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MINISTÉRIO DAS FINANÇASPortugal: restoringcredibility and confidenceVítor GasparMINISTÉRIO DAS FINANÇASPeterson Institute, WashingtonMarch 19, 20121
Outline1. On the way to become the difficult Portuguese case2. The Economic Adjustment Program3. Fiscal consolidation4. Deleveraging and financial stability5. Structural transformation6. Conclusion: how will it work?MINISTÉRIO DAS FINANÇAS2
ON THE WAY TO BECOME THEDIFFICULT PORTUGUESE CASEMINISTÉRIO DAS FINANÇAS3
Portugal’s imbalances exposed in the context of theeconomic and financial crisis10-year Government bond yieldsSpread against Germany in basis nessesthat havebeenaccumulatedover morethan adecade1. Unsustainable publicfinances10008002. landNetherlandsPortugalFinlandGreece6004003. Anemic economic growthand low productivity2000Source: BloombergMINISTÉRIO DAS FINANÇAS4
Unsustainable public financesPersistent government deficits and increasingpublic debtFragile public financesDeficit and public debtAs a percentage of GDPStructural Current Primary BalanceAs a percentage of GDP1514131211109876543210Net borrowing of Gen. Govern.Public debt - right axis10069058047036050402101999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 201030-120-21001999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010Source: INE, Bank of Portugal and Ministry of FinanceMINISTÉRIO DAS FINANÇASPortugalEuro Area-3-4Source: AMECO and Ministry of Finance5
Debt accumulation by households and firmsIncreasing indebtedness of the private sectorIncreasing external debtDebt of the Households and Non-financial CorporationsAs a percentage of GDPPortuguese gross external debtAs a percentage of GDP1602501402001201001508010060Non-financial corporations40Households (a)50200020002001200220032004(*) Financial DebtSource: Bank of PortugalMINISTÉRIO DAS FINANÇAS2005200620072008200920101999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010Source: Bank of Portugal6
Insufficient conditions to foster economic growthObstaclesConsequences Restrictions on the market forcorporate control Insufficient attraction of direct foreigninvestment Protection of several sectors of theeconomy Capital accumulation in non-tradablegoods and services sectors Weak conditions to entrepreneurialactivity Lack of competition in several sectors Poor functioning of the justicesystem Rigidity of the labor marketMINISTÉRIO DAS FINANÇAS Low levels of innovation andproductivity growth High levels of youth and long-termunemployment7
Disappointing performance of the Portuguese economyGDP – Portugal and some of its European partners2000 100150140GermanyIrelandGreeceSpainFranceItalyEA -17Portugal130120110100In the period1999-2010, theGDP ofPortugal grewat an annualaverage rate of1%, comparedwith 1.4% inthe euro area901999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010Source: EurostatMINISTÉRIO DAS FINANÇAS8
THE ECONOMICADJUSTMENT PROGRAMMINISTÉRIO DAS FINANÇAS9
Adjustment Program agreed with the IMF, EC and ECB inApril 2011Key facts Financial packageEUR Billions(1)Already disbursed(1)4th Disbursement (April 2012)To be disbursedThe Economic Adjustment Programcovers the financing needs of GeneralGovernment for the period 2011 tomid-2014.IMF13,1 It comprises a financial packageamounting to EUR 78 billion in loans,including EUR 12 billion for bankingsector recapitalization.24,638,514,9EFSF9,8EFSM15,6 Each disbursement depends on thetechnical mission’s quarterlyassessment about Portugal’sperformance on the implementation ofthe Adjustment Program.(1) Net issuancesSource: IGCP, February 2012After the 3rd Review (completed inFebruary 28) the programimplementation was on trackStatement by the EC, ECB, and IMF on the Third Review Mission to Portugal: htmMINISTÉRIO DAS FINANÇAS10
