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Portugal 2019-economic-survey-presentation

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Presentation of the 2019 OECD Economic Survey of Portugal

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Portugal 2019-economic-survey-presentation

  1. 1. 2019 OECD ECONOMIC SURVEY OF PORTUGAL Promoting convergence and wellbeing Lisbon, 18 February 2019 http://www.oecd.org/economy/surveys/portugal-economic-snapshot @OECDeconomy @OECD
  2. 2. Key messages • Further progress in improving public finances, reducing private debt and the health of the banking system can improve resilience to shocks • Export performance can be enhanced through policies that better enable exporters to innovate and grow • The efficiency of the judicial system can be further improved, thereby spurring economic activity 2
  3. 3. Economic recovery is well entrenched but further improvements in wellbeing are needed 3
  4. 4. The economy is growing after a double dip recession Source: OECD Economic Outlook. Real GDP -5 -4 -3 -2 -1 0 1 2 3 4 -5 -4 -3 -2 -1 0 1 2 3 4 2007 2009 2011 2013 2015 2017 2019 y-o-y % changes y-o-y % changes 4
  5. 5. Unemployment has continued to decline Source: OECD Economic Outlook. 0 2 4 6 8 10 12 14 16 18 0 2 4 6 8 10 12 14 16 18 2007 2009 2011 2013 2015 2017 2019 Percentage Percentage 5 Unemployment rate
  6. 6. Domestic demand is now also driving the recovery Annual percentage change Source: OECD Economic Outlook. -15 -10 -5 0 5 10 15 -15 -10 -5 0 5 10 15 2007 2009 2011 2013 2015 2017 Exports Domestic demand 6
  7. 7. The economic expansion will continue Source: OECD % change 2018 2019 2020 Gross domestic product (GDP) 2.1 2.1 1.9 Private consumption 2.2 1.8 2.0 Government consumption 0.7 -0.1 -0.1 Gross fixed capital formation 4.5 5.6 4.7 Exports of goods and services 6.0 4.5 3.7 Imports of goods and services 6.2 4.7 4.2 Unemployment rate 7.1 6.4 5.7 Consumer price index 1.3 1.3 1.4 7
  8. 8. Convergence has been limited Source: OECD Compendium of Productivity Indicators GDP per capita, percentage of OECD average 8
  9. 9. Wellbeing can be improved Source: OECD (2017), OECD Better Life Index 11 16 18 20 24 28 30 31 32 33 35 Environmental quality Personal security Housing Work-life balance Income and wealth Social connections Health status Jobs and earnings Education and skills Civic engagement Subjective well-being OECD Better Life Index Country rankings from 1 (best) to 35 (worst), 2017 20% top performers 60% middle performers 20% bottom performers Portugal 9
  10. 10. Encouraging fiscal sustainability and green growth 10
  11. 11. The public debt ratio is falling, but remains high Source: OECD Economic Outlook: Statistics and Projections (database). 0 20 40 60 80 100 120 140 0 20 40 60 80 100 120 140 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 % of GDP % of GDP 11 Gross government debt as a percentage of GDP
  12. 12. Ageing costs will impact public debt Source: OECD, European Commissions, calculations by the OECD Secretariat. 0 20 40 60 80 100 120 140 160 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 Continued consolidation effort Continued consolidation effort and not offsetting increase in age-related costs Weakening consolidation effort Weakening consolidation effort and not offsetting ageing-related costs General government debt as a percentage of GDP 12
  13. 13. There are too many VAT exemptions and reduced rates Note: The VAT Revenue Ratio is the ratio between the actual value-added tax revenue collected and the revenue that would theoretically be raised if VAT was applied at the standard rate to all final consumption. Source: OECD. VAT Revenue Ratio 13
  14. 14. Public transport is used much less than in other EU countries 50 55 60 65 70 75 80 85 90 95 50 55 60 65 70 75 80 85 90 95 LTU PRT NOR ISL GBR SVN NLD DEU SWE LUX EU FIN GRC ITA BEL DNK ESP FRA LVA EST IRL POL AUT SVK CHE CZE TUR HUN Source: Eurostat. Percentage of individual car use in total passenger transport, 2016 14
  15. 15. • Continue gradual fiscal consolidation. • Raise taxes on diesel fuel, and increase energy taxes on coal and natural gas. • Encourage public transport use and the development of new shared transport solutions. Recommendations to improve fiscal sustainability and make growth greener 15
  16. 16. Improving financial stability 16
  17. 17. Bank profitability has improved, but remains low Source: European Banking Authority (EBA), “EBA Risk Dashboard” Return on Equity (%) -4 -2 0 2 4 6 8 10 12 14 16 18 20 -4 -2 0 2 4 6 8 10 12 14 16 18 20 GRC DEU FIN PRT ITA ISL GBR BEL FRA EU IRL DNK LUX ESP NLD POL EST AUT NOR SVN SVK SWE LTU LVA CZE HUN 2018 Q3 2016 Q3 17
