Oecd Economic Surveys: Portugal 2003 (Oecd Economic Surveys)

Table of contents......Page 5 Basic Statistics of Portugal......Page 8 Assessment and recommendations......Page 10 Portugal’s cycle in the European context......Page 24 Figure 1. Macroeconomic performance at a glance......Page 25 Table 1. Portugal and the euro area: key indicators......Page 26 Household demand is cooling off.........Page 27 Figure 2. Contribution to real GDP growth......Page 28 Figure 3. Aggregate saving and investment......Page 29 Table 3. Labour-market indicators......Page 30 ...but inflation remained high......Page 31 Figure 4. Inflation developments......Page 32 Export performance improved, despite the erosion of competitiveness......Page 33 Figure 5. Competitiveness indicators and export performance......Page 34 Table 5. Change in the trade specialisation......Page 35 Figure 6. Current and capital account breakdown......Page 36 Direct investment inflows remained strong, but their nature has changed......Page 37 Monetary conditions are becoming somewhat more restrictive.........Page 38 Figure 9. Monetary conditions......Page 39 ...and fiscal imbalances are being corrected......Page 40 The outlook is for a modest recovery and risks are mainly on the downside......Page 41 Figure 11. Economic confidence indicators......Page 42 Table 6. Short-term projections......Page 43 Disappointing results in2001......Page 46 Figure 12. Contributions to fiscal consolidation1995-2003......Page 47 Figure 13. The fiscal policy stance......Page 48 Table 7. Budget balance in 2001......Page 49 Table 8. From the initial 2001 budget to the outturn......Page 50 The2002 budget (and supplementary budget): implementation difficulties......Page 51 Box 2. The2002 Supplementary Budget......Page 52 The2003 budget: a restrictive stance......Page 54 The Stability Programme......Page 55 Figure 14. Fiscal targets......Page 56 Public debt trends and management......Page 57 Figure 15. Public debt scenario......Page 58 Progress with tax reform......Page 59 Box 3. Tax policy initiatives......Page 60 Primary current spending has been rising rapidly......Page 64 Figure 17. Government spending......Page 65 Figure 18. General government outlays by economic category......Page 67 Box 4. Pension system for civil servants (Caixa Geral de Aposentações, CGA)......Page 68 Figure 19. Main components of general government outlays......Page 70 Public investment has been boosted by EU membership despite spending freezes......Page 69 ...due to flaws in the budget management process.........Page 71 ...which have brought efforts at administrative reform......Page 73 Box 5. 2001Framework Law for the State Budget and the2002 Budgetary Stability Law......Page 74 Inefficiencies in human resource management......Page 75 Figure 20. General government employment and wage bill in OECD countries......Page 76 Table 10. Wage differences between the public and private sectors......Page 77 Table 11. Trends in general government employment......Page 78 The involvement of private finances is still limited......Page 79 Figure 21. Sub-contracting......Page 80 Table 12. Share of public procurement being openly advertised internationally inEuropean Union .........Page 81 Figure 22. Local government receipts by source of finance......Page 82 Table 13. Central Government transfers and bank liabilities of local authorities......Page 83 Education outcomes do not match costs......Page 84 Table 14. Spending and unit costs at various levels of education......Page 85 Figure 23. Total expenditure on health care......Page 87 Box 7. Transforming public hospitals into corporate entities......Page 89 Table 15. Social benefits and their redistributive effects......Page 91 Strengthening monitoring and control of the budget process......Page 93 Box 8. A synopsis of recommendations to improve public spending efficiency and effectiveness......Page 94 Better matching of resources could enforce local governments’ spending discipline.........Page 95 Setting outcome objectives and increasing incentives for managers......Page 96 Encouraging competition and extending market signals......Page 97 Portugal’s growth performance in comparison......Page 100 Figure 24. Portugal’s growth performance in comparison......Page 101 Figure 25. Private investment share......Page 103 Table 16. Factors explaining differences in growth rates across OECD countries......Page 104 Figure 26. The role of skills and labour utilisation in labour productivity growth......Page 105 Upgrading skills and human capital......Page 106 Figure 27. Educational attainment of the working-age population......Page 107 Table Private rates of return to education for men in selected OECD countries......Page 109 Enhancing the stock of human capital......Page 110 Portugal’s labour market performance has been impressive, despite strict regulations......Page 113 Figure 28. Labour market indicators: an international comparison, 2001......Page 114 Figure 29. Employment protection legislation: selected OECD countries......Page 115 Figure 30. Types of employment: an international comparison......Page 116 Recent changes in employment legislation......Page 117 Active labour market policies......Page 119 Figure 31. Labour market policies in OECD countries......Page 120 The general social security system: the reform process has started......Page 121 Box 10. The2002 New Basic Law on Social Security and additional measures......Page 124 Promoting a business friendly environment......Page 125 Figure 32. Breakdown of labour productivity growth in manufacturing......Page 126 Fostering a knowledge-based economy remains a challenge......Page 128 Figure 33. Science and technology indicators......Page 129 Figure 34. ICT diffusion indicators......Page 132 The institutional design......Page 133 Progress in privatisation and sectoral reform......Page 135 Table 18. The current phase of privatisation......Page 136 Figure 35. Electricity prices in selected OECD countries......Page 139 Figure 36. Telephone charges in selected OECD countries......Page 140 Concluding remarks......Page 141 Box 11. Implementing structural reform: an overview......Page 142 Box 12. Integrating policies relating to the different dimensions ofsustainable development......Page 145 Air pollution......Page 146 Figure 37. Performance indicators: air pollution......Page 147 Table 19. Atmospheric pollution performance indicators......Page 148 Figure 38. Urban concentrations of atmospheric pollutants inOECDcountries1995......Page 150 Table 20. Selected commitments to air quality......Page 151 Table 21. Road transport: emission standards and emissions......Page 153 Reducing water pollution......Page 154 Table 22. Performance indicators: water pollution......Page 155 Table 23. Water quality in Portugal......Page 156 Working towards the sustainable use of natural resources......Page 158 Table 24. Key indicators of sustainable use of natural resources......Page 159 Table 25. Irrigation: scope and trend......Page 160 Notes......Page 162 Bibliography......Page 177 Glossary of acronyms......Page 183 Annex I. Local government funding......Page 185 Annex II. Private internal rates of return on education......Page 187 Table A.1. Private rates of return, 1999......Page 188 Figure A.1. Wages differential by level of education and by age......Page 189 Annex III. The 2002 National Action Plan for employment......Page 191 Annex IV. The 2002 Productivity and Growth Programme......Page 193 Annex V. Chronology of main economic events......Page 197 Annotation The OECD's economic survey of Portugal considers a range of issues including: recent macroeconomic developments and prospects; fiscal policy issues; the effectiveness of public expenditure policies; and structural reforms designed to sustain high growth. Its findings include that after a five year long economic boom ended in 2001, the size of imbalances which had built up have weakened the outlook for domestic demand growth. It is likely that recovery will depend largely on foreign trade, although competitiveness has been damaged by comparatively high inflation rates. The recovery is likely to be gradual, and the authorities have focused on the need for fiscal consolidation. Longer term macroeconomic performance will be strengthened by a range of structural reforms in labour and product markets