OECD forecasts growth of 4.8% this year in Portugal
The Organization for Economic Cooperation and Development (OECD) forecasts that the Portuguese Gross Domestic Product (GDP) will grow 4.8% this year, similarly to the Government and Banco de Portugal (BdP), 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 this Wednesday.
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%.
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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.
Against raising the minimum wage
The OECD also spoke out against a rapid increase in the minimum wage in Portugal, considering it also “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.”
These considerations are contained in the section dedicated to Portugal of the economic functions of the OECD, released today, which point to a growth of the Gross Domestic Product (GDP) of 4.8%, 5.8% and 2.8% in 2021, 2022 and 2023 , respectively.
The organization led by Australian Mathias Cormann expects “job losses” in some sectors of the Portuguese economy, as “in other sectors they are increasing as vacancies, which cannot be easily filled due to discrepancies between jobs and qualifications”.
“This reallocation of employment can be facilitated by strengthening public employment services and training and retraining programs”, required by the OECD.
As for employment, it will “increase slowly, given that many jobs were protected by job retention systems, and companies got increase as working hours, at least bulletin.”
As disclosed today, the OECD does not include measures such as adjustments in the IRS and “the increase in salaries in public administration”, after the rejection of the Government’s proposal for the State Budget for 2022.
The reversal of some of the labor legislation, as well as the increase in the minimum wage to values above those proposed by the Government (705 euros in 2022), were at the center of the debate that led to the ‘lead’ of the proposed proposal.
More recently, after the rejection of the proposal, the votes against the PS and the PSD dictated the lead of projects by the BE and PCP on the settlement of overtime pay and another by the PCP to combat precariousness.
The bills, which were generally made viable by the PS, were rejected during the voting process in the specialty by the Committee on Labor and Social Security on November 24th.
At issue was a PCP project that provides for limitations on fixed-term contracts, according to the hypotheses in which a company can resort to fixed-term contracts, as well as the maximum number of renewals of these contracts, and alters the trial period, resuming the 90 days in into force until amendment of the Labor Code applicable in 2019.
Projects from the Left Block and the PCP were also voted on, which aimed at the reporting regime in force until 2012 regarding the payment of overtime and compensatory rest.
The PCP’s proposal to combat precariousness was again ‘failed’ by the plenary after being called up, a regimental figure that allows taking a vote from a commission to the plenary.