  18. 18. Nonperforming loans remain elevated, despite improvements Source: European Banking Authority (EBA), “EBA Risk Dashboard”. Non-performing loans as a ratio of total outstanding loans, 2018 Q3 0 2 4 6 8 10 12 14 16 18 20 0 2 4 6 8 10 12 14 16 18 20 GRC PRT ITA SVN HUN IRL POL ESP EU LVA AUT SVK FRA LTU ISL DNK BEL NLD DEU NOR EST CZE GBR FIN SWE LUX 43 18
  19. 19. Personal bankruptcy law is relatively stringent Source: Adapted from Adalet McGowan et al. (2017). OECD insolvency indicator: Treatment of failed entrepreneurs, 2016 0.0 0.2 0.4 0.6 0.8 1.0 0.0 0.2 0.4 0.6 0.8 1.0 CAN TUR USA AUS CHL GBR JPN AUT CHE DNK ESP FIN FRA GRC IRL ITA LVA MEX NOR NZL SVK SVN BEL DEU EST HUN ISR KOR NLD PRT SWE CZE 19
  20. 20. Court proceedings for credit claims can be long Source: Ministry of Justice. 0 10 20 30 40 50 60 70 0 10 20 30 40 50 60 70 less than 1 year 1 to 2 years 2 to 5 years more than 5 years Total Credit claim 20
  21. 21. • Continue to monitor NPL reduction plans, translating performance in achieving targets into capital requirements. • Make bankruptcy a viable solution for heavily indebted individuals, reducing the time to discharge and exempting more of the debtor’s assets from bankruptcy proceedings. • Introduce an out-of-court mechanism to facilitate the liquidation of non-viable firms. Recommendations to improve financial stability 21
  22. 22. Further raising export performance 22
  23. 23. The improvement in export performance has been impressive Source: OECD Economic Outlook: Statistics and Projections (database). 60 70 80 90 100 110 120 130 140 60 70 80 90 100 110 120 130 140 2007 2009 2011 2013 2015 2017 Portugal Germany Italy Spain Hungary Export performance, Index 2007=100 23
  24. 24. Tourism has been booming Source: Bank of Portugal, calculations by the OECD Secretariat. 0 2 4 6 8 10 12 14 16 18 20 0 2 4 6 8 10 12 14 16 18 20 Financialservices Insuranceandpension Intellectualpropertyuse Personal,culturalandrec. Construction Telecomm.andIT Clothingandfootwear Wood,corkandpaper Othermanufacturing Hides,leatherandtextiles Otherservices Transportation Transportmaterial Agri-food Machines Chemicals,rubbers Mineralsandmetals Travelandtourism Services Goods Percentage contribution to total export growth over the 2009-17 period 24
  25. 25. The economy can still be more outward oriented % of GDP Source: OECD. 0 20 40 60 80 100 120 0 20 40 60 80 100 120 PRT HUN CZE BEL FDI stock Exports 25
  26. 26. Most firms are too small to be significant exporters Source: Eurostat. Share of firms with more than 10 employees 0 2 4 6 8 10 12 14 16 0 2 4 6 8 10 12 14 16 SVK GRC CZE ESP ITA FRA BEL PRT POL SVN SWE NLD HUN ISL FIN LVA IRL EST LTU NOR GBR AUT DNK DEU LUX %% 26
  27. 27. It takes too long to prepare and pay taxes Time to prepare and pay taxes, 2018 Source: World Bank Doing Business Indicators. 0 50 100 150 200 250 300 0 50 100 150 200 250 300 EST LUX CHE NOR IRL FIN LTU AUS GBR NLD SWE JPN AUT CAN DNK BEL FRA ISL NZL ESP OECD LVA TUR USA KOR SVK GRC DEU CZE SVN ITA ISR MEX PRT COL HUN CHL HoursHours 27
  28. 28. Logistics infrastructure can be improved Ranking for logistics infrastructure Source: World Bank Doing Business Indicators. 0 5 10 15 20 25 30 35 0 5 10 15 20 25 30 35 PRT HUN CZE ESP ITA BEL FRA DEUBetter Worse 28
  29. 29. Improving workers skills is key for raising competitiveness Percentage of individuals that have completed education Source: Eurostat. 0 10 20 30 40 50 60 0 10 20 30 40 50 60 15-24 25-34 35-44 45-54 55-64 15-24 25-34 35-44 45-54 55-64 Upper secondary and post-secondary education Tertiary education EU Portugal 29
  30. 30. • Simplify the tax system by reducing the use of special provisions and ambiguity in tax language. • Ensure that port concession contracts specify a minimum level of investment by the operator and do not renew concessions without opening a new public tender. • In awarding port concessions, take into account the price that bidders will charge port users. • Target lifelong learning opportunities to the low-skilled, including by collecting information on the private returns to skills and making it publicly available. Recommendations for further promoting export performance 30
  31. 31. Enhancing judicial efficiency to foster economic activity 31
  32. 32. Court proceedings are shorter than before, but still long Source: Council of Europe European Commission for the efficiency of justice (CEPEJ) Average time needed to resolve civil and commercial cases, first instance courts, in days 32
