Tag Archive for portugal

IMF States Economic Recovery at Risk

It seems like these comments come along every week, in fact you’d probably manage to find IMF comments to support most divergent policies if you looked hard enough.  Although their latest statements regarding the economy rings very true with us on Jubileesouth.org.

It’s focussed not on our national debt for once, but on the household debt figures – the amount of debt that an average British household has to cope with.  Just like any sort of debt, it has to be serviced and can have a huge effect on our daily lives and the economy in general.  It’s quite simple really, an economy grows if it can stimulate demand and keep it’s output growing.  However domestic demand is obviously going to be related to our spending power, of which Britain has a problem.

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Families in the UK simply have more debt than the vast majority of developed countries, in fact the only comparable country is Portugal.  This is a country which has already sought emergency funding because it nearly ran out of money, it’s not a club that the UK wants to be a member of.

IMF suggests that household debt is 87% of GDP in the UK, compared with 82% in Portugal, 72% in Spain, 55% in Germany and less than 40% in France and Italy.

So are UK families excessive consumers?  Do we wander around on credit fuelled spending sprees and consistently live beyond our means?  Well the answer is no, not particularly our debt levels are largely due to our obsession with home ownership.

Houses are expensive in the UK, largely due to the laws of supply and demand.  The UK simply doesn’t have enough houses and demand is always very high. it’s simply hard coded into our identity – own your own home at all costs. Prices are unlikely to fall in the short term at least until some serious increases in supply are undertaken which also seems unlikely.

Just take a look at the UK media, get yourself a subscription to a proxy service like this and have a look at the BBC and other UK TV services.  You’ll see evidence of the UK’s obsession with home ownership pretty quickly, thousands of hours every week with buying, selling and upgrading property.

The problems is that this particular desire is extremely expensive, house prices are amongst the highest in the world and even the process of buying a house is expensive. Yet we all try and do this, an inevitably take on huge levels of debt in order to own our own home. Never mind property costs, first you have to deal with estate agent fees, removal costs, and stamp duty – average cost of moving or buying – about £12,000 currently.

UK consumers are unlikely to be able to either save enough or spend to fuel a domestic demand driven recovery with these sort of costs to contend with.  But until we change our outlook about owning property then it is likely that household debt is likely to stay extremely high.

Jennie Calwood

http://www.uktv-online.com/

Portugal Economic Recovery Still on Track

There is a feeling that the economic prospects for Portugal are at last showing some sign of recovery.    This month (May 2014) the bailout organised by the international community and the IMF is nearing it’s end.  The last review of the bailout was perhaps the first one with a slightly optimistic short term outlook.

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The IMF though did stress that there should be no let up on the economic reforms, the growth of debt is still concerning and without these reforms could easily spiral out of control very quickly.  Unemployment is probably the most worrying aspect of the recovery, it is obviously the one with the highest social cost.  At over 15% it is still among the highest in Europe and like other countries the worse affected sector are the countries young people.  However economic activity is improving all the time so it is hoped that this will filter through to the employment figures very shortly.

The reduction of GDP budget deficit is of course the core goal of the IMF bailout targets, Portugal has so far achieved or in some instances beaten it’s agreed levels.  Although the official bailout is finished this month, there will be a continuation of some payments whilst the deficit is still being tackled.

Furthermore the country has the option to request a standby loan, mainly to support the substantial shortfall that is still in existence for the 2015 economic year.  Access to the financial markets is still limited and until Portugal has full access to the credit markets then it is likely it still will need some financial assistance to stay in the Euro and maintain it’s austerity programme.

The full economic figures and economic indicators can be obtained from a variety of financial data sites.  If you want background stories and information on the European economies then check out the financial pages of the BBC website, all data should be available but you may need to use a VPN to access some of the transmitted broadcasts – here’s a guide.

James Goldwing writes on several technology and economic websites and blogs.