portugal - igcp

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Dec 7, 2017 - 4. Fiscal stabilization, with sizable fiscal adjustments and primary surplus .... Initiative Indústria 4.
PORTUGAL: THE WAY FORWARD

December 7, 2017

Executive summary Portugal has turned the corner from the European crisis, with economic rebalancing and structural reforms underpinning the recovery 5

Boom

Slump

Crisis

Balanced Growth

Outline

18

1. Economic revitalization, fuelled by real GDP growth and employment creation

-5

10

-10

-15

6

2 1995

1998

2001 2004 2007 2010 2013 2016 2019 Current account balance (LHS) Primary balance (LHS) Primary balance, excl BES/Banif resolutions (LHS) Unemployment rate (RHS)

% labour force

14

EC forecasts

% GDP

0

2. External rebalancing, through strong exports performance and external deleveraging 3. Private sector turnaround, resulting from improved profitability and balance sheet strengthening 4. Fiscal stabilization, with sizable fiscal adjustments and primary surplus achieved 5. Resilient public debt structure, enhancing shockabsorptive capacities

Source: EC, IGCP

2

Outline

1.

1.

1. Economic revitalization 2. External rebalancing

3. Private sector turnaround 4. Fiscal stabilization

5. Resilient public debt structure

3

1. Economic revitalization

Economic revitalization in evidence, underpinned by structural reforms Growth picked up since the 2nd half of 2016

Unemployment back to pre-crisis level

[Real GDP, YoY %]

[% labor force]

6%

27%

4%

24% 3.1% 2.5% 1.8%

Portugal

2%

21% 18%

Portugal

0%

16.8%

15% -2% 12% 11.1%

-4% 9%

8.9% 8.8%

-6% 6% -8%

3%

Euro area

Italy

Portugal

Spain Source: Eurostat

Euro Area

Portugal

Spain

Italy Source: Eurostat

4

1. Economic revitalization

Stronger foundations for GDP growth (1/2) Sustainable domestic and external demand

Improved confidence behind private consumption

[GDP YoY % and pp]

[Private consumption and Consumer confidence] YoY %

10

5

Index

6

3

4

-6

2

-15

0

-24

-2

-33

-4

-42

-6

-51

-8

-60

2.5 0

-5

-10

-15

Private consumption GFCF Exports GDP

Public consumption Change in inventories Imports

Private consumption (YoY %, LHS) Consumer confidence (index, RHS)

Source: Statistics Portugal

Source: Statistics Portugal

5

1. Economic revitalization

Stronger foundations for GDP growth (2/2) Robust exports growth …

… supported by a shift in investment pattern

[Contributions to YoY real Exports growth, %]

[Contributions to YoY real GFCF growth, %]

15

16 12

10

8 5

4 0

0

-4

-5

-8 -10

-12 -16

-15

-20 -20

-24

Exports of services Exports of mineral products Exports of goods excluding mineral products Exports of goods and services Source: Statistics Portugal

Others

Construction

Transport equipment

Other machinery and equipment

Gross fixed capital formation Source: Statistics Portugal

6

1. Economic revitalization

Labor market supported by growth and reforms Both employment and participation rates up

Job creation in more productive sectors

[% of total population]

[Contributions to YoY employment growth, %]

75.0

[% of total population] 62

6

Participation Rate (LHS) 74.5

Employment rate (RHS)

61 60

4

2

74.0 59 0 73.5

58 -2 57

73.0 56

-4

72.5 55 72.0

54

Source: Statistics Portugal

-6 2012Q1

2013Q1

2014Q1

2015Q1

2016Q1

2017Q1

Services Mining, manufacturing, electricity, gas and construction Agriculture, forestry and fishing yoy Source: Statistics Portugal

7

1. Economic revitalization

Structural reforms have been key to sustain a balanced growth environment

 What has been achieved: Labor market • Reduced severance payments and unemployment benefits • More flexible working arrangements

Product market • Reduced firms’ administrative burden (e.g. licensing) • Lower costs of context (e.g. communications, railways, ports) • Rental market reform

Public sector • Social Security reform • Improved effectiveness: reduction of civil servants (-10% since 2011) and SOEs restructuring • Simplified tax compliance + reduced fraud and fiscal evasion • New Budgetary Framework Law • Privatization program • Judicial system reform

Financial sector • Improved efficiency of credit allocation by banks • Resolution Fund: State loan extended for up to 30y, with maturity contingent on final outstanding amount (after NB sale)

 Underway: Corporate sector • Program Capitalizar: promote reduction of indebtedness levels and increase capital holdings • Initiative Indústria 4.0: designed to revitalize most traditional sectors (agroindustry, auto, fashion, retail and tourism) • Program Semente: new fiscal framework to promote Start Up investment

Public sector • Program Simplex+: improve efficient use of public resources and simplify administrative burden • Spending review focused on: (i) health and education sectors; (ii) procurement; (iii) real estate; and (iv) SOEs • Automatic income declaration for Personal Income Tax

Financial sector • NPLs: working group preparing measures to facilitate debt restructuring, including fiscal treatment of write-offs • Improve efficiency of insolvency and debt restructuring frameworks

8

1. Economic revitalization

Converging expectations around accelerating growth Portugal exceeded expectations in early 2017, which prompted a significant upward revision of growth forecasts

Macroeconomic Scenario INE Min Fin: 2018 State Statistics Portugal Budget Report October 2017

Real GDP (yoy%) (previous forecasts) Private Consumption Public Consumption GFCF Exports Imports Contributions to GDP growth (pp) Domestic demand Net exports External sector (% GDP) Current account of which Goods and Services Current and Capital account Unemployment (% labor force) Prices (yoy%) GDP deflator HICP

