WEEKLY ECONOMY NEWS REPORT February 17 23, 2018

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1 WEEKLY ECONOMY NEWS REPORT February 17 23, 2018 About 180 million euros were paid to Portuguese internationalization projects until January this year, under Portugal 2020 program, which gathers several community funds. The balance was made by the Secretary of State Assistant and for Trade, Paulo Alexandre Ferreira. Under this program, Portugal will have a total of 25 thousand million euros to boost growth and job creation. The Secretary of State considered that the financial supports have been having repercussions in the performance of the national exports over the last two years and praised the Portuguese entrepreneurial sector for their internationalization effort. The Minister of Economy, Manuel Caldeira Cabral, said this weekend that the investment of foreign companies in Portugal enables to bring back to the country young people who left during the adjustment period because they did not find opportunities that exist now through entrepreneurship, national companies growing and foreign companies operating in the country. Caldeira Cabral considered that the investment of foreign companies in Portugal is a vote of confidence in the country and the Portuguese talent. The choice for Portugal has to do with the good technologic infrastructures, good areas to grow, competitive costs, good connections, good technologic capacity and talent, and good working skills. Elvas, in Alentejo, will host the first Military Tourism World Summit on November. Announced by the Secretary of State of Defence and by the municipality a few months ago, the date of the event was chosen on purpose to overlap with the Web Summit in Lisbon. According to sources of the Defence Ministry, the idea is to compete with the Web Summit, the famous 1

2 tech summit that in this edition will have information on the event in Elvas and as a way to, using new technologies, give the highest possible visibility to the Portuguese historic military heritage. Web Summit has been a great stage for Portugal's external promotion. According to data of Turismo de Portugal, in November of last year there was a 10,2% increase in the number of guests comparing to the same month of Tourism in Portugal has been hitting records since 2014, but the salaries accounted by the statistics office do not seem to accompany this growth rhythm. Last year, the average net salary paid by the sector of accommodation, restaurants and alike was not higher than 632 euros, 41 euros more than in 2014, when the activity grew again, and only 45 euros more than in 2011, the year when the troika arrived to Portugal. Last year, Portugal hosted almost 21 million tourists, with the sector accounting for 7% of the national economy in 2016, with revenues achieving 12,6 thousand million euros, two times more than ten years ago. The unemployment rate of the Organization for Economic Cooperation and Development (OECD) recorded a decrease of one tenth in December to 5,5%, the same figure as before the crisis. The countries with the highest falls in the Eurozone were Portugal (three tenths), Ireland, Slovenia and Spain (all with a two-tenths decrease). The president of the Forum for Competitiveness, Pedro Ferraz da Costa, criticized the growth of the Portuguese economy, whose performance he considered weak comparing to the external framework. In his opinion, the national economy could be growing more than 4%, although it recorded last year the highest figure the year 2000: 2,7%. Ferraz da Costa also said, in an interview to Jornal i, that companies have difficulties in hiring, because "people do not want to work". 2

3 The 2018 Global Talent Competitiveness Index (GTCI) places Portugal in the 29 th place among the world's most talented countries, a two position raise comparing to the 2016 ranking. This year's chart is headed by Switzerland, followed by Singapore and the United States. Countries like Spain and Italy are below Portugal, which has better scores in tolerance to minorities and emigrants, quality of living, publication of articles in scientific magazines, pension system and salary gap between men and women. On the other hand, the worst marks of the country have to do with high-school, ease of change, high value exports, cooperation between organizations, intellectual enrichment and professional management. The Israeli company Delek Drilling and its north-american partner Noble Energy signed a 15 thousand million dollar agreement to sell 64 thousand million cubic meters of natural gas, throughout ten years, to the Egyptian company Dolphinus Holdings. Delek Drilling's CEO, Yossi Abu, explained that most part of the gas will be meant to the Egyptian domestic market, but admitted that these exports can pave the way to more cooperation and turn Egypt into an export platform for the Israeli gas. Novo Banco is expected to present losses between 1,6 and 1,8 thousand million euros in the exercise of last year, according to sources contacted by Negócios. If this scenario comes into being, it will be the fourth year in a row of losses to Novo banco: between 2014 and 2016, the institution had accumulated losses of 2,3 thousand million euros. Until September last year, the net results were negative in 419 million euros. Galp recorded profits of 602 million euros in 2017, which corresponds to a 25% increase in the net results when compared to The information was released this week to the market. The increase of production and of the fuel 3

