This overview is extracted from the 2017 Economic Survey of Portugal. The Survey is published by the Economic and Development Review Committee (EDRC) of the OECD, which is charged with the examination of the economic situation of member countries.
Portugal’s economy has gone through a gradual recovery from a deep recession. A wide-ranging structural reform agenda has supported thisrecovery and the ongoing reduction of imbalances built up in the past. Stronger investment, skills, and productivity will increasingly be the basis for sustainable income gains.
The summary includes the following points:
“Portugal has undertaken an ambitious structural reform programme since 2011. Reforms have spanned across a wide range of policy areas, product markets, labour markets, taxes, regulations and the public sector.These reforms have supported a gradual recovery of the Portuguese economy, with additional tailwinds resulting from highly accommodative monetary policy and low oil price
“The fragility of banks needs to be resolved sooner rather than later to reduce fiscal risks and restore credit growth. Reducing the amount of non-performing loans on bank balance sheets is key.
“With 54 bank branches per 100 000 inhabitants, against a euro area average of 28, Portuguese banks also have further scope for reducing operating expenses. Market valuations of Portuguese banks have fallen by over 80% over the past 5 years, significantly more than in other euro area countries. Markets also continue to view Portuguese banks as more risky than their European peers, as evidenced by higher CDS spreads
“Portugal also has one of the most unequal income distributions in Europe, and both inequality and poverty have been rising since the crisis.
“Restoring investment will be fundamental to raising prosperity and ensuring competitiveness. This will require comprehensive action on many fronts, including strengthening banks, reducing corporate debt, more efficient insolvency procedures and improvements in the business climate.”