XV CONFERÊNCIA A CRISE EUROPEIA E AS REFORMAS NECESSÁRIAS PORTUGAL E O CAMINHO PARA O FUTURO: A BANCA E O SEU PAPEL FERNANDO FARIA DE OLIVEIRA
AGENDA European Context: From the Actual Crisis to Growth and More Integration Portugal: Economic Adjustment Program and Economic Growth Portuguese Banking Sector: Main Aspects and Challenges
Growth estimates: a slow path for Europe Real Gross Domestic Product growth estimates (%) 0,4 0,5 0,6 0,6 0,8 0,9 1,7 1,5 1,3 1,3 0,9 1,6 3,1 1,9 1,4 2,2 1,8 2,8-0,7-1,7 Spain Italy Japan Portugal France Euro Area 15 United Kingdom 2011 2012 2013 2014 Germany Ireland United States Source: OECD Economic Outlook 3
European issues Structural imbalances Financial fragmentation No lender of last resort Decision making process Estimates for 2012: Country Public debt as % of GDP Public deficit as % of GDP Households gross saving rate (gross savings as % of gross disposable income) Source: Ameco, IMF PT 119,1% -5,0% 9,9% IE 117,7% -8,3% 17,2% UK 88,7% -8,2% 6,1% ES 76,0% -7,0% 8,7% BE 99,0% -3,0% 14,8% FR 90,0% -4,7% 15,5% NL 68,2% -0,8% 12,5% DE 83,0% -0,4% 16,5% AT 74,3% -2,9% 12,6% IT 126,3% -2,7% 12,4% FI 52,6% -1,4% 8,1% GR 170,7% -7,5% 1,4% 4
The process of deindustrialization in Europe affected mainly the periphery countries. Index of industrial production (Base year 2000=100) 118,2 122,1 108,0 115,7 115,5 109,0 102,6 105,8 Base year 2000 = 100 92,6 83,0 96,5 81,4 96,4 80,9 94,9 71,2 Finland Germany Sweden France Spain Portugal Italy Greece 2005 2011 Source: National Statistics Institutes 5
European Union policy and budget 3 objectives: Cohesion Convergence Solidarity Source: Financial Times 6
State support to banks during the financial crisis 2008-2010 The Portuguese banking sector has demonstrated great resilience Limited State intervention State support to the financial sector as a percentage of GDP (2008-2010) 268% 67% 21% 18% 17% 16% 12% 10% 10% 8% 6% 3% 0% Total support measures without guarantees Guarantees Source: European Commission 7
Core vs. periphery countries: competitive disadvantages Interest rates on new loans to non-financial corporations (September 2012): Portugal: 6,13% Germany: 2,37% Change in interest rates on new bank loans (December 2010 to July 2012) 150 Difference in credit default swap spreads of periphery and core countries* Basis points 500 400 300 200 Sovereigns Banks Corporates 100 Italy 100 Households (basis points) 50 0-50 -100 Finland France Netherlands Austria Belgium Germany Ireland Greece Spain Portugal Cyprus 0 * Core countries: Austria, Belgium, Finland, Germany and Netherlands. Periphery countries: Greece, Ireland, Italy, Portugal and Spain. Source: IMF GFSR -150-100 -50 0 50 100 Source: ECB, IMF GFSR Corporate (basis points) 8
Borrowing from the ECB Percentage share in total ECB lending (September 2012) 30,2% 24,4% Borrowing from central banks as a percentage of nominal GDP % 120 6,9% 5,0% 0,6% Spain Italy Ireland Portugal Greece 100 80 60 40 20 0 Ireland Greece Spain Portugal Italy Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Source: ECB, IMF, National Central Banks 9
Budget deficit: commitment to fiscal consolidation 5 th Review of the Economic Adjustment Programme Public sector revenues, expenses and deficit (as % of nominal GDP) While spending in 2012 has continued to perform better than budgeted, revenues are lagging behind. The reliance so far on raising new revenues and their disappointing performance so far, (...) put a premium on completing the planned expenditure review and rebalancing the adjustment effort. 60% 50% 40% 30% 20% 10% 0% -12% -10% -8% -6% -4% -2% 0% Net lending / Net borrowing (right-hand scale) Revenues Expenses Source: Eurostat, IMF 10
Challenges for Portuguese recovery Drivers of growth Business capacity entrepreneurship Capturing investment Tax policies Financing ability Banking Markets Nominal Gross Domestic Product and real growth rate YoY Million 200.000 180.000 160.000 140.000 120.000 100.000 80.000 60.000 40.000 20.000 0 6% 5% 4% 3% 2% 1% 0% -1% -2% -3% -4% Source: Eurostat, IMF Real annual growth rate Million 11
