Presentation of the 2019 OECD Economic Survey of Portugal

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. 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. Economic recovery is well entrenched but further
improvements in wellbeing are needed
3

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. 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. 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. 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. Convergence has been limited
Source: OECD Compendium of Productivity Indicators
GDP per capita, percentage of OECD average
8

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. Encouraging fiscal sustainability and green
growth
10

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. 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. 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. 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. • 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. Improving financial stability
16

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. 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. 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. 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. • 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. Further raising export performance
22

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. 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. 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. 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. 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. 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. 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. • 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. Enhancing judicial efficiency to foster economic
activity
31

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. 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. 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. 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. 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. 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. 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. • 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. Improving labour utilisation and further reducing
poverty
40

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. 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. • 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. 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.
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