO PREPARE THE FUTURE WITH THE RIGOUR AND DEPTH THAT HAVE FAILED US IN THE PAST”
“We need to look ahead to the future and to prepare it with the rigour and depth that have failed us in the past,” said Prime Minister Pedro Passos Coelho at a joint conference organised by economic daily Jornal de Negócios and Radio Renascença.
The efforts of the last three years are bearing fruits beyond what was expected by many in Portugal and elsewhere. In 2013, Portugal recorded the first current account surplus in more than 20 years thanks mostly to the good performance of exports, which increased 24.2% between 2010 and 2013 compared with a fall of 5.1% in imports.
The last few years also saw an unprecedented wave of reforms to increase the country’s competitiveness. Of course, reforms take time to permeate through the economy, the Prime Minister said, however noting that some effects are already being felt. The European Commission recently calculated that Spain, Denmark and Portugal are the only EU countries to have recorded a total factor productivity growth in the period 2008-2013 that is higher than in the pre-crisis period. Spain and Portugal were also the only ones likely to sustain this good performance in the following years. The OECD for its part stressed that Portugal is one of the countries that progressed the most in the product market regulation index, further liberating the potential of its companies and workforce.
If the results on the budgetary front are below initial expectations, this is largely due to the design faults in the adjustment programme signed in May 2011. But the figures are noticeable nonetheless.
“The original Memorandum of Understanding was based on assumptions that were exceedingly optimistic for what concerns the European economy. It did not predict correctly the extent of the economic crisis in Europe whose negative impact in Portugal was inevitable”, said Passos Coelho.
However, at the end of this year Portugal will have reduced its budget deficit to 4% of GDP from 9.8% in 2010. In structural terms – the measure that matters for the EU Budget Treaty – the equivalent figure is 2.6%, incomparably less than the 8.7% recorded in 2010. It means that in 2014 Portugal will record its first primary budget surplus since 1997.
The road ahead remains difficult and doubts are understandable. What is less understandable is to rush or make demands that can have disastrous effects, he said.
The fall in unemployment and other results show that the road and strategy undertaken is the correct one. We need to pursue the good work, which does not finish in May 2014, with the end of the adjustment programme. Europe for its part needs to “accompany adequately the adjustment process in the southern countries”. “The very idea of Europe is not compatible with permanent tensions and imbalances between its members”. The correction of the imbalances must be a task for the next few years”.
Passos Coelho called again for an enlarged political consensus on the budgetary strategy for the next five years.
“We learnt in the worst possible way the terrible costs of a high indebtedness, economic stagnation and irresponsible finance. We were able to count on the solidarity of Europe, which must live up to the new challenges. But we must also assume our responsibilities… To suggest that everything befalls on Europe is only an excuse not to have a strategy and avoid having to make the difficult choices”
“I believe this new comprise is needed and would be beneficial for the country as a whole. It would provide a new breath of confidence with widespread positive repercussions: for the financing of the State, companies and families alike, as well as for the sustainability of our welfare State.
I am confident economic growth in future will be better than in the last 15 years, Passos Coelho said. He acknowledged investment is needed, in particular foreign investment, but Portugal is now in better conditions to make this happen as the economy has been stabilised and the country has become more attractive.
Earlier today the European Commission also said “Portugal’s debt is sustainable and will be on a steady downward path from this year on”. Spokesman Simon O’Connor recalled that only ten days ago the eleventh review mission revised up Portugal’s growth forecast for both 2013 and 2014, and the more recent figure for growth in the fourth quarter of 2013 was higher than first estimated.”