Portugal Passes Economy Review Earlier than Expected
Published on 26th December, 2013 by
A review of the Portuguese economy by international lenders received approval six months earlier than planned. The approval gets the country one step closer to moving out of the bailout programme introduced in 2011 to save Portugal from bankruptcy. This is when the country received a major loan that was needed to boost economic recovery after Portugal suffered the consequences of the international financial crisis.
The international economic monitoring by the European Union and International Monetary Fund (IMF) was one of the conditions for the provision of the crucially important loan in 2011.
Portuguese officials are hopeful that the country will be capable of moving out of the bailout programme by the middle of 2014.
Reviews are performed on a regular basis by the so-called “troika” – the EU, IMF and the Central European Bank (CEB). Recently, Ireland became the first country from the eurozone to pass all of the reviews and to exit the bailout programme.
Portugal’s finance minister Maria Luis Albuquerque said that according to the latest review, the country has managed to meet its economic targets. The evaluation confirms the ability of Portugal to exit the bailout programme in the middle of 2014.
Until present, Portugal has received a loan of 71.4 billion euro. Once the country exits the programme, it will become once again eligible for borrowing on the financial market. Since the recession, the country has been incapable of borrowing due to unsustainably high interest rates on capital markets.
The entire loan amount approved by the troika under the bailout programme is 78 billion euro.
The economic predictions for 2014 are favourable, as well. Portugal is expected to register economic growth of 0.8 percent. In comparison, it experienced negative growth of 1.8 percent in 2013.
According to a Bloomberg report, the Portuguese economic growth in 2014 is going to exceed figures presented in earlier prognoses. The growth for 2015 is expected to be even bigger, reaching 1.3 percent on an annual basis.
The winter economic bulletin of Bank of Portugal states that private consumption will be the driving force behind the economic growth expected during the coming year. The growth is happening after a period of long recession that has been affecting the country over the past 25 years.
According to Bank of Portugal, exports will increase 5.5 percent in 2014 and the inflation is expected to remain at a level of 0.8 percent. The trade surplus will reach 2.7 percent of the GDP, in comparison to 1.7 percent in 2013. The predictions of the bank correspond to the government and the troika previews of the 2014 Portuguese economy.
Portuguese prime minister Pedro Passos Coehlo said that despite the optimistic predictions, the government will still try to keep spending in 2014 under control to enable the country to exit the bailout programme. Spending will be trimmed by 3.2 billion euro in a governmental attempt to meet the annual budget deficit targets. In 2013, the Portuguese government relied on a strict taxation policy to accomplish the country’s economic goals and to receive the favourable troika review.