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Portugal faces tangible risk of missing budget deficit target

Staff writer ▼ | June 15, 2015
Portugal faces a "tangible risk" of not meeting its budget deficit target this year if there are no further cuts in spending, the International Monetary Fund (IMF) warned.
IMF   International Monetary Fund warns
"In the absence of steps to reduce primary spending, the overall fiscal deficit this year is currently projected at 3.2 percent of GDP," the IMF's second Post-Program Monitoring report read.

The Portuguese government has insisted that the country will manage to bring its budget deficit down to 2.7 percent of GDP.

The IMF also said faster medium-term growth required further structural reforms.

"Recent efforts to move forward with privatization, transport concessions and lowering natural gas prices for end-users have been encouraging, but reforms to increase the effectiveness of the public sector have continued to lag," the IMF said.

"Labor market reforms to spur job creation remain a particular challenge, especially for lower-skilled workers, and fresh reform initiatives in this area would be desirable," the IMF said.

Portugal signed a 78-billion-euro ($87.8-billion) bailout with the European Central Bank (ECB), International Monetary Fund (IMF) and European Commission (EC) in 2011.

The country is nursing itself back to financial health and has said it will repay the IMF 2 billion euros ($2.3 billion) it owes earlier than scheduled. Portugal paid the IMF 6.6 billion euros ($7.4 billion) back in March.