OECD Economic Survey of Portugal 2021 - Presentation

2021 OECD ECONOMIC SURVEY OF PORTUGAL

Fostering a strong and sustainable recovery @OECD

@OECDeconomy

www.oecd.org/economy/portugal-economic-snapshot/

10 December 2021

Key messages Portugal is recovering from the COVID-19 crisis, supported by economic policies.

A sustainable recovery requires addressing persistent macroeconomic vulnerabilities.

Policies should prevent a rise in inequality and address environmental challenges.

Making the digital transformation works for all is key to raise Portugal’s economic potential.

2

Policies for a strong and resilient recovery

3

The economy is recovering fast Real GDP Index, 2015Q1=100

Note: Peers refer to the weighted average of Greece, Italy and Spain.

Source: OECD Economic Outlook: Statistics and Projections (database).

4

Tourism has rebounded, but remains well below pre-crisis levels Nights spent at tourist accommodation establishments Index, 2018 = 100

Source: Eurostat, Tourism Statistics (database).

5

The recovery is robust Annual percentage change 2019

2020

2021

2022

2023

Gross domestic product

2.7

-8.4

4.8

5.8

2.8

Unemployment rate (%)

6.6

7.0

6.9

6.7

6.5

0.1

-5.8

-4.3

-2.4

-1.6

116.6

135.2

133.4

128.3

125.8

General government balance (% of GDP)

fiscal

General government gross debt (% of GDP)

Source: OECD Economic Outlook 110: Statistics and Projections (database).

6

The vaccination rollout is a big success Share of the population fully vaccinated Per cent

Note: 7-day moving average. Peers refer to the average of Greece, Italy and Spain.

Source: Our World in Data (2021) from official data.

7

The risk of business insolvency remains large Loans and advances with EBA-compliant moratoria, As a percentage of all loans and advances, June 2021

Source: EBA (2021), Risk Dashboard.

8

Non-performing loans remain high Share of non-performing loans Per cent of total gross loans, 2021Q2 or latest available

Source: IMF (2021), Financial Soundness Indicators.

9

The profitability in the banking sector is low Return on Equity Per cent, 2021Q2

Source: European Banking Authority (EBA) “EBA Risk Dashboard”.

10

Sizeable EU funds should be used to support reforms Amounts of EU funds Total allocation, Per cent of GDP, 2020

Source: OECD calculations based on European Commission (2021) “The EU’s 2021-2027 longterm budget & Next Generation EU, Facts and figures”.

11

Key recommendations for a strong and resilient recovery Maintain fiscal policy support until the recovery is firmly underway, while making it more targeted.

Strengthen direct aid to companies in a timely, targeted, and temporary way.

Encourage the use of out-of-court insolvency procedures.

Strengthen incentives for banks to reduce their non-performing loans should they prove insufficient.

12

Key recommendations for a strong and resilient recovery Ensure the transparent and effective implementation of programmes financed with EU funds.

Prioritise public investment projects that have the strongest economic and social impact by relying on cost-benefit analysis.

Introduce codes of conduct on how to engage with lobbyists including a lobbying register.

13

Putting public finances on a sustainable path

14

Public debt is high Government debt % of GDP, Maastricht definition, 2020

Source: OECD (2021), OECD Economic Outlook: Statistics and Projections (database).

15

Age-related costs will weigh on public finances Gross government debt Per cent of GDP, Maastricht definition

Source: Adapted from OECD Economic Outlook: Statistics and Projections (database); and Longterm baseline projections; European Commission (2021), The 2021 Ageing Report.

16

Public investment has been low Public investment Per cent of GDP, 2020 or latest available

Source: OECD (2021), OECD Economic Outlook: Statistics and Projections (database).

17

Main recommendations for sustainable public finances Once the recovery is firmly established, gradually phase out support measures and announce a clear and credible medium-term fiscal consolidation strategy.

Duly implement the link between increases in the retirement age and life expectancy gains.

Extend that link to the minimum age of early retirement.

18

Addressing social and environmental challenges in crisis time

19

Job losses are still concentrated on young and temporary workers Employment Index, 2019Q4 = 100

Source: Statistics Portugal, Labour force survey (Series 2021).

20

Public employment services need more resources Public expenditure on public employment service and administration Per cent of GDP, 2019

Source: OECD (2020), Economic Outlook database and Statistics on Labour Market Programmes database.

21

Labour shortages in health and longterm care are large A. Practicing nurses

B. Long-term care workers

Number per 1000 population, 2019 or latest available

Number per 100 individuals aged 65 or more, 2019 or latest available

Source: OECD Health Statistics.

22

Reducing greenhouse gas emissions in transport is challenging GHG emissions Index, 1990 = 100

Source: Eurostat (2020), "Greenhouse gas emissions by source sector", Eurostat Database.

23

Water management needs to improve Freshwater use m3/capita, 2018 or latest available

Source: Eurostat, Environmental Statistics.

24

Main recommendations to address social and environmental challenges

Increase resources allocated to public employment services.

Improve the working conditions of healthcare professionals.

25

Main recommendations to address social and environmental challenges Accelerate investment in electric mobility and public transportation.

Once the recovery is firmly established, progressively increase the coverage of the carbon tax, while financially supporting the population in adjusting to greener usages.

Increase investment in water infrastructure further and strengthen technical support to municipalities.

26

Reaping the benefits of the digital transition

27

Productivity growth is low Labour productivity growth GDP per hour worked, yearly average

Source: OECD (2021), Productivity Database.

28

The adoption of digital technologies needs to increase Proportion of businesses using each technology 2020 or latest available, %

Source: OECD (2021), ICT Access and Usage by Businesses database.

29

SMEs lag behind on digital technologies Proportion of businesses using each technology By size class, 2020 or latest available, %

Source: OECD (2021), ICT Access and Usage by Businesses database.

30

Broadband prices are high Broadband Price Index 2020

Source: EC DESI 2020.

31

Communication infrastructure is well developed Fixed broadband subscriptions Share of subscriptions per 100 inhabitants, 2020

Source: OECD (2021), Broadband Portal.

32

Digital skills are below average Share of people with above basic overall digital skills Per cent, 16-74 year old, 2019

Source: Eurostat (2021).

33

Conditions for ICT use and teaching in schools need to improve Share of upper secondary teachers using ICT for teaching Per cent, 2018

Source: OECD, TALIS 2018 Database.

34

Few adults participate in training Participation in education and training Last 4 weeks, Per cent of 25-64 years old, 2019

Source: OECD (2020) Education at a Glance Database; Eurostat (2020).

35

More women could engage in ICT studies Gender gap among Bachelor’s graduates in STEM and ICT fields Percentage points (men minus women), 2019

Source: OECD (2020) Education at a Glance Database.

36

Recommendations for reaping the benefits of the digital transition

Expand the coverage of programmes for small companies to acquire digital training after a thorough evaluation of their impact.

Remove constraints to consumer mobility in telecommunication providers.

37

37

Recommendations for reaping the benefits of the digital transition Accelerate and expand the provision of adequate digital resources to schools and teachers.

Consider introducing a personal training account for adults, with more generous vouchers for low skilled workers.

Further promote the enrolment of women in STEM fields.

38

38

For more information

@OECD @OECDeconomy

www.oecd.og/economy/portugal-economic-snapshot/

39