A balanced Program to cope with the major challenges ofthe Portuguese economyFiscal consolidationPutting fiscal policy on asustainable pathDeleveraging andfinancial stabilityReduction of debt and financingneeds of the economyThe EconomicAdjustment ProgramStructural transformationImplementing structural reformsto contribute to potential growthMINISTÉRIO DAS FINANÇASThe EconomicAdjustment ProgramprotectsGovernmentfinancing frommarket pressures,allowing an orderlyadjustment ofimbalances andtime to build upconfidence andcredibility.11
Reducing uncertainty: Portugal is delivering in all frontsAt the startof theProgram (inMay 2011),Portugalfaced a veryuncertainoutlookMain risksMajor outcomes 1 Weakening of politicalsupport for the Program Broad political consensus Social support to the Program 2 Unfavorable macro-economicdevelopments Milder recession than expected in 2011 Stronger than expected external adjustment Dynamic exports 3 Missing the fiscal targets Major reduction in overall and structuraldeficits Progress in institutional reforms 4 Uncertainty regarding thestability of the financial sector Increase in banks’ capital Reduction of credit-to-deposit ratio Increase in transparency: on-site inspections 5 Insufficient pace of structuralreforms Success of privatizations process Labor market tripartite agreement Broad range of implemented measuresMINISTÉRIO DAS FINANÇAS12
A turning point in Treasury financingPortuguese Treasury BillsWeighted average yieldPercentage5,45,35,23 months11 months6 months12 94,95,05,04,95,04,94,94,74,64,54,34,44,24,03,84,3 4,34,13,83,6Note: Auction announcement dateSource: IGCPMINISTÉRIO DAS FINANÇAS13
A turning point in Treasury financingPortuguese Treasury BillsWeighted(1)Weighted(1) international allocationPercentageBid-to-cover 0%0,02011201220112012(1) Weighted average of 3 and 6 months auctionsNote: Auction announcement dateSource: IGCPMINISTÉRIO DAS FINANÇAS14
A turning point in Treasury financingPortuguese Treasury Bonds2 Years, yieldsPercentage5 Years, yieldsPercentage10 Years, ce: 2 years – Bloomberg; 5 and 10 years – ReutersMINISTÉRIO DAS FINANÇAS15
FISCAL CONSOLIDATIONMINISTÉRIO DAS FINANÇAS16
Portugal’s structural adjustment stands outStructural adjustment 2010-2011(1)Percentage points of potential GDP4,03,02,32,01,51,51,31,20,8Portugal Greece Germany IrelandItalyUnited Euro areaKingdomSpainFrance(1) Change in General Government Cyclically Adjusted BalanceSource: IMF, “Fiscal Monitor Update”, January 2012MINISTÉRIO DAS FINANÇAS17
Overall deficit below the average for euro areaOverall deficit 2011As percentage of GDP10,39,08,68,05,74,34,03,91,1Ireland (1) Greece(2) UnitedKingdomSpainFrance Euro area Portugal(3) ItalyGermanyWithout the partial transfer ofbanks’ pension funds, overalldeficit would be 7,5% of GDP(1) IMF, Staff report for the fourth review, 29 November 2011(2) IMF, Staff report for the fifth review, 30 November 2011(3) Ministry of Finance, January 2012Source: IMF, “Fiscal Monitor Update”, January 2012 (except for PT, IR and GR for which data is not available)MINISTÉRIO DAS FINANÇAS18
Portuguese public debt is sustainableGovernment Debt Sustainability Framework: BaselineAs percentage of reland(3)Italy(4)802010201120122013(1) Staff report: Second Review Under the Extended Arrangement; December, 7 2011(3) Staff report: Fourth Review Under the Extended Arrangement; November, 29 2011Source: IMFMINISTÉRIO DAS FINANÇAS2014201520162017201820192020(2) Staff report: Fifth Review Under the Stand-By Arrangement; November, 30 2011(4) Staff report for the 2011 Article IV Consultation; June, 20 200119
Portuguese public debt is sustainableGovernment Debt Sustainability Framework: BaselineAs percentage of 0959093Portugal – 2nd Review(1)Ireland – 4th Review(2)Portugal – 3rd Review(3)Ireland – 5th Review(4)93201020112012(1) Staff report: Second Review Under the Extended Arrangement; December, 7 2011(3) Third Review; February 2012Source: IMFMINISTÉRIO DAS FINANÇAS2013201420152016(2) Staff report: Fourth Review Under the Extended Arrangement; November, 29 2011(4) Staff report: Fifth Review Under the Extended Arrangement; February, 13 201220