2015 1.8

2016 1.5

2.3 1.3 5.8 6.1 8.5

Banco de Portugal October 2017 June 2017

Portuguese Public Financial Council September 2017

International Monetary Fund

European Commission

October 2017

November 2017

2.1 0.6 1.6 4.1 4.1

2017P 2.6 1.8 2.2 -0.2 7.7 8.3 8.0

2018P 2.2 1.9 1.9 -0.6 5.9 5.4 5.2

2017P 2.5 (2.5) 1.9 0.3 8.0 7.1 6.9

2018P 2.0 (1.7) 1.7 0.6 5.3 6.8 6.9

2017P 2.7 (1.7) 2.2 0.7 9.1 7.9 7.6

2018P 2.1 (1.7) 2.1 0.0 5.2 4.0 4.1

2017P 2.5 (1.7) 2.2 0.6 6.9 7.6 7.3

2018P 2.0 (1.5) 1.8 0.5 5.7 5.2 5.1

2017P 2.6 1.8 1.9 0.4 8.1 8.0 8.0

2018P 2.1 1.6 1.6 0.5 5.3 7.3 7.2

2.8 -1.1

1.6 -0.1

2.7 -0.1

2.2 0.0

2.5 0.0

2.2 -0.2

2.8 0.0

2.3 -0.1

2.6 -0.1

2.2 -0.1

2.6 0.0

2.0 0.0

-0.9 0.6 0.3 12.4

0.1 0.9 1.0 11.1

-0.1 0.9 0.8 9.2

0.1 1.0 1.0 8.6

1.7 1.8 9.0

2.2 2.4 8.2

0.3 0.9 1.3 9.2

0.3 0.7 1.3 8.5

0.4 9.7

0.3 9.0

0.1 1.0 9.2

0.2 1.1 8.3

2.0 0.5

1.4 0.6

1.3 1.2

1.4 1.4

1.6

1.4

1.3 1.6

1.8 1.9

2.2 1.6

1.7 2.0

1.3 1.5

1.4 1.4

-

Sources: Statistics Portugal, Ministry of Finance, Banco de Portugal, Public Finance Council, International Monetary Fund, and European Commission

9

Outline

2.

1. Economic revitalization 2. External rebalancing

3. Private sector turnaround 4. Fiscal stabilization

5. Resilient public debt structure

10

2. External rebalancing

Large imbalances have been successfully addressed, paving the way for sustainable growth From chronic external deficits to sustained surpluses

Significant gains in exports market share

[% GDP]

[Index 1Q2007=100]

2

44

0

130

40

Portugal

120 -2 36 -4

110 32

-6 28

100

-8 24

-10

20

Source: Statistics Portugal

Portugal

Germany

Spain

2017Q2

2016Q2

2015Q2

2014Q2

2013Q2

2012Q2

2011Q2

2010Q2

2009Q2

2008Q2

Imports of goods and services (rhs) Exports of goods and services (rhs) External balance of goods and services

80 2007Q2

1996Q2 1997Q2 1998Q2 1999Q2 2000Q2 2001Q2 2002Q2 2003Q2 2004Q2 2005Q2 2006Q2 2007Q2 2008Q2 2009Q2 2010Q2 2011Q2 2012Q2 2013Q2 2014Q2 2015Q2 2016Q2 2017Q2

-12

90

Italy Source: Eurostat

11

2. External rebalancing

Exports diversification improves resilience to external shocks Broader sectoral diversification

Geographical diversification sustaining exports growth

[Goods exports by sector, %]

[Goods exports by destination, YoY 3mMA %] 20

19 14 1212 9

12 11

25 20 15

6

4

443

3

6

5

33

44

55

4

10

2000

2010

Elec. and Mec. Machinery

Vehicles and parts, Aircraft

Textile Products

Pulp of Wood and Paper

Footware and other products

Wood and Cork

Cement, Ceramic and Glass

Mineral Products

Fish, Fruits, Veg.,Tobaco and Wine

Base Metals

Plastics and Rubber

5

Chemicals (incl. Pharma.)

4

7

56

8

88 7

8

1010

1515

30

2016 Source: Statistics Portugal

0 -5 -10

Germany

Spain

France

UK

Others Intra-EU

US

Africa

Others Extra-EU

Exports

Source: Statistics Portugal

12

2. External rebalancing

Sustained productivity gains leading to higher competitiveness Labor productivity: ongoing improvement

ULC: down from a relatively modest competitive position

[2001 = 100]

[2001 Q1 = 100; 12m MA]

115

Portugal

150

140

110

130 105 120 100

Portugal

110

95

100

90

90

Euro area (19 countries)

Spain

Italy

Portugal Source: Eurostat

Spain

Italy

Portugal

Euro Area Source: Eurostat

13

2. External rebalancing

Improving net external debt position Reversed historical net borrower position …

… leading to improvement in NIIP

[Current & capital account, % GDP: 4QMA]

[Net International Investment Position, % GDP] 0

4 2.6 2.1 1.9

2 0

-13.5

-20

-40

-2 -60 -4 -80

-86.5

Portugal

-6

-100

-8

-103.9 Portugal

-10

-18.2pp

-120 -122.1

Portugal

Spain

Italy

Spain Source: Eurostat

Italy

Mar-17

Mar-16

Mar-15

Mar-14

Mar-13

Mar-12

Mar-11

Mar-10

Mar-09

Mar-08

Mar-07

Mar-06

Mar-05

Mar-04

Mar-03

Mar-02

-140 Mar-01

Jun-01 Mar-02 Dec-02 Sep-03 Jun-04 Mar-05 Dec-05 Sep-06 Jun-07 Mar-08 Dec-08 Sep-09 Jun-10 Mar-11 Dec-11 Sep-12 Jun-13 Mar-14 Dec-14 Sep-15 Jun-16 Mar-17

-12

Portugal Source: Eurostat

14

Outline

1.

1.

3.

1. Economic revitalization 2. External rebalancing

3. Private sector turnaround 4. Fiscal stabilization

5. Resilient public debt structure

15

3. Private sector turnaround

Private sector turnaround, resulting from improved profitability and balance sheet strengthening Consistent net lending positions…

… leading to private sector deleveraging

[Net lending (+)/ Net borrowing (-) in % of GDP]

[Private sector debt/GDP]

6

270%

-54.6pp

4 255% Portugal

2

240% 0 225%

-2

Lowest since 2005Q1

-4 -6 -8

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017Q1

215.1%

210%

201.1%

195%

180%

2017Q2

-10

165% -12 Non financial corporations

Financial corporations

Households Portugal Source: Statistics Portugal

Euro area Source: ECB

16

3. Private sector turnaround

Households net financial position improving Net worth is now above pre-crisis levels …

… driven by deleveraging

[EUR billion]

[Debt/GDP; Non-consolidated; Nominal values] 140%

800

130% 650 568

551

120% Portugal

500

110%

350

100%

102.6% 101.8%

200

90%

94.2% 90.6% 84.4%

80%

50

70% -100 -184

-250

-160

61.2%

60% 50%

Total financial assets

Total non-financial assets

Germany

Spain

France

Total liabilities

Total net worth

Euro Area

Portugal

Italy

Source: Banco de Portugal

Source: ECB

17

3. Private sector turnaround

Strengthening of corporates’ capital structure ... Strong decline of debt stock

Improved solvency position

[Debt/GDP; Non-consolidated]

