-
Policy
Policy
Exclusive interviews with leading policymakers that convey the true policy message that impacts markets.
LATEST FROM POLICY: -
EM Policy
EM Policy
Exclusive interviews with leading policymakers that convey the true policy message that impacts markets.
LATEST FROM EM POLICY: -
G10 Markets
G10 Markets
Real-time insight on key fixed income and fx markets.
Launch MNI PodcastsFixed IncomeFI Markets AnalysisCentral Bank PreviewsFI PiFixed Income Technical AnalysisUS$ Credit Supply PipelineGilt Week AheadGlobal IssuanceEurozoneUKUSDeep DiveGlobal Issuance CalendarsEZ/UK Bond Auction CalendarEZ/UK T-bill Auction CalendarUS Treasury Auction CalendarPolitical RiskMNI Political Risk AnalysisMNI Political Risk - US Daily BriefMNI Political Risk - The week AheadElection Previews -
Emerging Markets
Emerging Markets
Real-time insight of emerging markets in CEMEA, Asia and LatAm region
-
Commodities
Commodities
Real-time insight of oil & gas markets
-
Credit
Credit
Real time insight of credit markets
-
Data
-
Global Macro
Global Macro
Actionable insight on monetary policy, balance sheet and inflation with focus on global issuance. Analysis on key political risk impacting the global markets.
Global MacroDM Central Bank PreviewsDM Central Bank ReviewsEM Central Bank PreviewsEM Central Bank ReviewsBalance Sheet AnalysisData AnalysisEurozone DataUK DataUS DataAPAC DataInflation InsightEmployment InsightGlobal IssuanceEurozoneUKUSDeep DiveGlobal Issuance Calendars EZ/UK Bond Auction Calendar EZ/UK T-bill Auction Calendar US Treasury Auction Calendar Chart Packs -
About Us
To read the full story
Sign up now for free trial access to this content.
Please enter your details below.
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
Real-time Actionable Insight
Get the latest on Central Bank Policy and FX & FI Markets to help inform both your strategic and tactical decision-making.
Free AccessMNI INTERVIEW: Portugal To Weather APP End, Hikes: BdP Correia
--Rate Hike Impact On Portugal Debt Limited, Transmission "Slow"
--Prudent Fiscal Policy Needed For The Longer Term
By Silvia Marchetti
ROME (MNI) - Portugal's economy is in a good state to weather the European
Central Bank's ending of its asset purchase program and subsequent interest rate
hikes, provided the public debt reduction path is pursued with determination,
Isabel Horta Correia, Head of Economics and Research at Banco de Portugal, told
MNI in an interview.
Correia noted how progress made in balancing fiscal and growth targets
allowed for significant headroom when the ECB's normalisation phase kicks in,
although the country's high public debt remained a vulnerability.
"The current Portuguese public debt structure allows for some resilience if
an interest rate shock occurs," Correia said.
The end of the APP, set for December, is seen as less critical than the
first hike in interest rates, even though not due before late Q3 2019.
"Available simulations show that a rise in interest rates by 100 bps would
imply an increase of interest payments, essentially through new issuance,
between 0.1 and 0.2 pp of GDP in the first year, and an additional 0.1 pp in the
following years. Overall, the full transmission, although depending on the
magnitude of the shock, would be relatively slow," she said.
--SOME VULNERABILITIES
But in any case, she warned, "the fact that Portugal is a small open
economy with a high public debt ratio contributes to increasing the
vulnerability of the country".
According to Correia, the public debt ratio, despite being on a sustained
declining trend path thanks to the ongoing fiscal adjustment underway, remains
very high and could expose Portugal to externally-fed sovereign risks.
In its updated projections, BdP predicts GDP to grow 2.3% this year and
1.9% in 2019, while public debt, despite having fallen from 131.7% of GDP in
2017 to a current 126.4%, still shows some monthly upward fluctuations. In May,
debt rose modestly, up E0.3 billion to E250.3 billion.
--NO NORMALISATION CONCERNS
Correia acknowledged that Portugal's debt spreads had been significantly
contained by the ECB's accommodative policy stance, but brushed away concerns
that normalisation could act as a potential setback to growth and fiscal
targets, provided there was a continued effort to boost both fronts.
Portugal had indeed benefitted from the ECB's measures but has also done
its homework in adjusting public finances, noted Correia.
The normalisation of debt spreads witnessed recently, particularly in
comparison to other southern European periphery states, was, in large part, due
to the prudent fiscal policy and structural reforms carried out by Lisbon's
government.
The only way therefore to avert risks from any post-APP normalisation phase
is to further boost fiscal efforts with a multi-year agenda, said Correia.
--GREATER REFORM NEEDED
More still needs to be done to curb public debt and reassure investors, and
the only way to do so is by means of a long-term "prudent fiscal policy" that
takes into account a potentially less favourable pan-Eurozone outlook post-APP
and rate hikes.
Correia stressed that the ECB's pledge of continued accommodative support
to the bloc remained crucial, even once normalisation kicks in.
"The continuation of an accommodative stance in monetary policy is
beneficial for the normalisation of credit conditions and the financing of
productive investment in the tradable sectors," she said.
--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com
[TOPICS: M$X$$$,MT$$$$,MX$$$$,M$$EC$,MFX$$$,MGX$$$]
To read the full story
Sign up now for free trial access to this content.
Please enter your details below.
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.