Front Matter

Front Matter

Dmitry Gershenson, Albert Jaeger, and Subir Lall
Published Date:
March 2016
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    European Deparment

    From Crisis to Convergence

    Charting a Course for Portugal

    Edited by Dmitry Gershenson, Albert Jaeger, and Subir Lall

    European Department

    From Crisis to Convergence: Charting a Course for Portugal

    Edited by: Dmitry Gershenson, Albert Jaeger, and Subir Lall

    Copyright © 2016

    International Monetary Fund

    Cataloging-in-Publication Data

    Joint Bank-Fund Library

    Names: Gershenson, Dmitriy, editor. | Jaeger, Albert, editor. | Lall, Subir, editor. | International Monetary Fund. | International Monetary Fund. European Department.

    Title: From crisis to convergence: charting a course for Portugal / editors: Dmitry Gershenson, Albert Jaeger, Subir Lall.

    Other titles: Charting a course for Portugal. | Departmental paper series (International Monetary Fund. European Department)

    Description: Washington, DC: International Monetary Fund, 2016. | At head of title: European Department. | Includes bibliographical references.

    Identifiers: ISBN 978-1-51359-722-5 (paper)

    Subjects: LCSH: Portugal – Economic conditions. | Portugal – Fiscal policy. | Economic stabilization – Portugal.

    Classification: LCC HC392.F76 2015

    The Departmental Paper Series covers research conducted by IMF staff, particularly on issues of broad regional or cross-country interest. The views expressed in this paper are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

    Publication orders may be placed online, by fax, or through the mail:

    International Monetary Fund, Publication Services

    P.O. Box 92780, Washington, DC 20090, U.S.A.

    Tel. (202) 623-7430 Fax: (202) 623-7201



    The authors are grateful to Mahmood Pradhan, deputy director of the European Department, for his valuable comments and support. We greatly benefited from insightful conversations with many counterparts in the government of Portugal and the Bank of Portugal, and other public and private entities. In particular, we would like to thank João Amador, Cristina Casalinho, José Miguel Costa, Maria Inês Drumond, Pedro Gonçalves, Susana Filipa Lima, Ines Lopes, Bernardo Afonso Maia, Álvaro Matias, Rui Miguel Pinto, and Ana Rangel Gonçalves, Carla Soares, and Susana Videira. Last but not least, we benefited from discussions with IMF colleagues, including Marcos Souto and Constant Verkoren.

    This Departmental Paper was edited by Dmitry Gershenson, Albert Jaeger, and Subir Lall, and prepared by a staff team under the overall direction of Subir Lall and led by Albert Jaeger. Contributors are Matthew Gaertner, Irene Yackovlev, and Li Zeng (all EUR), Maximilien Queyranne (FAD), Luciana Juvenal (ICD), Ana Gomes and Elsa Martins (both IMF Office in Portugal), Wolfgang Bergthaler (LEG), Antoine Bouveret (MCM), and Kevin Wiseman (SPR). Federico Diaz Kalan (SPR), Dustin Smith and Jessie Yang (both EUR) contributed to preparation of figures and tables. Daniela Santos (EUR) managed the overall document production and word processing. Departmental Paper series editor Joseph Procopio of the Communications Department’s Editorial and Publications Division oversaw the editing and production of this report, and Andreas Adriano (COM) guided the dissemination and outreach process.




    Allowance for corporate equity


    Active labor market policies


    Constitutional Court


    Public sector pension scheme


    Corporate income tax


    Domestic value-added


    External balance


    Earnings before interest, taxes, depreciation, and amortization


    Earned income tax credit


    European System of National and Regional Accounts


    European Union


    Fiscal Affairs Department, IMF


    Foreign direct investment


    Gross domestic product


    Internal balance


    Survey on Outgoing Migratory Movements


    National Institute of Statistics


    International Standard Classification of Education


    INE’s Labor Force Survey


    Medium-term budget framework


    Nonfinancial corporation


    Nonperforming loan


    Organisation for Economic Co-operation and Development

    PEC IV

    Fourth Stability and Growth Program for 2011–14


    In-court debt restructuring framework


    Programme for International Student Assessment


    Personal income tax


    Public-private partnerships


    Research and Development


    Return on assets


    Integrated Business Account System


    Stability and Growth Pact


    Out-of-court debt restructuring framework


    Small and medium enterprises


    State-owned enterprise


    Value-added tax


    In 2011, following years of large-scale external imbalance financed by debt, Portugal lost the confidence of its creditors and faced a sudden stop in capital inflows not only to the public sector, but also to banks and corporations. To restore credibility and economic growth, the country embarked on a difficult path of fiscal adjustment and structural reforms.

    By many metrics, Portugal’s 2011–14 macroeconomic stabilization program has been a success. Fiscal deficits declined, as revenues rose and spending was constrained, arresting the accumulation of public debt. Exports grew strongly, and the current account began to register surpluses for the first time in decades. Following a sharp contraction in 2011–12, output expanded steadily, and the headline unemployment rate has been decreasing since 2013. As a result, and also benefiting from a supportive monetary policy stance, market access was restored in 2013, with Portugal currently enjoying historically low borrowing costs.

    Despite this promising start, the agenda for policymakers is by no means finished. Portugal continues to have high public and private debt, which constrains activity and employment. Medium-term growth prospects are held back by underutilization of labor, low investment, and high nonperforming loans. This paper reviews Portugal’s experience of postcrisis recovery and points to ways to reduce vulnerabilities, absorb labor slack, and generate sustainable growth.

    Poul M. Thomsen

    Director of the European Department

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