[Capital ratio = Equity/Assets] 36%

150% Portugal

140%

133.6%

130%

35%

120% 110%

112.4% 106.9%

100%

100.1%

34%

33%

90% 80%

79.4% 32%

70% 62.0%

60%

31%

50%

30% Portugal

Spain

France

Italy

Euro Area

Germany Source: ECB

Source: Banco de Portugal

18

3. Private sector turnaround

… combined with improved profitability has paved the way for investment NFC profitability levels are being restored …

… which bodes well for investment growth

[NI/Equity and EBITDA/Assets]

[GVA and GFCF, YoY %]

14%

3%

15%

2%

10%

1%

5%

0%

0%

-1%

-5%

-2%

-10%

-3%

-15%

-4%

-20%

12% 10% 8% 6% 4% 2% 0% -2% -4%

Gross value added (YoY %, LHS) Return on equity

EBITDA/Assets Source: Banco de Portugal

Gross fixed capital formation (YoY %, RHS) Source: Statistics Portugal

19

3. Private sector turnaround

Banks dealing with legacy assets NPL ratio is receding…

… and overdue credit is declining sharply

[% of gross credit; at end of period]

[YoY %]

27.5%

29.0%

29.4%

30.1%

30.3%

29.6%

28.6%

65% 55% 45%

17.5%

17.9%

17.9%

17.6%

17.2%

35%

16.7% 15.5%

9.6% 6.5%

6.7%

7.0%

10.0%

10.7%

11.3% 7.1%

11.3% 7.2%

7.4%

7.2%

15%

12.4%

12.5%

25%

5% -5% -15%

2015Q4

2016Q1

2016Q2

2016Q3

2016Q4

2017Q1

2017Q2

NPLs - Consumption

NPLs - Non-financial corporations

NPLs - Total Source: Banco de Portugal

Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17

-25%

NPLs - Housing

Source: Banco de Portugal

20

3. Private sector turnaround

A three pillar strategy is being followed by the Authorities to deal with NPLs

Legal and judicial reform

Prudential supervisory action

Legislative changes to facilitate the restructuring of economically viable firms and the expedite insolvency and liquidation procedures of non-viable ones, capable of reimbursing creditors sooner and maximizing the value recovered by banks.

Shall play a key role in this process, within the SSM context, through the monitoring of granular information of NPL exposures, submission of NPL reduction plans by banks, as well as measures to encourage the reduction and to prevent the emergence of new streams of NPLs.

NPL management Creation of a system-wide platform to coordinate NPLs management between banks, backed by a framework for corporate debt restructuring and injection of capital / debt financing. Additionally, setting up an AMC favorable environment may facilitate the sale of NPLs, while attracting private sector investment and benefiting from the integrated management of these assets.

21

3. Private sector turnaround

Banking sector challenges being addressed

CGD

• The 2nd stage of CGD’s recapitalization was concluded in Mar-17, with issuance of €0.5 bn of subordinated bonds and State capital injection of €2.5 bn • The State capital injection may have an impact on the 2017 deficit figures (still to be determined), but it has no additional impact on public debt • NB redeemed all its State-guaranteed debt between Nov-16 and Feb-17 (€3.5bn)

Novo Banco

BCP

BPI





• NB bought back of senior bonds maturing between 2019 and 2052, ensuring a capital increase of €500mn



• A 75% stake in NB was sold to Lone Star, resulting in an immediate capital injection of €750 mn (and an additional €250 mn by the end of 2017). The Resolution Fund will retain 25% of the capital.



• Capital increase of €1.33 bn finalized in Feb-2017, which allowed the reimbursement of the remaining €700 mn of CoCos



• Following the capital increase, Fosun share reached 23.5%



• The removal of the voting rights limit opened the door for a successful public offer by CaixaBank, finalized in Feb-2017, which increased its share to over 84.5%

 22

3. Private sector turnaround

De-risking of the banks capital structure More stable funding structure

Higher capital levels in a challenging context

[Loans to Deposits Ratio, %]

[Core tier 1 | Common Equity tier 1, %] 10,3

150.8

9,8

12,6

13,3

12,3

13,3

12,3

14,4

Solvency Ratio 13.2 135.1

12.4

12.3

11.5

11.4

11.3

122.6

111.8 8.7

102.1 96.1

95.5

93.5

7.4 (*) Since Jan-2014 is in effect a new, transitory, regime of own funds adequacy, which takes into account Basel III phase-in arrangements.

2010

2011

2012

2013

2014

2015

2016

2017Q2

Source: Banco de Portugal

2010

2011

2012

2013

2014

2015

2016

2017Q2

Source: Banco de Portugal

23

3. Private sector turnaround

Helping improve credit allocation

14%

Real Estate

Construction

Manufacturing

Total

Trade

Jun-17

29%

Dec-16

-20

Jun-16

15%

Dec-15

31%

Jun-15

-15

Dec-14

16%

Jun-14

33%

Dec-13

-10

Jun-13

17%

Dec-12

35%

Jun-12

-5

Dec-11

18%

Jun-11

37%

Dec-10

0

Jun-10

19%

Dec-09

39%

Jul-17

5

Jan-17

20%

Jul-16

41%

Jul-15

10

Jan-16

21%

Jan-15

43%

Jul-14

15

Jan-14

22%

Jul-13

45%

Jan-13

20

Jul-12

23%

Jan-12

47%

Jul-11

25

Jan-11

24%

Jul-10

49%

Jan-10

30

Jul-09

[Exports % of GDP and Loans to exporting firms % of loans to NFC]

Jan-09

[Loans to NFC, annual rate of change, % ]

Jul-08

… supporting exports growth

Jan-08

Redirection towards tradable sectors …

Exports in % of GDP (LHS) Loans to exporting firms (% of total loans to NFC) (RHS)

Source: Banco de Portugal

Source: Banco de Portugal/Statistics Portugal

24

Outline

1.

4.