Important progress in the institutional reform frontNON-EXHAUSTIVEMajor onSOEs andPPPsNext challenges Approval of the SpendingCommitments’ Control Law Improve budgetary control across alllevels of Public Administration Establishment of the PortuguesePublic Finance Council Strategy to clear stock of arrears Changes to national law in order to includethe golden rule and the debt reduction rulefrom the Treaty on Stability,Coordination and Governance Adjustment Program for theAutonomous Region of Madeira Creation of the new Tax and CustomsAuthority Reduction of management positions(27%) and administrative units incentral administration (40%) Extend streamline measures to regionaland local administration Significant cost reductions in SOE(e.g.: voluntary redundancy programs) Operational balance for SOEs as awhole by end-2012 Awarded a contract to review all PPPcontracts to a top-tier accounting firm New fiscally-prudent PPPs institutionalframework: enhanced role of MoFMINISTÉRIO DAS FINANÇAS21
DELEVERAGING ANDFINANCIAL STABILITYMINISTÉRIO DAS FINANÇAS22
Stronger than expected external adjustmentBetter performance of current account thaninitial projectionsCurrent accountAs a percentage of GDP0,02010 2011 2012Balance of paymentsEUR 0,0Q1-1000-2000-6,4-6,0-8,0External surplus in Q4-9,9-12,0Actual(1)-5000Forecast(2)-6000Capital accountCurrent and capital accountsCurrent account(1) Bank of Portugal, BP Stat, February 2012;(2) IMF, Staff report: Request for a Three-Year Arrangement Under the Extended Fund Facility, May 2012MINISTÉRIO DAS FINANÇAS23
Fast correction of external imbalances under adjustmentprogramsCurrent accountAs a percentage of GDP, t first year of the Adjustment Programs3,5%4,0%2,0%0,1%1st Program (1)(t 1978)0,5%0,0%t-1tt 1t 2t 3t %-10,0%-2,7%-10,0%-7,2%-6,7%3rd Program - Forecast (2)(t 2011)-9,0%-9,9%-12,0%-14,0%2nd Program (1)(t 1983)3rd Program - Actual (3)(t 2011)-12,9%(1) Bank of Portugal, Long series(2) IMF, Staff report: Request for a Three-Year Arrangement Under the Extended Fund Facility, May 2012(3) Bank of Portugal, BP Stat, February 2012MINISTÉRIO DAS FINANÇAS24
Reinforcement of banks’ capital and deleveragingprocess are ongoingKey achievements Reinforcement ofbanks’capital Core Tier 1 target of 9% to be reached byend-June 2012, following a prudentevaluation of sovereign debt exposuresSpecial on-site inspections confirmed therobustness of capital adequacyRegulatory framework was improved:legislation on early intervention, resolutionand deposit insuranceCore Tier 1 ratio(1), percentage98,67,8877,97,88,58,16,865Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Sep-11Credit-to-deposits ratio, percentageDeleveragingprocess Adjustment is progressing as planned Important contribution of higher depositsand sizeable asset sales Stabilization of financing from theEurosystem170165160155150145(1) Excluding intervened institutionsSource: Bank of Portugal, January 2012MINISTÉRIO DAS FINANÇAS140Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Sep-1125
Easing of bank liquidity pressuresECB Measures (8 December)EuriborPercentageECB LTRO 36m2,25Longer-term refinancingoperations: 36 months(December 22 and March 1)2,0012m1,751,50Reduction of the reserverequirements ratio: from 2% to 1%1,253m1,000,75Broadening ofeligible collateralECB repo rate1m0,500,250,00Source: Bank of Portugal, March 2012MINISTÉRIO DAS FINANÇAS26
Depositors’ trust in the Portuguese banking systemTotal deposits (excluding deposits from financial institutions)EUR 210.000190.000170.000150.000Source: ECBMINISTÉRIO DAS FINANÇAS27
STRUCTURALTRANSFORMATIONMINISTÉRIO DAS FINANÇAS28
Economic growth: importance of the StructuralTransformation AgendaPillarsBroad range of reformsConfidence,credibility andjustice Judicial system Network industries: energy,telecommunications, transportsCompetitionHousing MarketOpenness,competition andcompetitiveness Entrepreneurship, innovation andlabor market flexibilityLimited State andeconomicdemocracyMINISTÉRIO DAS FINANÇAS Labor marketEducation and trainingPrivatizationsSpecial rights of the StatePublic procurementAdministrative burdenStructuraltransformation Opening toforeigninvestment and tothe challenges ofinternationalcompetition Competitivelocation forphysical andhuman capital Fully integration inthe SingleEuropean Market Development of astability culture29
