PORTUGAL: OECD RECOMMENDS THE PURSUIT OF BUDGETARY CONSOLIDATION.

The OECD is counting on the relatively favourable perspectives for 1999 and 2000. Even if since the end of 1998 the rate of growth has shown signs of slowing (notably due to the European wide slowdown), the slowdown in the Portuguese economy should offset the risk of its overheating. Moreover an economic recovery is expected for the second half of 1999 and should progress in 2000. The growth of GDP, even when taking into account the reduction when from the 1998 level, should maintain itself around its potential rate of growth. The rate of unemployment should stabilise and the rise in wages should slow down. The decline in domestic demand pressure coupled with the disappearance of the special factors that weighed on inflation in 1998 should moderate the rise of this indicator in 1999. It will, however, continue to exceed the Euro zone average, predict the OECD economists.Since the arrival of the single currency, Euro-zone countries' monetary policy has been steered by the European Central Bank (ECB) which forms its policy according to the developments of the entire Euro zone. For a country such as Portugal the study recognises that the monetary conditions of the ECB "may be inappropriate". This is why the OECD insists on the importance of budgetary policy and the efforts to...