1. Economic revitalization 2. External rebalancing

3. Private sector turnaround 4. Fiscal stabilization

5. Resilient public debt structure

25

4. Fiscal stabilization

Fiscal discipline has succeeded in stabilizing debt levels, throughout economic and political cycles Strong primary surplus …

… supporting public debt stabilization

[% of GDP]

[EDP gross debt, % of GDP]

6

140 130

4

126.4 2.5 Portugal

2

120

Portugal

110

0

100 90

-2

80

-4

EC projections

EC projections

70 60

-6

50 -8 40 -10 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018f Euro area

Spain

Italy

Portugal

Source: European Commission

30 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018f Euro area

Spain

Italy

Portugal

Source: European Commission

26

4. Fiscal stabilization

The overall deficit reached 2.0% of GDP in 2016 (the first time below 3% since entering the euro area and the lowest since 1974) and is expected to decline to 1.0% in 2018 Significant reduction of expenditure

Structural adjustment

[Total revenue, total spending and overall balance; % GDP]

[% GDP]

0%

52% MF projections

-1.0 -1.4 -2.0

50%

-2%

-1.3 -1.7 -2.0-1.8 -2.3 -2.9 -3.4

48% -4% 46%

-4.8

-6%

-4.4

-5.7 -6.1

44% -7.2

-7.4

-8% 42%

-9.0 -10%

40%

-12%

38%

-11.2 Overall balance

Total revenue

Total expenditure

Overall balance

Source: Statistics Portugal and Ministry of Finance

2010

2011

2012

2013

Structural overall balance 2014

2015

2016

2017p

2018p

Source: Statistics Portugal and Ministry of Finance

27

4. Fiscal stabilization

Fiscal consolidation was achieved through a strong improvement of the primary surplus (reaching a surplus of more than 2.0% of GDP since 2016) and is also supported by declining interest costs General Government Accounts [% GDP] General Government Account (accrual basis) (% GDP) Total revenue Current revenue Current taxes on income and wealth Taxes on production and imports Social contributions Other revenue Capital revenue Total expenditure Current expenditure Social benefits Compensation of employees Interest (EDP) Intermediate consumption Subsidies Other current expenditure Capital expenditure Gross fixed capital formation Other capital expenditure Overall balance Memo items Primary expenditure Primary balance

2010 40.6% 39.4% 8.5% 13.2% 11.9% 5.8% 1.3% 51.8% 44.6% 18.6% 13.7% 2.9% 5.9% 0.7% 2.8% 7.2% 5.3% 1.9% -11.2%

2011 42.6% 41.5% 9.5% 13.9% 12.0% 6.2% 1.1% 50.0% 45.6% 18.9% 12.8% 4.3% 6.0% 0.7% 2.9% 4.4% 3.5% 0.9% -7.4%

2012 42.9% 41.1% 9.0% 13.9% 11.4% 6.9% 1.8% 48.5% 45.3% 19.6% 11.7% 4.9% 5.8% 0.6% 2.7% 3.3% 2.3% 1.0% -5.7%

2013 45.1% 44.0% 11.4% 13.7% 12.0% 6.8% 1.1% 49.9% 46.8% 20.4% 12.5% 4.9% 5.6% 0.6% 2.7% 3.2% 2.3% 0.9% -4.8%

2014 44.6% 43.6% 11.0% 14.2% 11.8% 6.6% 1.0% 51.8% 45.6% 19.7% 11.9% 4.9% 5.7% 0.7% 2.7% 6.2% 1.9% 4.2% -7.2%

48.9% -8.2%

45.7% -3.1%

43.6% -0.8%

45.1% 0.0%

46.9% -2.3%

2016 P 2015 43.8% 43.0% 43.0% 42.6% 10.9% 10.3% 14.5% 14.8% 11.6% 11.7% 5.9% 6.1% 0.4% 0.8% 48.2% 45.0% 43.9% 43.1% 19.3% 19.0% 11.3% 11.3% 4.2% 4.6% 5.6% 5.6% 0.5% 0.6% 2.5% 2.6% 1.9% 4.3% 1.5% 2.4% 0.4% 1.9% -2.0% -4.4% 43.6% 0.2%

40.8% 2.2%

2017 E 2018 P 2018 vs 2017 0.1pp 43.4% 43.5% 0.1pp 42.7% 42.8% -0.4pp 9.8% 10.2% 0.1pp 15.0% 15.1% 0.0pp 11.7% 11.7% 0.4pp 6.2% 5.8% 0.0pp 0.7% 0.7% -0.3pp 44.8% 44.5% -0.7pp 42.5% 41.8% -0.1pp 18.7% 18.6% -0.4pp 11.1% 10.8% -0.4pp 3.6% 3.9% 0.0pp 5.6% 5.6% 0.0pp 0.5% 0.5% 0.1pp 2.6% 2.5% 0.4pp 2.8% 2.4% 0.6pp 2.3% 1.7% -0.2pp 0.5% 0.7% 0.4pp -1.0% -1.4% 40.9% 2.5%

40.9% 2.6%

0.1pp 0.1pp

Source: Statistics Portugal and Ministry of Finance

28

4. Fiscal stabilization

Public debt to decline … is supported by strong primary surpluses and decreasing interest costs

Public debt downward trend … [Maastricht debt, % GDP]

Decomposition of public debt dynamics 130

129.0

128.8

[pp GDP]

130.1 126.2

126.2 10.6

120

130.6

10.2

7.4

123.5

9.3 7.2

10.5

6.1

YEAR

2015

2016

2017 P

2018 P

128.8

130.1

126.2

123.5

-1.8

1.4

-3.9

-2.8

Primary balance effect Snowball effect Interest costs Nominal GDP

-0.2 -0.3 4.6 -4.9

-2.2 0.5 4.2 -3.7

-2.5 -1.0 3.9 -4.9

-2.6 -0.8 3.6 -4.4

Other stock-flow adjustments

-1.3

3.1

-0.4

0.6

2015

2016

2017 P

2018 P

Real growth rate (yoy%)

1.8

1.5

2.6

2.2

GDP deflator (yoy%)

2.0

1.4

1.3

1.4

Overall balance (%GDP)

-4.4

-2.0

-1.4

-1.0

0.2 4.6 3.6

2.2 4.2 3.4

2.5 3.9 3.1

2.5 3.6 2.9

Maastricht debt (% GDP) Change (pp GDP)

110

100

115.7

118.4

120.4

121.4

120.8

119.1

117.3

90

Assumptions for public debt dynamics 80 2012

2013

2014

2015

2016

2017

CentralGov deposits GenGov debt net of CentralGov deposits GenGov gross debt

(*) State-guaranteed debt not considered in the Maastricht debt currently amounts to about 6pp of GDP.

