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After two decades of strong economic growth and convergence in living standards towards the levels of more prosperous OECD countries, Portugal’s performance weakened in the 2000s, productivity growth slowed and competitiveness deteriorated. Restoring Portugal’s potential for strong, inclusive growth calls for a comprehensive reform of the State.
Today the OECD is publishing a report on Portugal's challenges as far as structural reform is concerned. The OECD is an outstanding reference for policy-makers all around the world and I wanted my country to benefit from your skills, experience, and insights, especially on the question of structural reform, said the Portuguese Prime Minister.
Low growth and huge current account deficits have characterised the Portuguese economy over the past decade.
This paper illustrates possible trade-offs between two different fiscal consolidation strategies in Portugal: sticking to the nominal fiscal targets in the EU-IMF programme or allowing automatic stabilisers to work, while sticking to the structural primary deficit targets implied by the programme.
Owing to slow growth and a relatively weak fiscal position, Portugal’s public debt had been rising for almost a decade when the global crisis struck, sharply increasing the deficit.
Portugal has started on a long road of economic adjustment to boost growth and reduce debt. A range of structural reforms are needed to restore fiscal sustainability, improve labour market performance and rebalance the economy towards tradables.
Country Notes from OECD Economic Policy Reforms: Going for growth 2011 presenting OECD recommendations for structural reform priorities for individual countries.
The process of fiscal consolidation and the need to step up the poor long term economic performance provide an opportunity to implement tax measures to improve efficiency and rebalance the economy.
Portugal has made significant progress in modernising its economy over recent years but the country needs to further pursue structural reforms to restore competitiveness and thus move to more dynamic and sustainable growth.
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This note is taken from Chapter 3 of Economic Policy Reforms: Going for Growth 2010.