Ease of doing business rank for small and medium enterprises - I 1. Singapore 2. Hong Kong 4. United States 5. Denmark 6. Norway 7. United Kingdom 13. Sweden 15. Ireland 20. Germany 30. Portugal 31. Netherlands 34. France 44. Spain 130. Brazil Study conducted to assess regulations affecting domestic firms in 185 countries. Evaluates 10 parameters: Starting a business Dealing with construction permits Getting electricity Registering property Getting credit Protecting investors Paying taxes Trading across borders Enforcing contracts Resolving insolvency Source: Doing Business (The World Bank and International Finance Corporation) 12
Ease of doing business rank for small and medium enterprises - II 1. New Zealand 2. Australia 3. Canada 31. Portugal 1. Hong Kong 2. Singapore 3. Georgia 78. Portugal 1. Iceland 2. Germany 3. Korea 35. Portugal 1. Georgia 2. New Zealand 3. Belarus 30. Portugal 1. United Kingdom 2. Malaysia 3. South Africa 104.Portugal Starting a business Construction permits Getting electricity Registering property Getting credit 1. New Zealand 2. Singapore 3. Hong Kong 49. Portugal 1. New Zealand 2. Australia 3. Canada 77. Portugal 1. New Zealand 2. Australia 3. Canada 17. Portugal 1. New Zealand 2. Australia 3. Canada 22. Portugal 1. New Zealand 2. Australia 3. Canada 23. Portugal Protecting investors Paying taxes Trading across borders Enforcing contracts Resolving insolvency Total tax rate: Ireland 26,4% Denmark 27,7% Switzerland 30,2% United Kingdom 35,5% Spain 38,7% Finland 40,6% Portugal 42,6% Greece 44,6% France 65,7% Italy 68,3% Source: Doing Business (The World Bank and International Finance Corporation) 13
Exports as a source of growth Portuguese exports, imports and trade balance of goods and services as a percentage of GDP* % GDP* 45% 35% 25% Imports Exports 15% 5% -5% -15% * Nominal Gross Domestic Product. Source: IMF, Statistics Portugal Trade Balance Imports Exports 14
Diversification of markets Portuguese exports, percentage share by destination 20,5% 22,5% 24,1% 25,9% 28,3% Other ountries 1,4% 2,6% 5,6% 5,3% 5,8% 5,5% 3,4% 6,3% 3,5% 19,5% 4,2% 19,2% 16,5% 18,6% 19,3% 10,8% 8,1% 5,5% 5,1% 12,7% 13,3% 11,8% 5,1% 12,1% 11,8% 12,0% 12,8% 13,5% 17,8% 12,6% 27,4% 27,9% 24,9% 20,1% 22,3% Angola USA Other EU countries UK France Germany Spain 2000 2005 2008 2011 Jan-Sep 2012 Source: Statistics Portugal 15
Main aspects of the Portuguese banking sector I. II. III. Solvency position has been evolving in a positive way Increase of Core Tier 1 Ratio mainly through higher capital Improvements in the composition of overall solvency Positive signs in terms of funding and liquidity Deposit growth both in volume and in terms of weight in the financing structure Reduction of the Loan-to-Deposit Ratio to levels close to 120% Deterioration trend in credit quality Specially in loans to non-financial corporation and consumer credit, although the latter has little weight on total credit IV. Profitability was affected, specially due to the recording of impairments resulting directly from the deterioration in the quality of loans Source: Banco de Portugal 16
Conclusion European Union: on the way to a better integration Need to reinforce cohesion, converge and solidarity New strategy for growth and employment Strong and coherent financial regulation Portugal: the challenge to go from recession to growth Fulfilment of the Economic Adjustment Programme A new model of growth, based on tradable goods Maintain social peace and political compromise Portuguese banking sector: great resilience High level of soundness Capacity to implement a strict deleveraging process 17
XV CONFERÊNCIA A CRISE EUROPEIA E AS REFORMAS NECESSÁRIAS PORTUGAL E O CAMINHO PARA O FUTURO: A BANCA E O SEU PAPEL FERNANDO FARIA DE OLIVEIRA