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Portugal: Rebalancing the Economy and Returning to Growth Through Job Creation and Better Capital Allocation

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  • Álvaro Pina
  • Ildeberta Abreu

Abstract

Low growth and huge current account deficits have characterised the Portuguese economy over the past decade. Easy credit in global markets, combined with the absence of incentives to limit loan-to-deposit ratios until recently, made it possible to finance internationally high levels of consumption and investment relative to gross domestic product (GDP) through over reliance of the banking sector on wholesale funding. This led to high households’ and firms’ indebtedness and made banks vulnerable to shifts in investor sentiment. However, investment and credit were mostly directed to sheltered sectors, giving rise to an oversized road infrastructure, electricity generation capacity and housing stock. Weaknesses in labour market institutions further held back productivity and hampered wage adjustment, making it harder to gain cost competitiveness. The deleveraging process set in motion by the loss of access to foreign financing is helping to rapidly reduce external deficits, but also has the potential to generate a damaging credit contraction, which enhances the importance of alternative financing strategies for firms, such as greater reliance on equity. To restore growth, Portugal needs to foster the reallocation of both labour and capital, essentially towards the tradable sector. Building on recent policy initiatives or commitments, this will require reforming public policies that have long distorted investment allocation, ensuring that banks adequately recognise and provision problematic loans and, on the employment front, reducing labour market segmentation and increasing targeted training. Reforms in wage setting, labour taxation, unemployment benefits and activation policies will foster job creation, thus enhancing output growth while avoiding high unemployment becoming entrenched and threatening social cohesion. This Working Paper relates to the 2012 OECD Economic Survey of Portugal (www.oecd.org/eco/surveys/portugal). Portugal : Rééquilibrer l'économie et renouer avec la croissance par la création d'emplois et une meilleure affectation des capitaux L’économie portugaise s’est caractérisée ces dix dernières années par une croissance faible et des déficits volumineux des paiements courants. L’accès au crédit facile sur les marchés mondiaux, conjugué jusqu’à ces derniers temps à une absence de dispositifs incitant les banques à limiter leur ratio prêts/dépôts, a permis de financer à l’international une forte consommation et des investissements élevés par rapport au produit intérieur brut (PIB), par un recours excessif du secteur bancaire aux marchés de la dette internationaux. Ce phénomène a abouti à un endettement important des ménages et des entreprises et a rendu les banques vulnérables à un retournement de la confiance des investisseurs. Cela étant, l’investissement et le crédit ont été principalement orientés vers les secteurs protégés, donnant naissance à une infrastructure routière, à des capacités de production d’électricité et à un stock de logements surdimensionnés. Les carences des institutions du marché du travail ont encore sapé la productivité et entravé l’ajustement des salaires, rendant encore plus difficiles les gains de compétitivité-coûts. Le processus de désendettement déclenché par la perte de l’accès aux financements internationaux contribue à réduire rapidement les déficits extérieurs mais pourrait également engendrer un resserrement du crédit préjudiciable pour l’économie, ce qui accroît l’importance de stratégies de financement alternatives pour les entreprises, telles qu’une plus grande dépendance sur les fonds propres. Pour renouer avec la croissance, le Portugal doit favoriser le redéploiement de la main-d’oeuvre et du capital, pour l’essentiel vers les secteurs exportateurs. En s’appuyant sur les récentes initiatives et engagements politiques, il lui faudra engager une réforme de ses politiques publiques qui ont longtemps faussé la répartition des investissements, veiller à ce que les banques comptabilisent et provisionnent comme il se doit leurs prêts problématiques et, sur le front de l’emploi, réduire la segmentation du marché du travail et renforcer les formations ciblées. Des réformes concernant la fixation des salaires, l’imposition du travail, les allocations chômage et les politiques d’activation stimuleront la création d’emplois et renforceront de ce fait la croissance de la production tout en évitant l’enracinement d’un chômage élevé mettant en péril la cohésion sociale. Ce Document de travail se rapporte à l’Étude économique de l’OCDE du Portugal, 2012 (www.oecd.org/eco/etudes/portugal).

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Bibliographic Info

Paper provided by OECD Publishing in its series OECD Economics Department Working Papers with number 994.

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Date of creation: 17 Oct 2012
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Handle: RePEc:oec:ecoaaa:994-en

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Keywords: unemployment; housing; labour costs; financial regulation; labour market segmentation; deleveraging; banks; macroeconomic imbalances; credit allocation; activation policy; Portugal; energy; wage bargaining; négociation salariale; énergie; Portugal; banques; déséquilibres macroéconomiques; allocation du crédit; réduction de l’effet de levier; segmentation du marché du travail; politiques d'activation; régulation financière; coûts salariaux; logement; chômage;

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Cited by:
  1. Carneiro, Anabela & Portugal, Pedro & Varejão, José, 2013. "Catastrophic Job Destruction," IZA Discussion Papers 7670, Institute for the Study of Labor (IZA).
  2. Giuseppe Bertola & John Driffill & Harold James & Hans-Werner Sinn & Jan-Egbert Sturm & Ákos Valentinyi, 2013. "Chapter 3: Labour Market Reform and Youth Unemployment," EEAG Report on the European Economy, CESifo Group Munich, vol. 0, pages 73-94, 02.

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