from the edi­tor

Finweek English Edition - - CONTENTS - JANA MARAIS

I've spent the past week hik­ing through the Por­tuguese coun­try­side, where there has been lit­tle ev­i­dence of the coun­try’s eco­nomic re­cov­ery.

Por­tu­gal, like a num­ber of its fel­low south­ern Euro­pean coun­tries, was hit hard by the global fi­nan­cial crisis, prompt­ing a pro­tracted re­ces­sion, mas­sive debt han­gover and €78bn bailout from the EU and In­ter­na­tional Mone­tary Fund in 2011.

At that time, the coun­try was down­graded to junk – six years and many painful re­forms later, it is yet to re­gain an in­vest­ment grade credit rat­ing from Moody’s, Stan­dard & Poor’s and Fitch. (The lit­tle-known Cana­dian rat­ing agency DBRS has main­tained its in­vest­ment grade rat­ing on Por­tuguese debt, which has al­lowed the coun­try to ben­e­fit from the Euro­pean Cen­tral Bank’s bond-buy­ing pro­gramme.) Growth is ex­pected to re­main a very lack­lus­tre 1.25% over the next two years, ac­cord­ing to the Or­gan­i­sa­tion for Eco­nomic Co-op­er­a­tion and De­vel­op­ment (OECD).

While Por­tu­gal has seen sig­nif­i­cant im­prove­ments in a num­ber of ar­eas – un­em­ploy­ment, for ex­am­ple, has been cut from over 15% to around 10%, and the bud­get deficit hit a 40-year low of 2.1% in 2016, less than half of 2015’s 4.4% and back within EU lim­its – it has been a long, hard slog. GDP re­mains be­low pre-crisis lev­els; govern­ment debt is a mas­sive 130% of GDP (2008: 70%); and con­cerns re­main about the health of its bank­ing sec­tor, which has re­quired govern­ment bailouts and con­tin­ues to weigh on in­vestor con­fi­dence. Cor­po­rate debt lev­els (ex­clud­ing the fi­nan­cial sec­tor) are at about 145% of GDP, among the high­est lev­els in Europe.

As part of its re­cov­ery plans, a pro­gramme called Por­tu­gal 2020 was launched in 2014, with €25bn ear­marked from the Euro­pean Com­mis­sion for projects to im­prove com­pet­i­tive­ness, cre­ate jobs and de­velop skills. Dur­ing our hike we passed nu­mer­ous con­struc­tion and agri­cul­tural projects that ben­e­fit from this pro­gramme, though it is clear that much more in­vest­ment will be needed to reach higher and sus­tain­able lev­els of growth.

In gen­eral, ob­serv­ing the di­lap­i­dated man­sions in Por­tu­gal’s small towns and vil­lages left me with the feel­ing that the coun­try’s glory days are be­hind it. In South Africa, de­spite our many chal­lenges, there are many signs of progress – and I con­tinue to be­lieve that our best days are yet to come. But, as Por­tu­gal’s re­cov­ery shows, it is much eas­ier to wreck an econ­omy than to build it – we, too, are in for a long, hard slog.

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