2018

YEAR

Primary balance (%GDP) Interest costs (%GDP) Implicit interest rate (%GGDebt t-1)

Source: Ministry of Finance

29

Outline

1.

5.

1. Economic revitalization 2. External rebalancing

3. Private sector turnaround 4. Fiscal stabilization

5. Resilient public debt structure

30

5. Resilient public debt structure

A significant improvement in the debt structure is a key source of resilience One of the longest average maturities …

… with a declining implicit interest rate

[Years]

[%] 12.1 5.8 9.6 8.2

8.8 8.8 8.2

8.3 7.8

7.3

6.9

6.7 6.0

5.3

5.1

4.5

4.4 4.1

6.5

4.2 3.9

3.5

5.5

3.6

3.7 3.6

3.4 3.2

4.0

2.7

2.8

2015

2016

3.0 2.6

3.0

Dec-09

Dec-10

Dec-11

Dec-12

Dec-13

Dec-14

Dec-15

Dec-16

Average residual maturity Average residual maturity excl EU-IMF loan Average maturity of MLT debt issuance in each year Source: IGCP

2010

2011

2012

2013

Cost of issuance per year

2014

2017

Cost of debt outstanding

Source: IGCP

31

5. Resilient public debt structure

Prudent and stable funding plan State’s borrowing needs and sources 2016-2021 [EUR billion; as of 6 December, 2017] State borrowing requirements Net financing needs Overall deficit * Other net acquisitions of financial assets ** MLT Redemptions Tbonds (PGB + MTN) FRN/OTRV IMF (executed) IMF (to be executed) p.m. IMF (original maturity of outstanding loan) State financing sources Use of deposits Financing in the year Executed Tbonds (PGB + MTN) FRN/OTRV Retail debt (net) Tbills (net) Other flows (net) *** To be executed Tbonds (PGB + MTN) Retail debt (net) Tbills (net) Other flows (net) *** State Treasury cash position at year-end ****

2016 22.5 8.3 6.2 2.1 14.2 9.7

2017 P 27.2 9.4 4.5 4.9 17.9 7.8

4.5

9.0 1.0 0.0 27.2 2.4 24.9 23.9 15.1 3.5 2.7 0.3 2.3 0.9

22.5 -3.6 26.1 26.1 17.4 3.5 3.5 0.1 1.7

10.2

2018 P 18.6 11.0 5.6 5.4 7.6 6.7 0.8 0.0 18.6 1.1 17.5

0.1

17.5 15.0 1.8

0.9 7.8

0.7 6.8

2019 P 14.4 5.4 1.6 3.8 9.0 9.0

2020 P 13.1 3.1 0.5 2.5 10.0 10.0

2021 P 20.4 1.4 -1.5 2.8 19.0 13.7 3.5

0.0 14.4 0.3 14.1

0.0 13.1 -3.5 16.6

1.8 3.7 20.4 6.0 14.4

14.1

16.6

14.4

6.5

10.0

4.0

* State sub-sector cash deficit in 2016-18. Projection for GG deficit (excl SS) in 2019-21 (Stability Program, Apr 2017). ** Includes refinancing of other public entities (namely SOEs), as well as the redemption of CoCos, the direct Source: IGCP and Ministry of Finance capitalization of CGD, and the credit line to the Single Resolution Board. *** Includes centralization of funds of other public entities in the Single Treasury Account. 32 **** Excluding cash-collateral.

5. Resilient public debt structure

Regular issuance of MLT debt through different channels and across the curve Auctions regaining the main role in the annual funding plan

Supporting liquidity in different points of the curve

[MLT debt issuance per method of issuance; EUR billion]

[MLT debt issuance per bucket; EUR billion]

24

24

23

11%

22 20

23

7%

22

21

17%

20

19%

16% 17% 23% 9%

36%

5%

14% 48%

12 77%

55%

12% 47%

12% 2010

41% 2011

Syndications

46% 25%

45%

8

4 100% 2012

Auctions

55%

48%

25%

45%

Exchanges

2015

MTN Issuance

53%

15%

2016 OTRV

26%

42% 35%

25%

2014

10%

4 21% 15%

2013

8%

8 8% 41%

47%

45%

46%

12

8%

20%

21 2%

17%

38%

8%

8%

2017 Jan-Dec 2017 MLT Issuance

Source: IGCP

2010

51%

2011

100% 2012 =13 Source: IGCP

33

5. Resilient public debt structure

The diversification of investors ensures a stable base of debt holders (1/2) Progressively regaining traditional investors [Distribution by geography and investor type of 10-year syndications from 2010 to 2017]

Distribution by Geography

Distribution by Investor Type

Asia France

2017 2013

2010

Germany/Austria/Switzerland Nordics

Asset Managers 2010

Banks Official Institutions

North America

Hedge Funds Other Other EU

2013 2017

Insurance / Pension Funds Others

Portugal

Spain UK

Source: IGCP

34

5. Resilient public debt structure

The diversification of investors ensures a stable base of debt holders (2/2) More diversified public debt composition

Non-domestic holdings in line with EU peers

[EUR billion and % of total State debt]

[% of total State debt securities]

240 194

200

133 120

13% 15%

13%

7% 7%

13%

25%

32%

35%

36% 11%

85

75

65

10%

11%

118

242

32%

152 21%

226

30%

175

160

80

204

217

236

9% 6%

6%

8%

9%

9%

7%

6%

7%

55

7%

11%

45 40

69%

69%

70%

59%

48%

45%

43%

46%

47%

48%

35 0

Portugal Source: IGCP

Spain

Dec-16

Jun-16

Dec-15

Jun-15

Dec-14

Jun-14

Dec-13

Jun-13

Dec-12

Jun-12

Dec-11

Jun-11

Dec-10

Other MLT Other ST EU-IMF TOTAL

Jun-10

PGB Tbills Retail Other non-tradable

25

Dec-09

Dec Dec Dec Dec Dec Dec Dec Dec Dec Oct 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Italy Source: IGCP

35

5. Resilient public debt structure

Since April 2016, ECB purchases of PGBs have been lower than what would be executed from applying the capital key ECB PGB purchases under PSPP

PSPP purchases (cumulative diff vs capital key)

[EUR billion]

[EUR billion]

2.0

14 12

1.5

10 8

1.0

France

Germany

Italy

Portugal

Spain

Ireland

Slovenia

Slovakia

6 4

EUR billion

0.5

0.0

2 0

-2 -4

-0.5

-6 -8 -10

-1.0

-12 -14

-1.5

PSPP actual purchases

PSPP purchases with capital key

difference Source: ECB

Source: ECB

36

5. Resilient public debt structure

Liability management operations have smoothed the redemption profile 76% of the IMF loan has been fully repaid