4 and natural gas prices made up for the dollar devaluation against the euro. The exploration and production business area was the one that grew the most last year, surpassing even the segment of refinery and distribution. The Spanish Finance Minister, Luis de Guindos, will replace Vítor Constâncio in the vice-presidency of the European Central Bank (ECB), after his only competitor, Philip Lane, withdrew from the run due to lack of enough support. Mário Centeno, the president of the Eurogroup, already confirmed this information. The Secretary of State of Finance, Ricardo Mourinho Félix, who represents Portugal at the meetings of the Eurozone Finance Ministers since Mário Centeno became the president of the Eurogroup, commented in the end of yesterday's meeting in Brussels that Luis de Guindos gathers good conditions to be a great vice-president of the European Central Bank and rejected the idea of the danger of a "politicization" of the institution because a Finance Minister was chosen rather than a Governor of a Central Bank. The real estate market in Porto is attracting increasingly more Israeli Jews. The business opportunity, combined with the easiness of obtaining the Portuguese nationality, through the proof of Sephardic ancestry, has been raising the curiosity of these new investors. There are already million euros invested in projects in the city. Last year, the number of Chinese who visited Portugal went up 40,7% ( more), a rhythm three times higher than the one recorded in Overall, and according to data of the National Bureau of Statistics (INE), Chinese tourists visited Portugal in 2017, the year when the direct flight between Lisbon and Beijing was inaugurated. According to the Secretary of State for Tourism, Ana Mendes Godinho, the growth of the Chinese market is 4

5 also explained by a joint promotion work with the private sector in the Chinese market. Chinese tourists were accountable for overnight stays in Portugal and spent an average of 642 euros per day. This amount is quite above the 506 euros that the north-american tourists spend and the 252 euros spent by the Angolans. The Social Security informed that the number of unemployed being granted the unemployment allowance fell 13,1% in January, when compared to the same month of last year, and went up 3,8% comparing to December 2017, to The average amount of the unemployment subsidy in January was 481,49 euros. The president of the Portuguese Farmers Confederation (CAP), Eduardo Oliveira e Sousa, considers that the current drought situation that led to the reduction of the crop area of the Autumn/Winter cereals to an historic low of the last 100 years is a "catastrophe" and must be fought by a national emergency plan involving several Ministries. Oliveira e Sousa adds that the current situation is not affecting only agriculture, but also livestock industry, water reserves and is killing the forest. Concerning the credit lines of the Government, the president of CAP considers that they are not enough and are not suitable to emergency situations. The Minister of Economy, Manuel Caldeira Cabral, considered yesterday that the Portuguese economy is recovering in a sustainable way. In 2017, exports went up 11%, the highest growth of the last six years. Meanwhile, it was already known that investment recorded the highest growth of the last 18 years and the Gross Domestic Product (GDP) the highest of this century. The Minister added that, two years ago, the confidence of the companies and the citizens was still resuming and now the country records a solid, robust and 5

