The Portuguese government has decided, after a special cabinet
meeting today, to conclude and exit the three-year EU-IMF
adjustment programme without requesting any further external
financial assistance. The programme ends on 17 May.
The decision follows a careful assessment of the current
economic situation and future prospects, the situation in the
financial markets, notably the successful issuance of long-term
debt, and the existence of a cash buffer that covers the
government's funding needs for the next 12 months. The government
also took into consideration the views expressed by relevant
stakeholders and market participants on the options around the exit
strategy. Finally, the decision follows last Friday's successful
completion by the European Commission, the European Central Bank
and the International Monetary Fund, of the 12th and final review
mission of the Economic Adjustment Programme. The disbursement is
expected to occur in June corresponding to the formal
During the last three years the budget deficit was more than
halved and the external current account has moved from a
substantial deficit into a surplus. The economy is expected to grow
by 1.2% this year, 1.5% in 2015, 1.7% in 2016 and 1.8% in 2017-2018
on the back of robust export growth and the gradual recovery of
private consumption and investment. Growth forecasts are prudent
and do not factor in the full impact of the extensive structural
reforms implemented during the adjustment programme period and
projected for coming years, which contribute to a stronger economy
and job creation. Albeit still at very high levels, the
unemployment rate is set to fall to 15.4% this year and 14.8% in
2015, from 16.3% in 2013.
Last week the government announced detailed measures to reach
the agreed objective of a budget deficit of 2.5% of GDP in 2015,
down from an expected 4.0% this year. The deficit target in 2013
was reached by a comfortable margin and budget performance in the
first months of this year was better than expected, as noted by the
Troika at the end of the last review (See Statement by the
Commission, ECB and IMF on the 12th review mission to
The Portuguese government reaffirms its commitment to continue
working towards sound public finances, in line with the commitments
under the Fiscal Compact as well as the momentum on structural
reforms, namely through monitoring their results, adjusting them
accordingly, and identifying further reforms needed.
Prime Minister Pedro Passos Coelho said: "This is the right
decision at the right moment. It's the decision that defends most
effectively the interests of Portugal and best matches the
expectations of the people. It was made possible because, as is
recognised in the Troika's last mission statement, Portugal in on
the right track, of more solid public finances, financial stability
and increased competitiveness". He added: "It is the firm intention
of this Government and of its parliamentary majority to stick to
responsible public finances". The efforts made by the Portuguese
people to pull the country back from the brink of bankruptcy,
represent "the best guarantee of national consensus that will give
strength to our recovery," he said.
The Prime Minister made the announcement to the Portuguese
people in a televised address on Sunday night, on the eve of the
information to euro area finance ministers, in Brussels.
Medium-term fiscal strategy
On April 30th, Portugal presented the Fiscal Strategy Document
for the period 2014-2018 (Documento de Estratégia Orçamental
2014-2018). It outlines the country's medium-term fiscal strategy
until 2018, according to the EU budgetary coordination and
surveillance rules and the conditions of the Economic Adjustment
Programme. It also includes detailed measures for 2015. The
continuation of the fiscal consolidation effort will allow for
- The medium-term objective (MTO) of a structural deficit of 0.5%
of GDP will be achieved in 2017, improving from an expected 2.1%
this year and 1.3% in 2015.
- The primary balance is expected to become positive already this
year, at 0.4% of GDP, and to increase to 4.2% in 2018.
- Budget Balance is forecast to be reached in 2018, following a
continuous improvement in the headline deficit.
- General Government gross debt is expected to peak at 130.2% of
GDP this year and to decrease to 116.7% in 2018. The current public
debt ratio is due to the accumulation of budget deficits in the
past, to the high financing costs during the euro area crisis and
to a cumulative output loss of around 6% of GDP from 2010 to 2013.
For 2014, the debt ratio also reflects the accumulation of cash
deposits to cover for future financing needs, which represent about
8 percentage points of GDP.
Main macroeconomic and fiscal indicators
Source: Ministry of Finance, Fiscal Strategy Document 2014-2018,