Chasing deficit targets might no longer be Portugal’s best policy if its economic slump deepens more than expected, the IMF said on Thursday.
It stopped short of calling for targets set under an EU/IMF bailout to be eased, but signaled concern over waning external demand and the recessive impact of bailout austerity.
However, it also said that this year’s targets remained in reach.
Portugal’s lenders from the EU have so far said sticking to stringent fiscal targets and reforms is the answer to the country’s woes.
In a staff report following a mission to Portugal in February last year, the IMF also agreed with the European Commission that the bailout’s size of 78 billion euros (US$102 billion) was sufficient and considered Portugal capable of returning to the bond market late next year as the program envisages.
Some investors remain concerned that Portugal will have to follow Greece in seeking a further bailout that could involve losses for private sector creditors.
The IMF quoted its new mission chief for Portugal, Abebe Selassie, as saying that “the main risk is that the recession turns out deeper than projected,” partly due to a mild recession in the eurozone where Portugal sells most of its products.
“In that case, we think that chasing after fixed nominal deficit targets may not be the best policy,” Selassie said.
Still, Selassie made clear that Portugal could not afford to miss any targets due to policy slippages as that would damage the program’s credibility.
Right now, this year’s targets of 4.5 percent of GDP deficit “remains within reach,” he said.
Portugal is in its worst recession since the 1970s, with the government and the lenders expecting a 3.3 percent slump this year and only meager growth of 0.3 percent next year.
The IMF has said it will release 5.17 billion euros to crisis-stricken Portugal under the bailout program aimed at helping it come to grips with its high budget deficits, lauding good progress made already.
Selassie said markets were “not yet fully convinced” that the adjustment challenges can be met even though bond spreads have eased somewhat from the beginning of the year.
However, the IMF believed that “the challenges can be met as long as the government stays on course.”
Portugal’s 10-year bond yields have increased since last week to about 12.2 percent, but are a long way below 17.4 percent highs seen at the end of January.
EXTRATERRITORIAL REACH: China extended its legal jurisdiction to ban some dual-use goods of Chinese origin from being sold to the US, even by third countries Beijing has set out to extend its domestic laws across international borders with a ban on selling some goods to the US that applies to companies both inside and outside China. The new export control rules are China’s first attempt to replicate the extraterritorial reach of US and European sanctions by covering Chinese products or goods with Chinese parts in them. In an announcement this week, China declared it is banning the sale of dual-use items to the US military and also the export to the US of materials such as gallium and germanium. Companies and people overseas would be subject to
Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) founder Morris Chang (張忠謀) yesterday said that Intel Corp would find itself in the same predicament as it did four years ago if its board does not come up with a core business strategy. Chang made the remarks in response to reporters’ questions about the ailing US chipmaker, once an archrival of TSMC, during a news conference in Taipei for the launch of the second volume of his autobiography. Intel unexpectedly announced the immediate retirement of former chief executive officer Pat Gelsinger last week, ending his nearly four-year tenure and ending his attempts to revive the
WORLD DOMINATION: TSMC’s lead over second-placed Samsung has grown as the latter faces increased Chinese competition and the end of clients’ product life cycles Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) retained the No. 1 title in the global pure-play wafer foundry business in the third quarter of this year, seeing its market share growing to 64.9 percent to leave South Korea’s Samsung Electronics Co, the No. 2 supplier, further behind, Taipei-based TrendForce Corp (集邦科技) said in a report. TSMC posted US$23.53 billion in sales in the July-September period, up 13.0 percent from a quarter earlier, which boosted its market share to 64.9 percent, up from 62.3 percent in the second quarter, the report issued on Monday last week showed. TSMC benefited from the debut of flagship
TENSE TIMES: Formosa Plastics sees uncertainty surrounding the incoming Trump administration in the US, geopolitical tensions and China’s faltering economy Formosa Plastics Group (台塑集團), Taiwan’s largest industrial conglomerate, yesterday posted overall revenue of NT$118.61 billion (US$3.66 billion) for last month, marking a 7.2 percent rise from October, but a 2.5 percent fall from one year earlier. The group has mixed views about its business outlook for the current quarter and beyond, as uncertainty builds over the US power transition and geopolitical tensions. Formosa Plastics Corp (台灣塑膠), a vertically integrated supplier of plastic resins and petrochemicals, reported a monthly uptick of 15.3 percent in its revenue to NT$18.15 billion, as Typhoon Kong-rey postponed partial shipments slated for October and last month, it said. The
RSS