Interview: Bank economist says Portugal unlikely to need second bailout

A second bailout is an unlikely scenario for Portugal as long as the country continues to consolidate its public finances, chief economist at bank Montepio Rui Bernardes Serra has said.

"The government is committed to complying with the budgetary goals agreed with the European Union and the strategy being followed by the country will ward off the need for new adjustment programs," he told Xinhua recently.

However, the European Commission is not completely satisfied with the government's strategy, he added, saying that the economy is not growing as much as the government hoped.

Last year, Portugal's deficit was 4.4 percent of GDP, above the target of 2.7 percent that the country agreed with the European Commission.

Portugal's Prime Minister Antonio Costa has said he will bring the deficit down comfortably below 2.5 percent of GDP this year. However, the IMF has predicted the deficit will be 3 percent of GDP.

Costa has lowered taxes and reversed pay cuts to spur growth since taking office in November, reversing his predecessor's austerity policies, making its main focus on private consumption.

Bernardes Serra pointed out that private consumption has grown at a moderate rate since 2014, and "in this sense, the government's policies of reversing cuts in salaries and pensions showed some results."

"Nevertheless, in terms of GDP, the results will fall short of what the government hoped, and investment is in large to blame."

Portugal's main challenges now are to continue to reduce the deficit, to accelerate growth of GDP so that unemployment falls to socially acceptable levels, and to maintain the current account surplus, he added.

Public investment will depend on the need to reduce the deficit, though there will be some leeway for local investments to rehabilitate the historical centers of Portuguese cities, he said.

These policies have the power to "promote growth and the local economy, as well as improve the quality of tourism supply of Portuguese cities, which is fundamental for exports of tourism services to continue to grow."

Private investment could be boosted by having a liberal or "market friendly" framework, he believed.

Exports have been the main engine of economic growth in past years but recent figures by the Portuguese national institute of statistics showed there has been a slowdown. The IMF recently said in a report that the economy was "losing momentum, with growth held back by sluggish investment and weak exports."

Bernardes Serra said that growth of exports in the past years have proven that Portuguese companies are competitive and managed to find an alternative in international markets.

However he suggested the government could alert businesspeople of the excessive dependency on riskier markets, and promote contact with markets of higher export levels and more potential for growth.

He also believed the country's falling unemployment rate shows the economy is improving slightly, though there is a long way to go to reach pre-crisis unemployment levels. Endit