Resist until spring

The Government's option for temporary measures is legitimate and prudent. But I believe it is possible, and desirable, to give greater scope to incentives to business activity. For exceptional moments, exceptional measures are also required.

The approval of OE2021 in the specialty did not bring great news to companies. Moreover, the budget debate has been very much about issues that are collateral to the economic and social crisis, and it seems that Parliament has forgotten the gravity of the moment we are experiencing. Immediate political struggle prevailed and consensus was not reached, as the situation requires, on issues that enhance the country's rapid and solid recovery.

Still, the approval of the extension of the adhesion to the credit moratoriums until March, of the possibility of payment to installments of VAT and IRC (up to 25 thousand euros) and of the inclusion of the managing partners in the new social support of 2021 is approved. Measures that add to many other budget proposals approved in general and that bring benefits to companies, such as investment tax credit and the non-aggravation of autonomous taxation. All in all, the idea that this is not an expansionist budget, aimed at stimulating the economy, is reinforced.

It seems clear that the Government's option is to present temporary measures to support companies, depending on the evolution of the pandemic. The executive thus seeks to avoid a significant increase in structural expenditure and the consequent worsening of the budget deficit, in order to contain the pressure on a public debt that has already reached 130% of GDP. Portugal is, therefore, among the eurozone countries with the least budgetary stimulus and is one of those most betting on temporary measures to support the economy.

The Government's option for temporary measures is legitimate and prudent. But I believe it is possible, and desirable, to give greater scope to incentives to business activity. EU budgetary rules are suspended and, in Brussels, there is even a call for the adoption of expansionary policies by Member States. Furthermore: the interest rates on the Portuguese debt are close to zero, which allows the country to save a few million euros and thus offset the increase in public spending.

There is, therefore, a context that favors the adoption of more vigorous measures to support the business fabric, at a time when there are already signs that the fourth quarter will be again of contraction. After a partial recovery in the value of GDP in the third quarter, the Portuguese economy sank again and the scenario of a U-shaped recovery seems increasingly unlikely.

The likelihood of a recovery in “W”, with economic activity falling again before starting to recover, is increasingly strong and makes the adoption of more support and incentives almost inevitable, in addition to the company capitalization program promised by the Minister Siza Vieira.

After a hard winter, a hopeful spring is expected. With the vaccination process against covid-19 underway, as expected, and the arrival of the first funds of the new European package, if negotiations in the EU are concluded soon, the second quarter of 2021 could be a turning point in the Portuguese economy. If this happens, the combination of these two factors will certainly cause a tree mainly driven by the increase in consumption and, by drag, investment. Even because bank deposits are on the rise and the drop in disposable income has not, for the moment, exceeded 2,44%.

But, until spring, an inclement winter must be resisted, which could still bring a new pandemic wave and more restrictions on economic activity. If so, the response to companies' difficulties will have to be robust and consistent. For exceptional moments, exceptional measures are also required.

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