(As prepared for delivery)
Your Excellency, Mr President,
It has been a great honour to welcome President Cavaco Silva to the OECD – the first ever visit to the OECD by a Portuguese Head of State.
The story of Portugal’s recovery is a positive one. This recovery consolidated last year, with GDP growing by 0.9%. In our last Economic Outlook (November 2014), we forecast growth of 1.3% for Portugal in 2015.
Falling oil prices will have a positive effect on Portuguese GDP. We expect that the new oil price of around USD 50 per barrel will reduce Portugal’s import bill for oil and gas by around 1.5% of GDP. Quantitative easing by the European Central Bank and a more favourable exchange rate will also be favourable for Portugal.
Portugal’s recovery and its exit from the Economic Adjustment Programme in 2014 are the result of an ambitious set of reforms in a range of areas, such as competition and labour. These reforms are already bearing fruit. Unemployment has started to decline – although it remains high; Portugal’s public sector debt is expected to decline; and household debt in Portugal is also coming down. Meanwhile, exports have grown rapidly since 2010 and have reached record levels, contributing to a rebalancing of the current account. And we just discussed how Portugal is leading the way towards a more sustainable future with its Green Growth Strategy, which includes an expansion of Portugal’s carbon tax which in turn allows taxes to be cut elsewhere.
Despite this progress, Portugal still faces challenges. As I mentioned, unemployment and inequality remain high, and young people face a tough job market. Private debt in the corporate sector is also uncomfortably high, at 144% of GDP. Further progress is needed to enhance competition and support innovation, productivity, and growth.
President Cavaco Silva’s visit to the OECD today underscores the strength of our partnership with Portugal. While Portugal no longer depends on external financial assistance, it remains determined to continue with reform efforts that will prepare it for a brighter future.
The OECD is privileged to work hand in hand with Portugal as it works towards this vision. For example, in three weeks’ time I will travel to Lisbon to launch our Skills Strategy Diagnostic Report of Portugal. We have worked hand-in-hand with the Portuguese authorities to undertake a full diagnosis of skills issues in Portugal. The challenge now is to move from a diagnosis to action – helping to reduce unemployment and make sure that businesses in Portugal have the skills they need. In all of these efforts, the OECD stands at Portugal’s side.
Mr President, dear colleagues: Portugal is the proof that Better Policies do lead to Better Lives.