The OECD’s ‘recipe’ for making Portugal a better country

Mathias Wichmann/Unsplash
Mathias Wichmann/Unsplash
22 February 2019, Redaction

Portugal as a country is on the right track economically, but there is still much to do to promote more inclusive and sustainable growth. This is according to the Organisation for Economic Co-operation and Development (OECD) in their biannual report about the Portuguese economy, released on 18th February 2019. The organisation left a series of recommendations to the country, a kind of "recipe" to increase the well-being of those who live in Portugal.

"Portugal’s economic recovery is now well established, with GDP back to pre-crisis levels, a substantially lower unemployment rate and renewed investment and domestic consumption now joining a robust export sector to drive the economy," reads the OECD statement, according to which efforts should now focus "on reducing vulnerabilities to build resilience to future shocks.”

The Secretary General of the OECD, Angel Gurría, who presented the study in Lisbon, together with Deputy Minister of the Economy Pedro Siza Vieira, welcomed the "good news" and the fact that the Portuguese economy is performing well, but argued that, despite the progress, "legacies of the crisis remain, with the poverty rate of the working age population still elevated and perceptions of subjective wellbeing below pre-crisis levels".

The OECD believes that Portugal should take the opportunity to further consolidate its public finances and the banking sector, making a number of suggestions ranging from fiscal sustainability to the efficiency of the judicial system, the fight against corruption and "greener" economic growth.

These are the OECD’s recommendations:

Improve fiscal sustainability and financial stability

  • Maintain gradual fiscal consolidation in order to ensure the reduction of public debt.
  • Simplify the tax system by reducing the use of special provisions (e.g. tax exemptions, special rates) and ambiguities in tax terminology.
  • Competent authorities should continue to monitor reduction plans for non-performing loans (NPLs), translating the results into changes in capital requirements.
  • Make insolvency a viable solution for highly indebted individuals by reducing the exemption period and making more of their assets exempt from insolvency.
  • Establish an extra-judicial mechanism to facilitate the liquidation of unviable companies. 

Continue to promote the good performance of the export sector

  • Target lifelong learning opportunities at low-skilled workers via the collection and public dissemination of information on the personal benefits of upgrading their qualifications.
  • Include the fees that tenderers will charge to port users in the criteria for awarding port concessions.
  • Ensure that port concession contracts specify a minimum level of investment by the operator and not renew concessions without launching a new public tender. 

Improve the efficiency of the judicial system to promote economic activity

  • Strengthen the autonomy of courts to manage and allocate resources, namely judges, other judicial officials and budgets more effectively.
  • Conduct a comprehensive analysis of the data collected through the IT system of the courts (CITIUS), so that they can identify problematic trials and other priority cases.
  • Establish an independent supervisory authority to ensure that the regulation of the legal profession serves the public interest.
  • Further improve the capacity of the public prosecutors to fight economic and financial crime, including corruption; prosecutors should continue to receive specialised training in this area.
  • Establish an electronic register of interests for all members of the government and senior public administration officials, to be regularly updated.

Enhance the use of manual labour and reduce poverty

  • Avoid the widespread use of employment grants, limiting them to cases where there is a high risk of long-term unemployment and a risk of poverty.
  • Extend the reach of well-designed vocational training programmes (i.e. "Apprenticeships" and "Adult Education and Training Courses") to serve a larger number of low-skilled people.
  • Consolidate the two vocational education and training systems into a single dual system with a strong focus on workplace training, and carry out an in-depth evaluation of all vocational training programmes.

Recalibrate the economy for greener growth

  • Promote the use of public transport and the development of new shared transport solutions, accompanied by appropriate supervision and regulation.
  • Raise taxes on gas oil and increase energy taxation on coal and natural gas.
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