Portugal EMU

HEAD-EMU

Country Analysis

Portugal

 


The probability of Portugal joining EMU from the start remains questionable at best. There is a possibility that Portugal could be in the first round based upon economic conditions. There is also a potential for gold sales to help bring its debt ratio into line. Overall, Portugal’s GDP growth is currently running at 2.3% while inflation has fallen rather steadily for the past few years. Fiscal conditions in Portugal have also improved significantly since the major low in 1993. The only questionable factor here remains the question of price stability criteria. Still, a continuation of current fiscal policies within Portugal should lead to its ultimate goal of meeting all the criteria by 1999 at the lastest suggesting that it should join EMU by 2001. It is unlikely that Portugal would join EMU unless Spain also is admitted.

Politics within Portugal currently places the centre-left government in a minority position in parliament. Still, there exists a broad overall consensus on both fiscal policy and matters relating to European Union. The current government may remain in power only until September 1999.


1995 1996e 1997f
ERM Member Y Y Y
Inflation 4.1 3.1 2.9
Budget Deficit / GDP 5.1 4.0 2.9
Debt / GDP 71.7 71.1 70.6
10Y Bond Yields 11.4 8.5 6.8
f=forecast e=estimate

 

© Princeton Economic Institute

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