Conjuntura dossiers Económica Portugal: 2016 in Review Economic Outlook Conjuntura Económica Portugal: 2016 in Review Prepared by PE Probe | Preparado por PE Probe Copyright © 2015 Portugal Economy Probe PE Probe Portugal Economy Probe (PE Probe) All rights reserved Conjuntura Económica Portugal: 2016 in Review Index / Índice I. 2017 Forecasts…………………………………………………………………………………………………………………………………………... 3 II. Main figures of 2016…………………………………………………………………………………………………………………………………. 6 III. Financial System ………………………………………………………………………………………………………………………………….…... 9 IV. Business Climate …………………………………………………………………………………………………………………………............. 11 V. Key Political Developments …………………………………………………………………………………………………………………...... 13 VI. Portuguese people with international recognition ………………………………………..……………………………………….. 15 VII. Head of State and Head of Government official visits…………………………………………………………………………..… 19 23 VIII. Main Economic Data …………………………………………………………………………………………………………………….......... IV. More About Portugal ……………………………………………………………………………………………………………………………… 24 © Portugal Economy Probe (PE Probe) 2 Conjuntura Económica Portugal: 2016 in Review I. 2017 Forecasts Economic growth is expected to increase in 2017 The Government will continue applying its policy to recover the incomes of Portuguese households The main national and international institutions foresee an acceleration of economic growth, with particular emphasis on the positive evolution of investment. Public accounts are also expected to continue to improve, as will the unemployment rate. The minimum wage will increase to 557 euros (7 798 euros annually), with effect from 1 January. During 2017, local government elections will be taking place in Portugal, Pope Francis will be attending the celebrations of the Centenary of the Apparitions of Our Lady of Fátima, and Lisbon will once again be hosting the Web Summit, this time expecting to welcome more than 80 000 participants. Portuguese Economy Official Forecasts for 2017 Institution¹ MF PPFC BdP EC IMF OECD Real GDP and components (% change) Real GDP 1.5 1.3 1.4 1.2 1.3 1.2 Private consumption 1.5 2.0 1.3 1.1 1.3 1.2 Public consumption -1.2 0.1 0.0 0.4 0.6 0.2 Investment (GFCF) 3.1 2.9 4.4 3.7 2.5 0.7 Exports 4.2 3.8 4.8 3.7 3.6 3.7 Imports 3.6 4.0 4.8 4.1 3.4 3.6 Contribution to growth (p.p.) Internal demand 1.3 1.5 0.5 1.4 1.4 - Net external demand 0.2 -0.2 0.9 -0.1 0.0 - External sector (% GDP) Net lending 2.2 1.3 0.9 2.0 - - Labor market (% change) Employment 1.0 0.9 1.0 0.7 1.0 - Unemployment rate (% labour force) 10.3 10.7 10.1 10.0 10.6 10.1 Prices GDP deflator 1.5 1.1 - 1.7 1.4 0.9 CPI/HCPI 1.5 1.0 1.4 1.2 1.1 1.1 Public finances (% GDP) Budget balance -1.6 -2.6 - -2.2 -2.1 -2.1 Primary balance 2.8 - - 2.2 2.3 - Gross public debt 128.3 - - 129.5 129.9 129.5 ¹ - MF – Ministry of Finance, PPFC – Portuguese Public Finance Council, BdP – Banco de Portugal (Portuguese Central Bank), EC – European Commission, IMF – International Monetary Fund, OECD – Organisation for Economic Co-operation and Development. © Portugal Economy Probe (PE Probe) 3 Conjuntura Económica Portugal: 2016 in Review I. 2017 Forecasts The official forecasts for the Portuguese economy in 2017 from the most relevant institutions are fairly homogenous and predict a slight increase in economic growth. Regarding the components of GDP, the Ministry of Finance is the only institution foreseeing a negative change in public consumption. The Portuguese Public Finance Council and the European Commission anticipate a higher growth in imports than that in exports; therefore, for those institutions net external demand will make a negative contribution on growth. All institutions expect a positive change in investment, an increase of employment, the continuous decline of the unemployment rate, and an improvement in the budget balance and also in gross public debt as a percentage of GDP. The Troika taskforce made up of members from the European Commission, the European Central Bank and the International Monetary Fund (IMF) will continue to carry out Post-Programme Monitoring discussions in Portugal within the framework of the Economic Adjustment Programme, and two more visits are planned for 2017. Due to the European rules, the Post-Programme Surveillance will continue until Portugal reimburses at least 75% of the borrowed funds. With regard to the IMF, the missions are undertaken as part of regular consultations under Article IV of the IMF's Articles of Agreement in the context of Portugal’s request to use IMF resources on its bailout in 2011. Portugal will be monitored until its outstanding debt is less than 200% of its respective share of contribution to the Fund. Local government elections will be held in Portugal during 2017. The President of the Republic Marcelo Rebelo de Sousa has not yet set a date but the election