Portugal needs a broad transformation agendaStructural reforms gaps in European economies: a heatmap(1)Euro area countriesDE FR NL BEITESPT GR ATSelected comparatorsFIIEDK SE UK USJPLabor market inefficiencyBusiness regulationsMediumtermNetwork regulationRetail sector regulationProfess. services regulationInstitutions and contractsLongtermHuman capitalInfrastructureInnovation(1) The heatmap is constructed based on a variety of structural indicators from alternative sources in order to flag areas where a country has the greatest need to implement structural reforms. For adiscussion of the methodology and detailed components, see IMF, 2010d, “Cross-Cutting Themes in Employment Experiences During the Crisis”, IMF Report SM/10/274Source: OECD; World Economic Forum; Fraser Institute and IMF staff calculationsMINISTÉRIO DAS FINANÇAS30
Structural reforms: long-run potential impact2 empirical studies for PortugalApproach No model: useempirical resultsfrom several studiesResults%2020GDP per capita, increase in level in percent at 10-year horizonPT 13%( 5% after 5 years)1515BouisandDuval(2011) Gomeset al(2011) Broad range ofreforms that includereforms in productand labor marketand reforms ofbenefit, tax andretirements systemsMulti-country DSGEModelReforms of laborand services market10105500Increase in long-term output of 7.8% , after 7 years(8.6% in case of cross-country coordination of reformsin the euro area)Source: Bouis and Duval (2011), OECD Economics Department Working Paper n.º 835; Gomes et al (2011), Banco de Portugal Working Paper n.º 13MINISTÉRIO DAS FINANÇAS31
In-depth labor market reformAgreement on Growth, Competitiveness and EmploymentNON-EXHAUSTIVEObjectivesImplemented measures Tackle labormarketsegmentationReducinglaborcostsFoster jobcreationEasetransition ofworkersacross firmsand sectorsMINISTÉRIO DAS FINANÇAS Labormarketflexibilization Reduction of 4 national holidaysElimination of 3 extra days of vacationDecrease in 50% of compensation forovertime workSuspend automatic extension of collectiveagreementsImplementation of individual and groupworking time management mechanismsReduction of restrictions to individualdismissalReduction of severance payments to alignwith EU averageImplementation of labor arbitrationmechanismsThe agreementbetween theGovernment,Unions andEnterprisesAssociations: animportant step toimplement reforms inan environment ofsocial dialogue32
Broad product market reformNON-EXHAUSTIVEObjectiveImplemented measuresTelecommunicationsReduceexcessivemark-ups innetworkindustriesand nontradable Reduce mobile termination rates Broaden access of all operators to existingnetworks Revise remuneration scheme of cogeneration to accelerate converge to marketbased pricing Redesign Power Guarantee mechanism Revised margins of pharmacies Set targets for reduction of pharmaceuticalprofit marginsElectricityHealthMINISTÉRIO DAS FINANÇASIncreasing tradablesectorcompetitiveness byreducing nontradable sectorsexcessive costscascaded throughthe economy33
Improving business environmentNON-EXHAUSTIVEObjectiveImplemented measuresJudicialsystem FosterinvestmentandinnovationIncentive amoreefficientuse ofresourcesCompetitionOtherservicesMINISTÉRIO DAS FINANÇAS Targeted measures to accelerate the resolution of the backlog:50,000 enforcement cleared since November Adoption of a law on arbitration to facilitate out-of-court settlement Proposal to amend the insolvency code and corporate recovery,focusing on speed, simplification and creation of an extra-judicialphase of corporate recovery Approval of a new Competition Law harmonized with the EU legalcompetition framework Strengthen the power of the Competition Authority Approval of a specialized court on Competition, Regulation andSupervision Liberalization of regulated professions’ access and exercise Reduction of firms’ administrative burden: licensing requirementsand other legal formalities Revision of the Urban Lease Law34