Maturity profile spread over a long time span

[Repurchases of IMF loan]

[Redemption calendar MLT debt; Dec-17 + rollover EFSM; EUR billion]

Date

SDR million

EUR million

2015

6,579

8,448

2016

3,560

4,496

2017

7,394

9,012

TOTAL

17,534

21,956

EFSF EFSM

21

EFSM (final maturity to be confirmed) IMF

18

Other medium- and long-term debt 15

IGCP is actively buying back off-the-run PGBs [PGB buybacks, Jan-Dec 2017]

12

Security

Outright buyback (EUR million)

Exchange (EUR million)

OT Oct 2017

361

-

OT Jun 2018

1,091

427

OT Jun 2019

101

1,117

OT Jun 2020

-

1,231

OT Oct 2022

-

- 2,508

OT Apr 2027

-

-324

TOTAL

1,554

-

Source: IGCP

24

9

6

3

0 2017

2021

2025

2029

2033

2037

2041

2045 Source: IGCP

(*) Exact final maturity date of each EFSM individual loan will be defined when the original loans are rolled over (IGCP simulation in orange), but it is not expected that Portugal will have to refinance any of its EFSM loans before 2026.

37

Appendix

A. Macroeconomic indicators B. Structural reforms C. Fiscal indicators D. Debt management indicators

38

A. Macroeconomic indicators

Economic structure better adapted for sustainable recovery cycle, as exports now weigh 40% of GDP GDP composition (current prices)

GVA composition (current prices)

[% of GDP]

[% of GVA] Other services

19 18

24

29

21

24

21

19

19

18

18

16

15

15

15

63

64

29

21

66

66

66

66

General government consumption

14

27

7

30

38

40

41

40

8

3

1995

2000

-36

2005

-37

2010

-38

2012

-40

2014

-40

2015

-39

2016

Source: Statistics Portugal

8

8

20

6 3

4 5

15

14

14

8 3

19

17

18

7 3

-39

Financial, insurance and real estate

Wholesale and retail trade, repair of motor vehicles; accommodation and food service Construction

19 18

7

17

8

Private consumption

Exports

-33

30

Transportation and storage; information and communication 15

19

28

32

13

Gross fixed capital formation

27

31

Imports

66 65

27

18

5

4

3

2

2

1995

2000

2005

2010

2016

Energy, water supply and sewerage Industry

Agriculture, forestry and fishing

Source: Eurostat

39

A. Macroeconomic indicators

Upward trend in soft and hard data economic indicators Coincident indicators and real GDP

Retail sales and Industrial production

[yoy %]

[3 month average, YoY%]

4

10%

2 5%

0 0% -2 -5% -4

-6

Activity Coincident Indicator (3m MA)

-10% Industrial Production

Private Consumption Coincident Indicator (3m MA) -8

GDP (yoy %)

-15%

Source: Banco de Portugal, Statistics Portugal

Retail Sales

Source: Statistics Portugal

40

A. Macroeconomic indicators

In 2017, investment main objectives are extension of production capacity and replacement, mainly directed to manufacturing Investment objectives in 2017

Investment objectives by economic sector in 2017

[Investment distribution by objectives, % of total]

[Investment distribution by NACE sections, %]

38.2%

28.7% 36.3%

13.8%

12.8% 10.6% 9.3%

13.4% 12.0%

7.6% 5.3% 2.9% 2.7% 2.6%

Extension of production capacity

Replacement

To stream line of production

1.8%

1.1% 0.9%

Other investment objectives

Source: Statistics Portugal

Source: Statistics Portugal

41

A. Macroeconomic indicators

Inflation in Portugal is in line with other European countries, despite some additional volatility in recent figures HICP

Core HICP

[Year-on-year growth, %]

[Year-on-year growth; %] 3

5 4

2 3 1

2 1

0

0 -1 -1 -2 Diff

Euro area (19 countries)

Portugal

-2 Diff

-3 Oct-09 Oct-10 Oct-11 Oct-12 Oct-13 Oct-14 Oct-15 Oct-16 Oct-17

Source: Eurostat

-3 Oct-09

Oct-10

Oct-11

Euro area (19 countries)

Oct-12

Oct-13

Oct-14

Portugal

Oct-15

Oct-16

Oct-17

Source: Eurostat

42

A. Macroeconomic indicators

Currently most sectors are contributing positively to HICP inflation in Portugal, in particular restaurants and hotels, and transport and communication Portugal

Euro Area

[Contributions to yoy HICP growth, %]

[Contributions to yoy HICP growth, %]

4

4

3

3

2

2

1

1

0

0

-1 Oct-11

Jul-12

Apr-13 Jan-14 Oct-14

Jul-15

Apr-16 Jan-17 Oct-17

Others Restaurants and hotels Transport and communications Housing, water, electricity, gas and other fuels Food, beverages, tobacco and narcotics HICP

Source: Eurostat

-1 Oct-11

Jul-12

Apr-13

Jan-14

Oct-14

Jul-15

Apr-16

Jan-17

Oct-17

Others Restaurants and hotels Transport and communications Housing, water, electricity, gas and other fuels Food, beverages, tobacco and narcotics HICP Source: Eurostat

43

A. Macroeconomic indicators

Well diversified exports distribution, with limited sectoral or geographical concentration Portuguese goods exports by major destination and sector [% total exports by destination and sector; YTD Jul 2017]

Others

WORLD

Elec. and Mec. Machinery

2.15

1.55

3.57

1.50

0.51

0.28

0.42

0.32

0.77

0.14

4.29

15.5

Vehicles and parts, Aircraft

2.98

2.06

2.07

1.10

0.21

0.14

0.35

0.17

0.06

0.48

1.83

11.4

Textile Products

3.31

1.27

0.87

0.80

0.53

0.37

0.45

0.19

0.09

0.07

1.85

9.8

Plastics and Rubber

2.34

0.93

0.99

0.39

0.29

0.47

0.27

0.23

0.20

0.05

1.58

7.7

Base Metals

2.72

1.27

0.56

0.54

0.36

0.19

0.09

0.15

0.28

0.06

1.65

7.9

Mineral products

1.88

0.28

0.05

0.13

1.20

0.62

0.29

0.28

0.05

0.19

3.47

8.4

Prep. Food, Beverages and Tobaco

1.67

0.82

0.20

0.38

0.22

0.18

0.27

0.15

0.33

0.15

1.31

5.7

Chemicals (incl. Pharma.)

