The Organization for Economic Cooperation and Development (OECD) forecasts that the national Gross Domestic Product (GDP) will grow 4.8% this year, similarly to the Government and Banco de Portugal (BdP), which are also optimistic for the next two years.
“The economy is expected to grow 4.8% in 2021, 5.8% in 2022 and 2.8% in 2023. GDP should only surpass the pre-crisis level around 2022. The robust growth is mainly driven by domestic demand, and will be accelerated by the absorption of EU funds. [União Europeia]”, can be read in the economic functions of the OECD released today.
The OECD further points out that “the current rise in production costs, driven primarily by energy prices, should not fuel the current momentum as underlying price pressures.” The 4.8% economic growth achieved for this year is in line with the rules of the Government and BdP, and exceeds those of the Public Finance Council (CFP), 4.7%, as well as the European Commission (4.5% ) and the International Monetary Fund (IMF), 4.4%, updating still as the OECD, made in May, which pointed to 3.7%.
As for 2022, a multilateral organization is even the most optimistic, since next year it forecasts a growth of 5.8%, when the Government points to 5.5%, the European Commission to 5.3%, the IMF and the CFP 5.1%, with the previous forecast of the OECD itself being updated (4.9%).
For 2023, as a function of the Paris-based organization, at 2.8%, it is just below the CFP (2.9%), online above the IMF (2.5%) and the European Commission (2.4% )
“Perseverance must remain supportive on the horizon for change, mainly due to the absorption of grants from the Next Generation EU,” the covid-19 pandemic European fundraising program predicts to the OECD.
The organization led by Mathias Cormann warns that “the bad debt ratio, despite decreasing, is among the highest in Europe, which is a possible source of financial ‘stress'”.
“Since some reallocation of activities and jobs is inevitable in the wake of the covid-19 crisis, strengthening insolvency regimes would facilitate them, allowing the economy to better deal with a possible increase in bankruptcies and bad debt”, also mandatory by the OECD .
This year, “GDP recovered stronger than expected in the second and third quarters of 2021, driven mainly by private consumption, as the most restrictive sanitary measures were removed”.
“Both consumer confidence data and retail sales have seen a continued strong recovery in consumption in the short term. Business sentiment continues to improve, while the tourism industry is recovering rapidly, despite doing so from very low levels” , refers to the organization.
The OECD signals, on the other hand, that “industrial production has slowed down moderately in recent months, as production costs have risen sharply, mainly due to energy prices and supply constraints, although this has not been reflected much in prices to the consumer”.
“The Government has also introduced a series of measures to cushion the negative effects of rising prices due to rising energy prices, such as subsidies for households and public transporters, as well as a control of oil companies’ profit margins,” he adds. yet.
The OECD predicts that consumption “will remain strong, while the savings rate is likely to fall, as the uncertainty related to the pandemic fades away.”
“Exports, currently still moderate, will be slow to fully recover, reaching the pre-crisis level only in early 2023, as tourism will continue to be affected by restrictions on cross-border mobility”, but the OECD foresees positive effects case as restrictions lifted earlier.
“A major risk is related to bankruptcies, which may be more prevalent than expected, damaging financial stability and rising unemployment. This may follow the removal of bank moratoriums, given that the percentage of businesses that signed up in Portugal was , by far, the largest among European countries,” warns the OECD.
OECD against rapid increase in the minimum wage and reversal of labor reforms in Portugal
The OECD also spoke out against a rapid increase in the minimum wage in Portugal, also considering it “important to avoid reversing labor market reforms”, as this could “compromise a sustainable recovery”.
“The government should also avoid sharply increasing the costs of dismissal, which would discourage job creation, and raise the minimum wage quickly, which would reduce opportunities, in particular, for low-employed workers” reads the economic conditions of the OECD released today.
According to the OECD, in the long run these policies would foster “inefficiently high labor costs”.
For a Paris-based multilateral organization, “it is also important to avoid reversing past labor market reforms, which could compromise a sustainable recovery.”