Privatization program as a flagship in the agendaEnergy retailand productionEnergy retailand tribution2013Q2Air isionbroadcasting(1) Sale of “Caixa Geral de Depósitos” participation of 1%(2) Concession(3) Expected completion date by “Caixa Geral de Depósitos”MINISTÉRIO DAS FINANÇAS35
Privatization results above expectationsSelected bidders% EquityBiddersRevenueFinancingInvestment 21,35% 40% Asia: China Three Gorges Asia: State Grid Europe: E.ON Latin America: Eletrobrasand CemigSaudi Arabia: Oman OilCompany EUR 2,693M: premium of53.6% per share1 EUR 593M: average premiumof 33.6% per share1 EUR 2,000M throughChinese banking entities EUR 1,000M through Chinesebanking entities EUR 2,000M until 2015 inwind farms Strategic plan for nationaleconomy development (e.g.I&D center construction)The proceedsamount to about60% of theestimate ofprivatizationsrevenuesforeseen in theAdjustmentProgram1 Considering the closing price of the day before the Council of Ministers decisionMINISTÉRIO DAS FINANÇAS36
CONCLUSION:HOW WILL IT WORK?MINISTÉRIO DAS FINANÇAS37
Restoring credibility and confidenceThe adjustmentis inevitable Solid startingpoint for theProgram Broad popularand socialsupport foradjustmentThe Program addressesfundamental imbalancesand deficiencies Elimination of budget deficiton a durable way –supported by a new fiscalpolicy framework (at nationaland European level) Elimination of externaldeficit – current and capitalaccount is projected to be insurplus in 2014(1) Deep and frontloadedstructural reform agenda thatwill boost potential outputand competitivenessRobustness of theoverall Program The Program worksdisregarding positiveimpact of structuralreforms on potentialgrowth Structural reforms arelikely to speed upadjustmentGradual credibility buildup The Program sheltersgovernment financingfrom the vagaries offinancial markets Quantitative objectivesand targets steered andmonitored over time(total of 9 reviews)before September, 2013. Compliance with theProgram will push for agradual change inmarkets’ expectationsand perceptions(1) Ministry of Finance”, February 2012MINISTÉRIO DAS FINANÇAS38
MINISTÉRIO DAS FINANÇASPortugal: restoringcredibility and confidenceVítor GasparMINISTÉRIO DAS FINANÇASFrankfurtMarch 16, 201239
BACKGROUND SLIDESMINISTÉRIO DAS FINANÇAS40
Index On the way to become the difficult Portuguese case– Forecasted and actual budgetary balances– Net international investment position– Unemployment in Portugal– Youth and long-term unemployment in Europe Fiscal consolidation– Macroeconomic Scenario 2009-2012– Overall and Structural deficit in 2011 and 2012– Fiscal consolidation process: revenue and expenditure 2010-2012 Deleveraging and Financial Stability– External adjustment: Actual vs Forecast - Current and Capital Account and Balance of Goods and Services– Current account in Portugal’s past adjustments– EBA Communication, 08 December 2011 Structural transformation– Higher qualifications of younger generations– Positive performance in advanced education levels– Geographic diversification of Portuguese exports– Technology intensity of Portuguese exports– Increasing diversity of Portuguese exports– Portugal as a competitive location for business in the euro area Conclusion: how will it work?– Council of the European Union, 30 January 2012– Private sector response in 83-84 and 2009MINISTÉRIO DAS FINANÇAS41
ON THE WAY TO BECOME THEDIFFICULT PORTUGUESE CASEMINISTÉRIO DAS FINANÇAS42
Index1. PUBLIC FINANCES ON AN UNSUSTAINABLE PATHLack of disciplineForecasted and actual budgetary balancesAs a percentage of GDP1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 20102SGP 2002-20050SGP 2003-2006SGP 2004-2007 SGP 2007-2011SGP 1999-2002-2-4-6SGP 2005-2009 (June)-8SGP 2010-2013-10Actual figures-12Source: INE and Ministry of FinanceNote: The figures for the forecasts correspond to the values that have been reported in the SGP updatesMINISTÉRIO DAS FINANÇAS43
