Teixeira dos Santos: Portugal has a savings problem – Economy
Former finance minister Fernando Teixeira dos Santos defended this Thursday that Portugal has “a savings problem”. The former ruler recognizes that there has been an “improvement” in savings in recent years, but this is still “insufficient” when he discovered savings at European level.
“Portugal has a savings problem”, began by referring to the former Minister of Finance at the annual conference of the Supervisory Authority for Insurance and Pension Funds (ASF), stressing that “a policy of strengthening national savings must necessarily go through the guarantee of long-term savings”. “The other savings [de curto prazo] is done for reasons influenced by the economic cycle and that will have fluctuations”, he said.
Teixeira dos Santos recalled that, until the financial crisis of 2008, national savings “declined by around 10 percentage points in terms of its weight in GDP” and this progressive decline translated into “a widening of the [diferença] between savings and investment”, which is reflected in the worsening of the external debt. The former ruler, responsible for the request for financial aid from Portugal, recalled that, when the 2008 crisis began, the net external debt was close to 100% of GDP, while in 1995 it was “partially nil”.
“With the adjustment program implemented, we are committed to correcting this situation, fulfilling a historically initiated result, which was to reach a situation of sustained external balance, which was recently disturbed by the pandemic. Never in these two centuries of our history, Portugal had so many years of external balance as it had from 2012 until the pandemic”, he said.
This rebalancing of public accounts will have allowed, in the view of Teixeira dos Santos, to recover savings, which began in 2009 with “some recovery of private savings”.
Savings below the European average
But, “despite the improvement in savings in recent years, it is still insufficient”, he mentioned. “Portugal has saved in recent years something around 18% of GDP, which compares with 25% of GDP in terms of the Euro Zone average. In other words, we are saving less than the Euro Zone as a whole”, he highlighted.
“On the other hand, even more serious than these savings in the euro zone is the fact that we need a great investment effort in our country. This is related to human productivity, total factor productivity, which has much to do with aspects of the legislative framework, regulation, technological progress, etc”, said Teixeira dos Santos.
The former minister also highlighted that, with regard to productivity, the capital-labor ratio has a very significant impact and that the working capital coefficient in Portugal “is 49% of the euro zone average”. As “there is a very strong association between productivity and wages, if productivity does not improve, it is not possible to improve income and living standards”, he argued.
“It is, in this context, that savings assumes a fundamental role in overcoming obstacles to growth and the improvement of incomes in our country”, he concluded, stressing that there is already a perception among the Portuguese that, given the demographic trend, “the pension will be reduced more and more in the course of time”.
Hmm studying of the ASF, released this Thursday, reveals that less than half of the Portuguese (43%) are saving for retirement. Anticipating a loss of income in the future is the main reason given for saving for retirement (54%), followed by the forecast of higher health costs and the intention to travel.
The main application of savings for retirement is the purchase of shares (26%), followed by time deposits (18%) and, in third place, retirement savings plans (13%).