It said Portugal needed to implement sustained structural reforms, taking advantage of a more favourable euro exchange rate, a highly supportive monetary policy environment and low oil prices.
‘This provides an excellent window of opportunity to undertake these reforms,’ the IMF said.
The growth rate in Portugal remains tepid even as private consumption expanded the economy by 1% in 2014, it added. Public debt increased to 128% of gross domestic product last year, reflecting in part several large one-off transactions.
The fund suggested that Portugal’s government secure medium-term policies aimed at reducing public debt to a more sustainable level.
‘Addressing public spending pressures calls for further efforts underpinned by structural reforms of the wage and pension systems,’ the IMF said in the preliminary conclusion of the technical mission to Portugal in the wake of the country’s eurozone bailout exit.
‘Finally, the envisaged revisions of the Budget Framework Law would be an important step in giving a medium-term orientation to public financial management.’
The IMF has projected growth to accelerate to around 1.5% in 2015, while annual average inflation is expected to turn positive this year. The overall fiscal deficit this year would remain at 3.2% of GDP, marginally above the excessive deficit procedure target of 3% of GDP.