Index2. ENORMOUS LEVEL OF EXTERNAL INDEBTEDNESSVery high levels of the economy borrowing requirementsThe worsening of the international investmentposition led to the worst position among Euro areacountriesNet international investment positionAs a percentage of GDPNet international investment position in 2010As a percentage of e-60AustriaGeneral GovernmentFinancial SectorNon-f inancial corporations and HouseholdsMonetary AuthoritiesNet Foreign Assets 150Source: Bank of PortugalMINISTÉRIO DAS FINANÇAS-100-50050100Note: The NIIP of Ireland refers to 30 June 2010Source: AMECO, Bank of Portugal and IMF44
IndexUnemployment in Portugal4Q 2011By agePercentage of total unemployedBy durationPercentage of total unemployedBy education levelPercentage of total 4445 and moreUntil 11 months12 months and more (long-term)Until basic education ("3º ciclo")Secundary and post-secundaryHigher educationSource: INE, “Estatísticas do Emprego”, November 2011MINISTÉRIO DAS FINANÇAS45
IndexHigh levels of youth and long-term unemploymentAs percentage of labor force, 4035302520151050109876543210PT: 27,7PT: 6,3(1) Less than 25 years, annual average(2) 12 months or more, annual averageSource: EurostatMINISTÉRIO DAS FINANÇAS46
FISCAL CONSOLIDATIONMINISTÉRIO DAS FINANÇAS47
IndexMacroeconomic Scenario 2009-2012GDP and expenditure componentsPrivate ConsumptionPublic ConsumptionGFCFDomestic DemandExportsImportsGDPGDP -contributions to growth (p.p.)Domestic DemandNet ExportsGDP - DeflatorsPrivate ConsumptionPublic ConsumptionGFCFExportsImportsGDPmemo item:CPIHICPLabour MarketUnemployment Rate (%)Employment growthProductivity and CompetitivenessLabour productivityNominal Unit Labour CostsNominal Unit Labour Costs (relative to UE27)Change in Market ShareTerms of TradeDisposable Income and SavingHouseholds Disposable Income (real)Households Disposable Income (nominal)Saving rate (% of Disposable Income)Indebteness of HouseholdsCurrent and Capital Account (% of GDP)Goods AccountCurrent AccountCapital AccountCurrent and Capital ,3-7,2-6,51,4-5,1-5,1-4,61,5-3,1Source: Ministry of Finance; March 12, 2012MINISTÉRIO DAS FINANÇAS48
IndexMajor reduction of structural deficit in 2011 and 2012Structural deficit (*)As a percentage of GDPOverall deficitAs a percentage of 00920102011(**)2012Limit of 5,9% prescribedin the Program(*) Deficit adjusted for the effect of the cycle; excludes transfer of pensions funds in 2010 and 2011 and concessions in 2011(**) Excludes temporary effects in 2012Source: Ministry of Finance, January 2012MINISTÉRIO DAS FINANÇAS49
IndexSignificant fiscal consolidation in 2011Percent changein total valuesTotal expenditureIn percentage of GDPTotal revenuesIn percentage of GDPOther revenueInterestTax RevenuePrimary %23,42011(*) Excludes temporary effects in 2012Source: Ministry of Finance, January 2012MINISTÉRIO DAS ,0%-8,1%44,9-7,9%42,024,62012(*)201020112012 (*)Coercive tax collection of1.230M : 12% above target50
DELEVERAGING ANDFINANCIAL STABILITYMINISTÉRIO DAS FINANÇAS51
IndexFaster external adjustment than expectedActual(1)Forecast(2)Current and capital accountAs a percentage of GDPBalance of goods and servicesAs a percentage of -5-72010-6,5-8-8,1-9(1) Bank of Portugal, BP Stat, February 2012;(2) IMF, Staff report: Request for a Three-Year Arrangement Under the Extended Fund Facility, May 2012MINISTÉRIO DAS FINANÇAS52
IndexPortugal succeeded in past adjustmentsPortugal is a paradigmatic example of successful and rapidadjustments in democracyCurrent balanceAs a percentage of GDPAdjustmentprograms inPortugal642In the past, theadjustment wasmainly due to theprivate sector01973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986-2-4-6-8Currently,the public sectorwill also adjustsignificantly-10-12-14Source: Bank of PortugalMINISTÉRIO DAS FINANÇAS53
