Banks, Financial

Banking app targets millennials who want help budgeting

Graduate debt, rent and high living costs have made it hard for millennials to save for a house, a pension or even a holiday. For Ollie Purdue, a 23-year-old law graduate, this was reason enough to launch Loot, a banking app targeted at tech-dependent 20-somethings who want help to manage their money and avoid falling […]

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Eurozone inflation climbs to highest since April 2014

A welcome dose of good news before next week’s big European Central Bank meeting. Year on year inflation in the eurozone has climbed to its best rate since April 2014 this month, accelerating to 0.6 per cent from 0.5 per cent on the back of the rising cost of services and the fading effect of […]

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Wealth manager Brewin Dolphin hit by restructuring costs

Profits at wealth manager Brewin Dolphin were hit by restructuring costs as the company continued to shift its focus towards portfolio management. The FTSE 250 company reported pre-tax profits of £50.1m in the year to September 30, down 17.9 per cent from £61m the previous year. Finance director Andrew Westenberger said its 2015 figure was […]

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Travis Perkins and Polymetal to lose out in FTSE 100 reshuffle

Builders’ merchant Travis Perkins and mining company Polymetal face relegation from the FTSE 100 after their recent performances were hit by political events. The share price of Travis Perkins has dropped 29 per cent since the UK voted to leave the EU in June, as economic uncertainty has sparked concerns among some investors about the […]

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RBS share drop accelerates on stress test flop

Stressed. Shares in Royal Bank of Scotland have accelerated their losses this morning, falling over 4.5 per cent after the state-backed lender came in bottom of the heap in the Bank of England’s latest stress tests. RBS failed the toughest ever stress tests carried out by the BoE, with results this morning showing the lender’s […]

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Categorized | Economy

Portugal faces renewed slowdown, says IMF

Posted on September 22, 2016

Pedestrians walk past stores in a shopping street in central Lisbon, Portugal, on Wednesday, Oct. 13, 2010. Portugal's four biggest banks will meet Social Democratic Party leader Pedro Passos Coelho today to discuss the risks the country will face if the 2011 budget is not approved in parliament, Diario Economico reported, without saying how it obtained the information. Photographers: Mario Proenca/Bloomberg©Bloomberg

The IMF says Portugal’s consumer-driven recovery is running out of steam

Portugal’s fragile recovery is losing momentum, with growth held back by sluggish investment and weak exports as uncertainty and corporate debt weigh on the economy, the International Monetary Fund has warned.

    “The consumption-based recovery of the past three years is running out of steam, the fiscal stance remains expansionary, the current account is weakening and the banking system is plagued by low profitability,” the fund said on Thursday in its latest report on Portugal’s progress since a 2011-2014 bailout programme.

    Portugal, it said, “remains uniquely vulnerable to shifts in market sentiment”.

    The IMF’s forecast of a worsening slowdown comes ahead of critical decisions by the minority Socialist government and its leftwing partners on next year’s budget and a crucial ruling by Canadian rating agency DBRS in October on Portugal’s only investment-grade credit rating.

    Warning that growth was likely to decelerate to 1 per cent this year from 1.5 per cent in 2015, the fund said policy reversals by the “anti-austerity” government that took office in November “had generated uncertainty that appears to be a significant factor behind the slowdown in investment”.

    António Costa, the prime minister, who has vowed to “turn the page on austerity”, has increased the minimum wage, restored cuts in public sector wages, reinstated public holidays abolished during the bailout and removed an increase in working hours for most civil servants.

    Mr Costa said his anti-austerity programme was delivering both economic growth and fiscal discipline. He has dismissed any suggestion of a second bailout as “nonsense” and says the budget deficit this year will fall “comfortably below” the 2.5 per cent of national output agreed with the European Commission.

    Mr Costa believes his policies have also been vindicated by the recent damning internal report into the IMF’s handing of the eurozone debt crisis.

    While forecasting the budget deficit at 3 per cent of output this year and next, the IMF said “fiscal loosening” together with support from the European Central Bank through its government bond-buying programme had translated into “robust consumption growth”.

    But it warned that a slowdown in economic activity coupled with vulnerabilities in the banking sector and high public debt left Portugal at a “challenging juncture”, saying that “risks had tilted to the downside”.

    The fund forecasts investment will contract by 1.2 per cent this year after increasing 4.1 per cent in 2015. It also sees the positive current account balance of recent years, one of the most significant achievements of Portugal’s adjustment programme, falling to zero this year and minus 0.6 per cent of gross domestic product in 2017.

    Portugal’s borrowing costs have been higher this year than at any time since April 2014, when Lisbon resumed long-term debt auctions, the report added. “Further negative surprises,” such as a “renewed period of political instability” could push spreads on government bonds even higher, it warned.

    Portugal reforms not gone far enough to ensure financial solidity

    Minority Socialist government more inclined to crowd-pleasing anti-austerity measures than deep reform

    Instability could stem from potential disagreements over next year’s budget between the minority government and the parties further to its left on whose parliamentary support it depends, or between Lisbon and the commission, the IMF said.

    A decision by Canada’s DBRS to downgrade Portugal when it reviews the country’s credit rating in October would deprive Lisbon of its only investment-grade rating and exclude the country from the ECB’s bond-buying programme.

    However, although DBRS has expressed concern over Portugal’s disappointing growth, it has stated that it remains “comfortable” with its current rating. Having maintained an investment-grade rating since before the bailout, DBRS is seen by most analysts as unlikely to downgrade Portugal now.