Portugal Says It’s Closely Following Ireland in Return to MarketDavid Tweed and Henrique Almeida
Portugal will “wait and see” how Ireland attempts to regain full access to debt markets before deciding how to exit its own bailout program next year, Economy Minister Antonio Pires de Lima said.
“Ireland, I think, might be a good example for what is the Portuguese ambition,” Pires de Lima said in a Bloomberg television interview today. While a precautionary program is “something that has to be placed on the table,” Portugal isn’t negotiating anything right now with its creditors, he said.
Portugal, which in 2011 followed Greece and Ireland in requesting emergency aid, plans to cut spending by 3.2 billion euros ($4.3 billion) in its 2014 budget to meet deficit targets agreed with the European Union and the International Monetary Fund. The government is counting on “strong signs” of an economic recovery to attract investors and return to markets in June as planned, Pires de Lima said.
“All the indicators are quite positive and I really think that we already got out of recession and we are on good track to achieve some modest growth in 2014,” Pires de Lima said. “The biggest priority has to be attracting investment.”
Portugal’s 10-year bond yield has climbed since May, and was at 6.11 percent today compared to 3.58 pecent for similar Irish debt. Portugal pays 3.2 percent on its bailout loans, and its debt is ranked below investment grade by Fitch Ratings, Moody’s Investors Service and Standard & Poor’s.
Portugal raised its 2014 growth outlook on Oct. 3 to 0.8 percent from 0.6 percent. It forecasts GDP will shrink 1.8 percent this year. The unemployment rate will be 17.7 percent in 2014. Portugal’s economy expanded in the second quarter for the first time since 2010 as export growth accelerated.
While the government is optimistic about its plans to sell as much as 70 percent of state-owned postal operator CTT-Correios de Portugal this year, partly through an initial public offering, it is cautious about a second attempt to dispose of airline TAP SGPS SA, Pires de Lima said.
“TAP airline is something where we have to be more prudent,” he said, citing market conditions and an EU rule limiting outside ownership of the bloc’s airlines to 49 percent. A sale “is planned for 2014 but I wouldn’t dare give you an exact timing for the privatization right now.”