Source: Bank of International Settlements process through which Portugal has reduced its external imbal- ances has broadly run its course, as austerity fatigue has led to leftist parties taking the helm of political life. As such, Portugal has limited prospects of implementing structural reforms aimed at boosting labour market flexibility and attracting the foreign investment needed to boost competitiveness. ...However, with this trend set to reverse in the coming years, the contribution of the energy sector will diminish. At the same time, we see limited prospects for other manufacturing industries or construction to contribute to fixed investment due to the many structural issues of the economy which will remain impediments to investment, including outdated infrastructure and technology, issues of corporate governance and burdensome bureaucracy. With further limited gains in productivity and competitiveness, the outlook for the external sector s share of economic output remains dim. ...With further limited gains in productivity and competitiveness, the outlook for the external sector s share of economic output remains dim. We forecast exports to expand to -- of GDP in -- Business Monitor International Ltd www.bmiresearch.com
...However, to partially compensate for the negative impact of wage increases on the budget, the government will raise taxes on cars, fuels and banks, meaning the boost to purchasing power will be somewhat limited. Purchasing power will be also squeezed with oil prices set to rebound in H---, according to our Oil & Gas team. ...It continues to struggle with the high level of bad-quality loans, low credit demand and corporate governance issues, exposed in the col- lapse of the country s biggest private lender Banco Espirito Santo in ----. In addition, the regulatory environment is now even more uncertain in light of the EU s new bail-in rules which require depositors and senior bondholders to bear some of the losses associated with the resolution of a failing bank. As such, credit conditions in Portugal will remain tight despite loose monetary policy by the ECB. ...As such, the limited pro- ductivity gains the country has seen post----- (which were mainly due to internal devaluation) will be reversed further. With external demand from the eurozone likely to stagnate throughout ----, exports will expand by just -.- in ----, after an estimated expansion of -.- in ----.
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