Investment manager fears “bad habits” could plunge Portugal back into crisis

An investment specialist has warned that Portugal could be facing another economic crisis in the next 10 to 20 years if the country fails to change its “bad habits”.

Diogo Teixeira, CEO of Optimize Investment Partners, said in an interview with American news channel CNBC that despite a projected growth rate of 2.5% this year, he fears consumer and business habits might jeopardise the economy in the future.

“My fear is more on the change of habits. We’ve seen in the last couple of years some signs of complacency and return to bad habits that have put the country in the bad shape it went through in 2011,” he noted, namely high consumer and business borrowing.

As CNBC points out, Portugal requested financial help in 2011 after “public and private debt surpassed the country’s ability to finance itself”.

And though many reforms were implemented, the corporate sector “still has to deal with a lot of debt on its balance sheets.

Forecasts from the European Commission indicate public debt is set to reach 128.5% of GDP this year, while the savings rate of households are expected to drop 0.2% in 2017 from last year.

CNBC adds that since the socialist government took power in 2015, many austerity measures have been scrapped in favour of higher consumer spending.

But Teixeira warns: “Any shock in interest rates could endanger the recovery of the country, that’s for sure, because the overall government debt is at about 130%, which is the third largest in terms of GDP just below Italy and Greece (in the euro zone).

“The banking sector is still burdened by a lot of non-performing loans.”

The American news giant points out that high debt levels and bad loans endanger the economic recovery, but for now “Portugal seems attractive to investors with tourism and real estate the top areas for investment”.

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