6 sustainable growth, both in the domestic demand and in consumption, investment and exports. The current situation of CTT has been generating many criticism by the political parties and also the regulator, mainly due to the deterioration of the postal service and the restructuring plan that includes closing some branches and reducing about 800 workers in three years. The renationalization of the company will go back to the Parliament, this time by the initiative of the Communist Party (PCP). CTT s privatization started in 2013 with the sale of 70% and ended in the following year with the sale of the remaining 30% of the capital. The return of CTT to the public sphere will be debated at the Parliament today, just a day before the company s workers strike again. This is not the first time that the return of CTT to the State is discussed at the Parliament. In the end of last year, the topic was debated and rejected. According to the 2017 ranking on corruption levels in the public sector, carried out by Transparency International, Portugal keeps the 29th place among 180 countries (the same as last year), by getting a score of 63 out of 100 points. According to the organization, Portugal is two points below the European average, which the association Transparency and Integrity regrets. In a press release, the association refers that Portugal continues to stand chronically below the average of Western Europe in the fight against corruption and adds that this stagnation is the sign of the lack of political will to address this critical problem for the proper functioning of the institutions and for the economy s capacity to be competitive, attract investment and create jobs. The index, which assesses 180 countries and territories according to their levels of perception of corruption in the public sector, uses a scale from zero to 100 points, in which zero qualifies a country as highly corrupt and 100 a country totally exempted from corruption. 6

7 The Portuguese Central Bank revealed this week that the Portuguese external debt decreased to 92,9% of the Gross Domestic Product (GDP) in The decline of the weight of external debt was only due to the growth of the economy, because, in nominal terms, the debt even went up. In the end of last year, the external debt was estimated in 178,6 thousand million euros, 3,3 thousand million more than in the end of Tourism is going through the best moment ever in Portugal and its effects on economy are undeniable. Last year, the expenditure of tourists who visited Portugal passed, for the first time, the barrier of 15,1 thousand million euros. Among trips, hotels and shopping, tourists left in Portugal 41,5 million euros every day. The data published yesterday by the Portuguese Central Bank confirm that 2017 was the best year ever for tourism. On its turn, the National Bureau of Statistics (INE) had already released the data of the tourism activity that hit all records: almost 21 million visitors and more than 57 million overnight stays. The Chinese, north-american and Brazilian tourists are the ones who spend the most when travelling. The Minister of Economy, Manuel Caldeira Cabral, presented this week the new model of Interface program, which will have two six-year credit lines of 120 million euros, in order to bring more innovation to companies in Portugal. The defined priorities are digitalization, circular economy and energetic efficiency. Besides this, Interface intends to reinforce the role of the program's centres as a bridge for innovative technology transfer between universities and research centres and companies. The Minister of Science and Higher Education, Manuel Heitor, announced hat there will be a 5% reduction of the vacancies in Lisbon and Porto universities and polytechnic institutes. The idea is to distribute these thousand vacancies among universities of the interior of the country. 7

8 The average unemployment allowance recorded in January a 6,9% increase in a yearly comparison. This period of time matches the two moments of the gradual cancellation of the 10% cut that was applied after six months of unemployment. Even so, the average amount of this subsidy is 481,9 euros per month. The evolution of this indicator relevant not only for social reasons, but also because if influences the salaries that the unemployed are willing to accept, having thus an effect on the new salaries of the economy. During the period of the Economic and Financial Adjustment Program in Portugal, more than ten law changes in labour issues were introduced, with a main focus on making it easier to fire employees with a permanent contract and on decreasing the respective compensations. In spite of that, both the European Commission (EC) and the International Monetary Fund (IMF) have been stating, in almost every report since Portugal ended the program in 2014, that labour law continues to be too restrictive and that one had to go further. This month, the Commission reaffirmed that Portugal still has room to implement reforms that reduce the excessive labour protection in permanent contracts. It has been five years since the public debt had such a low weight in the Gross Domestic Product (GDP): in 2017, it fell to 126,2% of the GDP, precisely the goal outlined by the Government and 4,1 percentage points less than in the end of The early payments to the International Monetary Fund (IMF) played a vital role, as the numbers published yesterday by the Portuguese Central Bank show. Despite the reversion of the increase trend, the public debt in Portugal continues to be one of the highest of the Eurozone, just after Greece and Italy. The Finance Minister already assumed that the one of the Government's goals is to take advantage of the good economic situation to accelerate the reduction of the debt weight. For this year, the Government is committed to another decrease, to 123,5% of the GDP. The debt reduction 8

9 was one of the key factors for rating agencies to upgrade the Republic's credit notch. 9