NRP Portugal

|MACROLEVELThe improvement in the quality of public finances, with emphasis on its long termsustainability,andthecreationofastablemacroeconomicenvironmentthatfavourseconomic growth, remained as the main strategic objectives within themacroeconomicareainthelastyear.InJune2008,ayearearlierthanforecast,theproceedingsforexcessivedeficittakenagainstPortugalin2005wasterminated.Thebudgetaryconsolidationprocessinitiatedin2005enabledthecorrectionofaconsiderablepartofthebudgetaryimbalance.In2007,thepublicaccountsdeficitwasthelowestforthelast30years.Morethanhalfofthe3.5percentagepoint(p.p.),reductioninthedeficitinrelationtoGDPregisteredin2006and2007(from6.1%to2.6%oftheGDP),resultedfromthedecreasedweightofpublicexpenditureintheGDP.AlsotheweightofpublicdebtintheGDPwasreducedin2007,paralleltotheevolutionofthebudgetarydeficit;thisstoodat63,6%(‐1,1p.p.thanin2006),thusinterruptingtheupwardtrendofthesixpreviousyears.Giventhegoodresultswhichwereobtained,thebudgetarytargetfor2008wasrevisedto‐2.2%oftheGDP(previously‐2.4%).On the other hand, the reforms taken in the social security systems, both in thegeneral regime and the social security regime for public servants, enabled thereduction of the sustainability risk associated with the evolution of public expenseswhich are sensitive to the aging of the population (namely, pension expenses),removing Portugal from the group of “high risk” countries, favouring the long termsustainabilityofpubicfinances(see“SocialSecuritySustainabilityDriver”Box),throughthemaintenanceofthepublicsocialsecuritysystem,thatwillassurethepensionsofthePortugueseworkersinthelong‐run,guaranteeingthesocialsecuritysustainability,protectingthelongercareers(throughactiveretirementpolicies)andprotectinglowincome pensioners (stimulating positive discrimination policies in the pension’scalculation.In2007,thePortugueseeconomyacceleratedinrelationtothepreviousyear,withtheGDPgrowing1.9%inrealterms(1.4%in2006).However,theinternationaleconomicsituationhassincetakenadownturnmainlyduetotheprolongeddisturbanceintheinternational finance markets and to the bullish oil and food prices; this led to adeterioration of the contribution of the net external demand and in a moderateaccelerationofthepricegrowthduringthefirsthalfof2008inPortugal.ItisworthstressingthatthegrowingrhythmofpricesinPortugalhasbeenbelowtheeurozoneaverage and in the last few months the national inflation rate remained the secondlowestofthesecountries.The national finance system has maintained a solid financial structure and effectivesupervision; we note in particular the capacity of Portuguese banks to adapt theunfavourableconditionsofthefinancemarkets.6