IndexPortuguese measures are aligned with the EuropeanstrategyAggregated shortfall requiredby country, million Euros The European Banking Authority (EBA) published a formalRecommendation, and the final figures, related to banks’recapitalization needs. The aggregated shortfall amounts to 114.7bnEuros. Banks will be required to strengthen their capital positions by building upan exceptional and temporary capital buffer against sovereign debtexposures to reflect market prices as at the end of September. In addition, banks will be required to establish an exceptional andtemporary buffer such that the Core Tier 1 capital ratio reaches alevel of 9% by the end of June 2012. Sales of sovereign bonds will not alleviate the buffer requirementto be achieved by June 2012. Pursuant to the Recommendation, the national authorities will requirebanks to submit, by 20th January, their plans detailing the actionsthey intend to take to reach the set targets.Source: EBA Communication, 08 December 2011MINISTÉRIO DAS FINANÇAS54
STRUCTURALTRANSFORMATIONMINISTÉRIO DAS FINANÇAS55
IndexStructural transformation is ongoing Higher qualifications of younger generationsThe increase in education level of youngergenerations has approached the human capitalqualification to its European pearsPopulation with higher education by age groupPercentagePopulation with higher education in age group25-34 in -3435-4445-5455-64Source: OCDE - "Education at a Glance 2011"MINISTÉRIO DAS FINANÇAS56
IndexStructural transformation is ongoing Very positive performance in advanced education levelsThe completion rate of PhDs is the highest inEuropeSome Portuguese schools are among best-inclassStudents completing a PhD in 2009PercentageFinancial Times – Business Education RankingsPosition in 2011PortugalFinlandGermany#33 European Business School#65 Master in Management#45 Executive education – Customized#54 Executive education – OpenSlovakiaAustriaEU 21The NetherlandsFranceSloveniaIreland#39 European Business School#2 e #61 Master in Management(1)#64 Executive education – OpenBelgiumSpainEstonia01Source: OCDE - "Education at a Glance 2011"MINISTÉRIO DAS FINANÇAS23(1) The Master #2 (CEMS) is offered by a network of schools of whichNova SBE is part ofSource: Financial Times – Business Education Rankings57
IndexStructural transformation is ongoing Geographic diversification of Portuguese exportsTotal weightPercentageIntra - s020406080EFTA: Iceland, Norway, Liechtenstein, SwitzerlandPALOP: Angola, Cape-Verde, Guinea-Bissau, Mozambique and São Tomé and PríncipeUE-15: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxemburg, The Netherlands, Portugal, Spain, Sweden e United KingdomSource: INEMINISTÉRIO DAS FINANÇAS58
IndexStructural transformation is ongoing Technology intensity of Portuguese exportsExports of manufacturing goods by technology rce: INE and GEE, “Boletim Mensal de Economia Portuguesa”, December 2011MINISTÉRIO DAS FINANÇAS59
IndexStructural transformation is ongoing Increasing diversity of Portuguese exportsExports of manufacturing goods by type of goodsPercentage23191310Textiles and textile articles15Machinery and mechanicalappliances; electrical ear, headgear and otheraccessoriesVehicles, aircraft, vessels andassociated transport equipmentWood and articles of wood; cork;manufactures of strawPulp of wood or of other fibrouscellulosic material; paperMineral products28Others1995200020052010Source: INEMINISTÉRIO DAS FINANÇAS60
IndexStructural transformation is ongoing Portugal as a competitive location for business in the euro areaEase of Doing Business Rank (June 2011)Country position in OECD ranking3013815171819202123242531269 -Note:
Fiscal consolidation . 4. Deleveraging and financial stability . 5. Structural transformation . 6. . Staff report: Second Review Under the Extended Arrangement; December, 7 2011 (2) Staff report: Fifth Review Under the Stand-By Arrangement; November, 30 2011 (3) Staff report: Fourth Review Under the Extended Arrangement; November, 29 2011 (4 .