1.13

0.28

0.61

0.41

0.50

0.18

0.17

0.32

0.40

0.02

1.21

5.2

Pulp of Wood and Paper

1.09

0.46

0.44

0.20

0.20

0.33

0.25

0.06

0.10

0.20

1.22

4.6

Footware

0.37

0.85

0.73

0.22

0.14

0.55

0.11

0.10

0.04

0.02

0.78

3.9

Others

5.74

3.00

1.22

1.03

1.06

0.70

0.96

0.45

0.90

0.15

4.63

19.8

TOTAL

25.4

12.8

11.3

6.7

5.2

4.0

3.6

2.4

3.2

1.5

23.8

100

Source: Statistics Portugal

44

A. Macroeconomic indicators

Exports growth based on geographical and sectoral contributors Major sector and country contributions [%, YTD Jul 2017]

Others

WORLD

YoY

Textile Products

0.06

0.08

-0.01

0.04

0.07

0.01

0.00

0.04

0.16

0.45

4

Plastics and Rubber

0.23

0.07

0.03

0.09

0.07

-0.02

0.00

0.09

0.27

0.82

11

Manufactured Products

0.03

0.11

0.04

-0.07

0.03

0.01

-0.01

0.07

0.09

0.31

8

Vegetable Products

0.13

0.05

0.00

0.05

0.00

0.00

0.00

0.05

0.17

0.45

22

Footware

-0.01

-0.01

-0.01

0.06

0.00

-0.01

0.00

0.02

0.13

0.18

4

Optical / medical / precision instr.

0.01

-0.02

0.03

0.18

0.10

0.01

0.00

0.02

0.17

0.49

30

Animal Products

0.16

0.00

0.01

0.00

0.01

0.01

0.00

0.05

0.32

0.55

21

Vehicles and parts, Aircraft

0.21

0.30

-0.04

-0.37

0.12

0.29

0.00

0.00

0.20

0.72

6

Prep. Food, Beverages and Tobaco

-0.06

0.00

-0.05

0.02

0.03

0.05

0.00

0.09

0.21

0.29

5

Base Metals

0.57

0.16

0.11

0.05

0.21

0.02

-0.25

0.13

0.24

1.24

17

Mineral products

0.37

-0.02

0.12

0.01

0.32

-0.03

-0.12

0.01

1.83

2.50

36

Others

0.14

0.32

-0.04

0.40

0.10

0.09

-0.10

0.60

1.64

3.13

TOTAL

1.85

1.05

0.17

0.46

1.04

0.43

-0.47

1.17

5.44

YoY

7

8

2

4

22

34

-47

48

11.14 Source: Statistics Portugal

45

A. Macroeconomic indicators

Services exports are benefiting from a strong performance of the tourism sector Decomposition of services exports

Nights spent in hotel establishments

[Contributions to yoy Services exports growth, %]

[yoy %]

19.8

20

12 15.7

15

8

12.1

6

10.2 10

9.6

5.9 4.4

4.6 2.7

6.5 5.8

5.8

5.5

4

7.5

6.5 5

10.4

10

4.8

2.6

2

0.6

0

4.0

-2

0

-1.3

-4 -6

-5

-7.1

-8 -8.5

-10

Transportation

Tourism

-10

Other

Services

Source: Banco de Portugal

Residents

Non Residents

Total Source: Statistics Portugal

46

Appendix

A. Macroeconomic indicators B. Structural reforms C. Fiscal indicators D. Debt management indicators

47

B. Structural reforms

Labor market reforms Unemployment Benefits

Capped at: 26 months (38 months before) 2.5x IAS (3xIAS before) with 10% reduction after 6 months Min. contribution period 12 months (15 before) Extension to self employed (1)

Severance Payment

12 days/year for new contracts; 18 days/year (old contracts first 3 years) (30/36 days before) Cap: 12 months

Reduce risk of long term unemployment Encourage earlier return to labor market Reduce contribution period that gives access unemployment insurance

(1)

Working time Arrangements

Introduction of individual bank of hours, capped at 150 hours (vs. 200 before);

Collective bank of hours Vacations up to 22 (vs 25 days )

Increase flexibility in production cycle; Improve efficiency and eliminate labor market duality

Improve productivity; Improve production capacity adjustment to peak periods without increasing personnel costs

Unemployment benefit has been extended to certain self employed categories (+80% of wage needs to come from one employer )

48

B. Structural reforms

Hiring and firing is now easier and less costly Hiring and firing practices

Redundancy costs

[Index scale from 1 to7 (best)]

[Cost of advance notice requirements, severance payments, and penalties due when terminating a redundant worker, expressed in weekly wages]

5

100

90 80 4 70 60 3

50 40 30

2 20 10 1

0 ITA

FRA

ESP

PRT 2015

DEU

GRC

IRL

2008 Source: World Economic Forum

ITA

FRA

IRL

GRC 2015

PRT

ESP

DEU

2008 Source: World Economic Forum

49

B. Structural reforms

Judicial system reforms Effectiveness of labor, civil, commercial and tax courts

Streamline and speed up court proceedings; Reduce and expedite the resolution of backlog cases;

Alternative dispute resolution

Create and strengthen alternative dispute resolution means to facilitate out-of-court mechanisms.

Improve enforcement procedures.

Restructuring of the court system with the adoption of new court management models (New Judicial Map);

New Tax Arbitration Law;

New Code of Civil Procedure;

Strengthened Peaces of Justice regime;

Creation of specialized courts (new Competition Court and Intellectual Property Court);

Out-of-court debt restructuring framework (SIREVE).

50

B. Structural reforms

Since 2012, significant improvements were made both in the clearance rate and in the disposition time Clearance Rate

Disposition Time (days)

[Clearance Rate (%) = Resolved cases/ Incoming cases × 100]

Disposition Time = Pending cases/Resolved cases × 365] 1100

130%

124% 1000 120% 900 110%

849 800

100%

97%

700

710

90% 600

80%

500

400

70% 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015

Source: DGPJ

1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015

Source: DGPJ

51

B. Structural reforms

Public Administration reforms Portugal was one of the first EA countries to translate the “Fiscal Compact” rules to its legal framework

New Budgetary Framework Law:

New Commitments’ Control Law:

• Fiscal compact rules introduced in 2013 and new Law approved in 2015 (both approved by a qualified majority in Parliament);

• Ability of public entities in assuming commitments is constrained to the quarterly available funds;

• Introduction of a program-based budgeting.