  33. 33. The average time to pay is long in Portugal, partly reflecting weak contract enforcement The average time actually taken to pay, Business to business, in days. Source: Intrum (2018), “European Payment Reports 2018”. 33
  34. 34. Loan forbearance is common, while collateral enforcement is difficult Source: EBA, “Risk Assessment Report” December 2018. The forbearance loans ratio as a percentage of total outstanding loans in the corporate sector, Q2 2018 0 5 10 15 20 25 0 5 10 15 20 25 GRC PRT SVN IRL ITA ESP ISL NOR HUN POL EU DEU NLD AUT DNK BEL GBR SWE FRA FIN EST LUX 34
  35. 35. Recent reforms reduced pending proceedings, but court congestion remains significant Source: Pordata. Number of initiated, terminated and pending proceedings per judge 0 200 400 600 800 1000 1200 0 200 400 600 800 1000 1200 2000 2002 2004 2006 2008 2010 2012 2014 2016 Initiated Terminated Pending 35
  36. 36. Significant bottlenecks remain in some courts Source: Ministry of Justice and High Council for the Judiciary. Civil cases, 2017 How to read this chart: Court efficiency (measured by “Resolution rate” which is the number of resolved cases divided by the cases in stock) tends to be low where court resources are relatively scarce. 0 300 600 900 1200 1500 1800 0 0.1 0.2 0.3 0.4 0.5 0.6 Resolution rate (LHS) cases in stock/number of judges (ratio, RHS) 36
  37. 37. Regulation in the legal professions is too strict OECD Indicators of regulation in the legal services sector Source: OECD Product Market Regulations Statistics (database). 37
  38. 38. Alternative dispute resolution mechanisms can be developed further Source: INE. Number of proceedings in “Justice of peace courts” vs. in the court system. 0 200 400 600 800 1000 1200 1400 0 2 4 6 8 10 12 14 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 thousandsthousands incoming cases, justice of peace courts (LHS) pending cases, justice of peace courts (LHS) incoming cases, court system (RHS) 38
  39. 39. • Increase the managerial autonomy of the courts so that they can effectively allocate resources. • Fully analyse the data collected from the information system on court proceedings (CITIUS) so that it allows the courts to identify problematic cases and those that should be prioritised. • Set up an independent supervisory body to ensure that regulations in the legal profession are in the public interest. • Continue to enhance the capacity of the Public Prosecution Office to address economic and financial crime. Public prosecutors should continue to undertake specialised training in this area. • Establish an electronic registry of interests for all government members and senior civil servants that is regularly updated. Recommendations for enhancing the judiciary to foster economic activity 39
  40. 40. Improving labour utilisation and further reducing poverty 40
  41. 41. The incidence of long-term unemployment is still quite high Source: Eurostat Labour Force Survey database. As a percentage of total labour force, 2018 Q3 0 3 6 9 12 15 18 21 0 3 6 9 12 15 18 21 GRC ESP TUR ITA FRA LVA PRT FIN SVK LUX SWE IRL BEL LTU EST SVN DNK AUT CHE GBR NOR HUN POL NLD DEU CZE ISL Unemployment rate of which, long-term unemployment 41
  42. 42. Low-skilled people face significant employment barriers 0 10 20 30 40 50 60 70 80 0 10 20 30 40 50 60 70 80 Lack of skills Scarce job opportunities (regress) Health limitations "High" non-labour income "Low" relative work experience No past work experience "High" earnings replacements "High" care responsabilities Percentage of those unemployed or with weak labour market attachment facing each employment barrier Source: OECD (2018), “Faces of joblessness in Portugal”. 42
  43. 43. • Avoid across-the-board rises in hiring subsides, limiting them to those at high risk of long-term unemployment and those at risk of poverty. • Expand well-designed vocational training programmes (i.e. “Aprendizagem” and “Cursos de Educação e Formação de Adultos”), so that they reach more of the low-skilled population. • Consolidate the two vocational education systems into a single dual VET system with strong workplace training and perform a thorough evaluation of all vocational training. Recommendations for improving labour utilisation and reducing poverty 43
  44. 44. Disclaimers: The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The use of such data by the OECD is without prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlements in the West Bank under the terms of international law. This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area. Follow us on twitter: For more information OECD Economics OECD http://www.oecd.org/economy/surveys/portugal-economic-snapshot 44

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