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Portugal Current Account Balance

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Portugal Current Account Balance

Statistics Portugal has withheld details of the country’s Current Account Balance for the month of February which were due this morning, An improvement on last months €0.185Bn deficit was expected.

The Portuguese authorities had been hoping for some welcome news as they continue preparations to exit their EU/IMF bail out in the coming weeks. In advance of this the International Monetary Fund has taken the opportunity to issue some updated guidance on Portugal’s economic situation.

The key tenet of the IMF advice is that although the near term prospects for the Portuguese economy are positive, there is a strong requirement that recent reforms are continued in order to ensure a successful transition to a post bailout situation.

In February’s IMF bailout review, the second last before the program ends, the IMF stressed that employment is still ‘troublingly’ high at over 15% but that ‘activity and employment have continued to exceed expectations.’ The IMF was particularly complimentary on the country’s budget deficit reduction efforts noting that Portugal had clearly beaten it’s 2013 target of a 5.5% deficit to GDP.

The IMF however also sounded a cautionary note to the Portuguese authorities, stating that the Government must take steps to make the hiring employees easier and also to encourage more competition in the energy markets. Portugal has an urgent need to further increase it’s international competitiveness in order to encourage stronger trader trade lead growth.

The EU/IMF bailout program will end in mid May and the troika have publicly stated that they do not consider a need for Portugal to exit this bailout with the safety net of a precautionary credit line. The Portuguese Government has however not yet decided if it will request this back up credit facility, it will be granted if they do but it looks like Ireland has set a precedent of going it alone, a path that markets would expect Portugal to follow.

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