THE PORTUGUESE economy is in a better shape to cope with recent higher oil prices and the sub-prime mortgage lending crisis, according to the Minister of Finances.
Addressing a meeting of the Portuguese Council of Ministers over the weekend, the first cabinet meeting of the year, Francisco Teixeira dos Santos said that, without “ignoring or minimising the negative effects that could result in higher raw material prices, particularly oil and gas, and the turbulence in the financial markets, the “economy is much better prepared than it was two years ago” and that negative effects would be “minimised” giving Portugal a relatively soft landing.
Exports were up, there were signs of recovery in investment following a lack-lustre period, while tight and sound financial management at a national budgetary level all boded well for an increase in growth and improved employment figures.
The Prime Minister José Sócrates said at the same meeting that there “was every reason for believing that 2008 would be more positive than 2007, with the country’s GDP growing above the 1.8 per cent forecasted by the government.”
Without announcing a set of new policies, the Minister of Finances reiterated Portugal’s reasonable economic performance in 2007 with a GDP above the 1.8 per cent initially predicted by the government, the best growth rate in six years.
Fernando Teixeira dos Santos also highlighted good results in the nation’s public finances and promised that the Portuguese government deficit would be below the three per cent ceiling imposed by the European Union’s Stability and Growth Pact.
He said that he also didn’t expect any nasty financial “surprises” over the social security and local government administration situation.
The minister refused, however, to reveal the total value of the budget deficit for 2007 which has yet to be decided by a team of economists and analysts from the Bank of Portugal before being published by the Portuguese Statistics Institute (INE).
Despite 2007’s optimistic results, the Finance Minister said he would continue to navigate the same course in 2008 without making any drastic policy changes, and that there would be no decision to lower taxes this year.
The good news was that the Portuguese would not be expected to make any further financial sacrifices in 2008.
Structural reforms had been carried out over the past two years and were now beginning to show fruit.
Fernando Teixeira dos Santos recalled that in 2007 there had not been a sharp hike in either direct or indirect taxation (VAT, IRS and IRC) and that better taxation receipts explained why the government’s budget deficit was below three per cent, at 2.8 per cent.
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