Mário Centento, governor of the Bank of Portugal
Mário Centento, governor of the Bank of Portugal Photo: MARIA SIMIRIS/OPEN MEDIA GROUP

Full house in Faro for Mário Centeno

Governor of Bank of Portugal spoke about current affairs, from inflation to education, to students, teachers and parents, at Faro secondary school

Mário Centeno, Governor of the Bank of Portugal and former Finance Minister, travelled to the Algarve last week to talk about current affairs, the economy and “much more” with students, their parents and teachers at Faro’s João de Deus secondary school.

“Wow, so many people together! It is great to be here today,” said the 56-year-old from Vila Real de Santo António last Friday afternoon.

Without losing much time, Centeno immediately provided his outlook on current affairs.

“We are going through a challenging period from an economic point of view, marked by inflation, which has been lasting longer than desirable and which had not happened for decades. We are all being penalised as economic players. Families, companies, the government, we are all facing many difficulties and cannot predict the future,” Centeno said.

He guaranteed, however, that decisions are being made to ensure that inflation will be reduced to 2% in two years.

“It won’t be easy, I can assure you,” he told the audience.

Packed audience at Escola Secundária João de Deus in Faro
Packed audience at Escola Secundária João de Deus in Faro

One of those decisions is coming from the Central European Bank and aims to “show all economic agents its determination” by increasing interest rates.

“This is the least pleasant part of monetary policy – retracting our intentions of consumption. As we all know, if there is more demand, prices increase,” said Centeno, explaining that increasing interest rates will lead to a decrease in demand.

“Of course, many will say that if there is less demand, there will be less production and more unemployment. In economy, we use a term that is difficult to translate into Portuguese: the trade-off. But there is no economic system that can live with a galloping increase of prices without breaking.

“Inflation reached 10% in Portugal and the eurozone at the end of 2022. It is an unsustainable situation,” he said.

But there is good news to celebrate, Centeno said. Prices of energy, food and all essential goods are decreasing, which will “be reflected on the prices that we see in supermarkets today, which we hope will gradually decrease in a sustainable way throughout 2023.”

Meanwhile, the Portuguese economy is described by Centeno as “in full employment” – an economic situation in which all available labour resources are being used in the most efficient way possible – which he said will also help fight inflation.

“I believe we have instruments to avoid a recession,” said the governor of Portugal’s central bank, adding that the country’s economy grew around 6.8% in 2022.

“It is the largest growth in many decades and is justified by the recovery from the Covid-19 crisis, which shut down a large part of the economy. The Portuguese economy came out of 2022 growing more than the European average and the indicators tell us today that that will continue for some time.”

Portugal’s long years of financial noncompliance and instability did cast a shadow over the country, but Centeno stressed that Portugal has been able to leave this past of financial struggles behind it.

“Since the start of the century, 80% of our days (2002-2017) were marked by financial noncompliance, which meant instability and doubts about our ability to comply. But it was from that moment forward that Portugal was able to, year after year, have a larger economic activity than expected. That is an achievement that no new instability should jeopardise,” the former finance minister said.

He added that “everyone today recognises the success that Portugal achieved in overcoming the enormous difficulties it faced” and said the country is carrying out a revolution in terms of education.

“In 2000, only four out of 10 people your age would finish secondary school. Portugal, at the time, was competing with Mexico and Turkey as one of the countries with the lowest rate of education in the OECD (Organisation for Economic Co-operation and Development).

“Today, nearly nine in 10 finish their studies with at least 12th grade completed. In just 20 years, we began a transition which will take another 20 to complete. We have to maintain this trajectory; we must believe this is the right path.”

Original article written by Maria Simiris for Barlavento newspaper.