World Economy

Portugal Should Reduce Instability

Portugal Should Reduce InstabilityPortugal Should Reduce Instability

The Portuguese economy might be on an unstable footing with only one credit rating agency giving it an investment grade, but such instability should lessen in the medium-term, the country’s economy minister told CNBC.

The investment grade given by the Canadian firm DBRS is vital for Portugal. It allows the European Central Bank to keep purchasing Portuguese government bonds and, thus gives Lisbon lower borrowing costs.

Manuel Caldeira Cabral, the Portuguese economy minister, told CNBC that “Portugal has a lot of work to do” to convince the other credit rating firms but he is certain that, in the medium-term, the country will be getting an upgrade.

“We still have a lot of work to do, but I think our fundamentals now make us deserve a better rating than we have,” Cabral said.

“I think the prospects in the medium run are for ratings of most agencies to come up. We don’t expect this to happen the next day or the coming semester (six months). I think they’re going to stay stable and then in the medium-term they’re going to increase,” the economy minister added.

The Portuguese government is projecting a deficit of 1.6% compared to 2.4% in 2016. In 2015, its public debt stood at 129% of gross domestic product, but, according to government data, that number should decrease slightly to 128.3% of GDP in 2017.

Portugal was severely hit by the 2008 financial crisis and the high level of public and corporate debt, along with a high level of non-performing loans, continue to be a drag to more growth.

“The third quarter is going to show a very interesting growth rate,” Cabral said, as the economy benefits from an expansion in the tourism and technologic sectors.

Lisbon is currently hosting high-tech showcase Web Summit. On the sidelines of the event, Cabral told CNBC that the highly-skilled and multilingual labor force that the country has make the country more prone to become the next tech hub and is an attractive asset to investors, including firms that may relocate from the UK to Portugal in a post-Brexit environment.

Cabral is hopeful that whoever wins the next term in the White House will not close doors to international trade.

“I don’t think the US should go for protectionism. It would be bad for US workers; it would be bad for the US economy. It would really be the wrong signal to the world economy as well,” Cabral said.

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