The July Portuguese Monthly is now available

The July Portuguese is now available here.

This month’s special article looks into the recent proposals for reforming Portugal’s personal income tax (IRS) system. In particular, we juxtapose the substantial reforms related to taxation of families with the broader context of Portugal’s low fertility rates.

Other highlights include:

  • The first estimates of Q2 GDP in Portugal will come out in mid-August. We continue to expect a mild rebound in Q2, although high frequency activity and sentiment indicators continue to provide some uncertainty.
  • According to Eurostat, the unemployment rate in Portugal fell again in May to 14.3%. Unemployment has been declining markedly in the last few months, and it will be interesting to compare these numbers with the Q2 unemployment rate to be released by the National Statistics.
  • The June Cosumer Price Index reported prices fell 0.4%yoy, identical to May’s numbers and negative for now the fifth consecutive month. The continual fall in prices confirms the scenario of deflation in Portugal. It may be too soon to see if the ECB’s rate changes at the beginning of June will counteract this trend.
  • May exports fell 3.6%yoy while imports increased 1.9%yoy. These numbers lay out additional downside risks on Q2 GDP and confirms the stagnation of goods’ account in the last few months.
  • Yields on bonds shot up (nearly 4% for ten-year bonds), mainly due to uncertainty over the exposure of other Portuguese banks and major firms to the BES crisis. At the end of the month, interest rates settled at 3.67% for 10-year treasury bills, still significantly above the minimum rates they had achieved in June of 3.32%.
  • As announced in June, the ECB kept its main rates unchanged. It also revealed more details about the cheap loans to Eurozone lenders and announced that the central bank will move its meetings to a six-week cycle and publish  regular accounts of its deliberations beggining in January 2015, moving the ECB closer to the way other big central banks work.