of local authorities is expected to take place between September and October. The mandates last four years, and in terms of the official candidates to the most important municipalities known so far, only the President of the CDS-PP party Assunção Cristas has announced she will run for the Lisbon City Council. As it stands at the moment, it is expected that the current mayors of Lisbon and Porto, Fernando Medina and Rui Moreira, respectively, will run for re-election. The State Budget for 2017 introduces a series of relevant changes in the lives of the people living in Portugal. The minimum wage will rise to 557 euros (7 798 euros annually) with effect from 1 January, a measure that will be compensated by the reduction from 23.75% to 22.5% of the Single Social Security Rate (TSU) paid by companies. The Government will continue applying its policy to recover the incomes of households by gradually eliminating the personal income surcharge throughout the year, increasing the lower pensions, updating the social support index, reintroducing the income support allowance, increasing the family allowance, and by reinstating public servants wages. With regard to the tax system, the 6% VAT charged on public transport passes for any member of the household is now deductible on the personal income tax up to a maximum of 250 euros. In terms of social protection, the Government will move forward with the provision of free school textbooks to all primary school students and universal preschool education, as well as the strengthening of the primary care network, extending access to the family doctor to 500 thousand additional users. To provide support to businesses, the Government has extended until the end of 2017 the corporate tax benefit for job creation for youth and the long-term unemployed. It has also reinforced the investment benefits by doubling the ceiling from 5 to 10 million euros of the eligible expenses deductible in corporate taxes. The Government is also introducing the Semente Program (Seed Program) to encourage entrepreneurship by allowing a deduction on personal income tax of 25% of the investment made in startups as a way to attract small investors. © Portugal Economy Probe (PE Probe) 4 Conjuntura Económica Portugal: 2016 in Review I. 2017 Forecasts Within the framework of the monetary policy, the European Central Bank (ECB) announced at the last meeting that it will extend the programme for the purchase of securities until at least December 2017 (previously expected to end in March), while reducing the monthly purchase limit from 80 billion euros to 60 billion euros. Given the importance of the ECB in the secondary public debt market, these measures will surely affect the financing costs that Portugal will have during the funding rounds in 2017. The ECB has also announced that it will maintain the main rate for refinancing operations at 0%, the deposit rate at -0.4%, and the marginal lending rate at 0.25%. According to the press, Portugal will celebrate the next 10th of June, the Day of Portugal, Camões and the Portuguese Communities, in Portugal and in Brazil. Due to the different time zones, the celebrations will start off in Porto and move on to Rio de Janeiro and São Paulo where they will end the following day. Prime Minister António Costa will accompany the President of the Republic Marcelo Rebelo de Sousa on this visit, and they will be hosted by the President of Brazil, Michel Temer. With regard to main events, a special highlight to the celebration of the Centenary of the Apparitions of Our Lady of Fátima, with the confirmed presence of Pope Francis on 12th and 13th of May 2017. Pope Francis will be the fourth Head of the Catholic Church to visit the Sanctuary of Fátima, following Pope Paul VI (1967), John Paul II (1982, 1991, and 2000) and Benedict XVI (2010). Portugal will participate in three major NATO operations in the Mediterranean, Lithuania and Romania. The city of Lisbon will be the Ibero-American Capital of Culture in 2017, and it will also be hosting the Web Summit once again, between 6th and 9th November. Founder Paddy Cosgrave said that he plans to expand next year's summit to 80 000 participants. The next edition of the EuBea - European Best Event Awards, a meeting that annually distinguishes the best events held in Europe, will take place in Porto in November. Peniche will once more stage the Meo Rip Curl of the World Surf League, from 17th to 28th October. The northern part of Portugal will hold another edition of the Rally de Portugal between 19th and 21st of May, a round of the World Rally Championship (WRC). Portugal has already secured 41 new international congresses for 2017. The National Soccer Team, as European Champions, will play the Confederations Cup in Russia for the first time and will also play the qualifying round for the 2018 World Cup.