• Establish strong incentives for suppliers to closely watch infringements.

New Public Finance Council: • Contribute to bring transparency and accountability on fiscal policy; • Review government revenue projections and multi-annual fiscal plans.

Restructuring State Owned Enterprises: • Commercial SOEs reached operational balance in 2012, through downsizing, cuts in operational costs, and investment restrictions; • Most subsidiaries and shareholdings in noncore activities will be eliminated by 2014; • New governance model (Ministry of Finance has stronger power) and tighter reporting framework.

52

B. Structural reforms

The number of civil servants declined by about 9% since Dec-11, putting a lid on current expenditure Number of civil servants [thousands] Regional and Local Government

728

551

700

530

Social Security Fund

675

656

510

497

659

Central Government

General Government

664

670

668

661

507

511

509

502

502

13

12

12

11

10

10

10

10

10

164

158

154

149

147

147

148

149

149

Source: DGAEP

53

B. Structural reforms

Social security reforms 2007: new Social Security Framework Law (Social Security Reform 2007 – Law no. 4 -2007)

• Introduction of new rules for the calculation of the pensions, considering the entire career and a sustainability factor (the “life expectancy coefficient”); • Further reduction of the benefits in relation to earlier retirement.

2007: Convergence between CGA and GSSS (Law no. 52/2007 of 31 August)

• Transposition of Social Security reform measures to CGA from 2008 on, with a transitory period until 2015.

2014: new rules were introduced (Decret-Law no. 167-E/2013 and ministerial directive no. 378-G/2013 of 31 December)

• 2014: Normal retirement age increased from 65 to 66 years old (sustainability factor update); • Following years: normal age of entitlement to old-age pension indexed to the average life expectancy (updated in a 2/3 proportion of the change of the average life expectancy observed between the 2nd and 3rd years preceding the pension entitlement ).

54

Appendix

A. Macroeconomic indicators B. Structural reforms C. Fiscal indicators D. Debt management indicators

55

C. Fiscal indicators

The overall balance of the GG on a cash basis stood at EUR -1,838 million between JanOct 2017, EUR 2,664 million above the same period in 2016 General Government (GG) balance [EUR million; yoy change] 2,000

10,000

1,022 132

0

-358

625 -19

-649 -2,000

-569

-339

-1,617

-698

8,000 -1,838

-2,034

6,000

-1,931 -2,811

-3,075 -3,763 -2,860

-4,000

-3,934 -4,916 -6,000

1,901

2,290

-4,182

-4,503

4,000

2,664 -4,763 2,000

1,153 290

-8,000

0 -397

-151

Jan

Feb

-314

-359

-264

Apr

May

Jun

-581

-10,000

-2,000 Mar

yoy change (RHS)

Jul

Aug

2017

Sep

Oct

Nov

Dec

Target

2016

56

C. Fiscal indicators

Jan-Oct 2017 budget execution (on cash basis) General Government total revenue on cash basis

General Government total expenditure on cash basis

[%, pp]

[%, pp]

4.2 3.9

Total revenues (yoy, %)

Main contributions (p.p.) 1.4

Direct taxes

0.0 0.2

Employees

1.6

Current transfers

- 0.9 0.7

0.7

0.2

Interest and other charges

- 0.1

0.7

Other current revenue

Capital revenue

4.4

Main contributions (p.p.)

0.5

Indirect taxes

SS contributions

0.0

Total expenditures (yoy, %)

Other current expenditure

0.1 0.1

0.4 1.8

2.0

Capital expenditures

0.4 0.9

Execution in Jan-Oct 2017

2017 Budget target

0.3 1.7

Source: Ministry of Finance

57

Appendix

A. Macroeconomic indicators B. Structural reforms C. Fiscal indicators D. Debt management indicators

58

D. Debt management indicators

Average implicit interest rate anchored in historically low level, given the relatively long average maturity Implicit interest rate on State direct debt

Average maturity around 8 years

[%; Interest costs in t / Average debt stock at the end of t-1 and t]

[State direct debt after swaps; Aug-2017]

2012

2013

2014

2015

2016

PGB

4,4%

4,6%

4,7%

4,4%

4,0%

Tbills

4,1%

2,4%

1,2%

0,2%

0,0%

Retail debt

3,1%

3,4%

3,5%

3,6%

3,3%

EU/IMF

3,1%

2,8%

3,0%

2,9%

2,8%

Total

3,9%

3,6%

3,6%

3,4%

3,2% Source: IGCP

Outstanding (EUR bn)

Current average residual maturity (years)

Final average residual maturity (years)

EU-IMF

61.8

11.3

13.0

Other debt

182.9

6.3

6.3

Total

244.7

7.6

8.0

EU/IMF loans with average cost of around 2.5% [Estimates; Aug-2017] Entity

Amount disbursed (EUR bn)

Estimated Final average maturity from all in cost disbursement date (years)

EFSM

24.1

2.7%

19.5

EFSF

26.0

1.9%

20.8

IMF

26.3

4.2%

5.9

Total EU-IMF

76.5

2.5%

15.3 Source: IGCP

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D. Debt management indicators

Over-the-counter and platforms average daily turnover improved since 2013 Average daily turnover on PGBs [EUR million] 2,000 1,800 1,600 1,400

1,200 1,000 800 600 400 200 0 Jan-12 May-12 Sep-12 Jan-13 May-13 Sep-13 Jan-14 May-14 Sep-14 Jan-15 May-15 Sep-15 Jan-16 May-16 Sep-16 Jan-17 May-17 Sep-17 Over-the-counter OT

Platforms OT

OT 12M Moving Average Source: IGCP, HRF reports by Primary Dealers

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Disclaimer The information and opinions contained in this presentation have been compiled or arrived at from sources believed to be reliable and in good faith, but no representation or warranty, express or implied, is made as to their accuracy, completeness or correctness. All opinions and estimates contained in this document are published for the assistance of recipients, but is not to be relied upon as authoritative or taken in substitution for the exercise of judgment by a recipient and, therefore, does not form the basis of any contract or commitment whatsoever. IGCP does not accept any liability whatsoever for any direct or consequential loss arising from any use of this document or its contents.

Web site: www.igcp.pt Bloomberg pages: IGCP Reuters pages: IGCP01

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