LISBON, May 17 (Xinhua) -- The International Monetary Fund (IMF) said on Friday that the Portuguese government's forecast of a deficit target of -0.2 percent of gross domestic product (GDP) this year is feasible, adding that a greater fiscal effort would reinforce the resilience of the economy.
"Despite the higher-than-budgeted transfer to Novo Banco under the contingent capitalization mechanism, the 2019 nominal fiscal deficit target of -0.2 percent of GDP looks feasible," said a "Staff Concluding Statement" released on Friday at the end of the IMF's Article IV mission.
"Portugal's expansion is in its sixth year, with unemployment now below pre-crisis levels and improved private and public leverage ratios," said the statement. "Growth is expected to ease to 1.7 percent in 2019, still above its medium-term potential."
The statement said that public policies should foster higher productivity, investment and saving to boost balanced long-run growth, due to the fact that "the high ratio of public debt warrants additional fiscal effort."
"A more streamlined regulatory environment, stronger product market competition, improved skills and more efficient use of labor are key to raising productivity and investment, which are needed to raise potential growth," it said.
The IMF recommends an additional 1 percent of GDP tightening of the structural primary balance over the next two years, said the statement.
"The authorities should aim to consider additional fiscal efforts now and in the coming year to build policy space by reducing still-high public debt more rapidly and better differentiate Portugal from other high-debt countries," it said.
The IMF also noted that bank balance sheets have improved, but bad credit is still high, and profitability is low compared to pre-crisis levels.
IMF's Article IV consultations provide for analyses of the economies of the fund's members, usually every year.
