Portugal faces a “tangible risk” of not meeting its budget deficit target this year if there are no further cuts in spending, the International Monetary Fund warned.
“In the absence of steps to reduce primary spending, the overall fiscal deficit this year is currently projected at 3.2 percent of gross domestic product,” the IMF’s second Post-Program Monitoring report read, Xinhua news agency reported.
The Portuguese government has insisted that the country will manage to bring its budget deficit down to 2.7 percent of GDP.
The IMF also said faster medium-term growth required further structural reforms.
“Recent efforts to move forward with privatization, transport concessions and lowering natural gas prices for end-users have been encouraging, but reforms to increase the effectiveness of the public sector have continued to lag,” the IMF said.
“Labor market reforms to spur job creation remain a particular challenge, especially for lower-skilled workers, and fresh reform initiatives in this area would be desirable,” the IMF said.
Portugal signed a 78-billion-euro ($87.8 billion) bailout with the European Central Bank, IMF and European Commission in 2011.
The country is nursing itself back to financial health and has said it will repay the IMF €2 billion ($2.3 billion) it owes earlier than scheduled.
Portugal paid the IMF €6.6 billion ($7.4 billion) back in March.
