Portugal needs deep reforms to unleash growth: OECD

The OECD on Tuesday said Portugal needed to push ahead with deep structural reforms to rebalance its economy and unleash its GDP growth potential of 3.5 percent by 2020.

The Paris-based Organization for Economic Co-operation and Development (OECD) identified the labor market, the tax system, competition, training and improving the efficiency of public administrations as some of the areas that need to be addressed.

“Portugal is now faced with a unique opportunity to modernize its economy, as well as building a fairer, more cohesive society and a more efficient dynamic public administration,” the OECD’s secretary general, Ángel Gurría, said in a foreword to a report entitled Portugal. Reforming the State to Promote Growth.

The OECD recommended further reforms to reduce protection for workers on regular contracts and for better training. “Despite the progress made, human capital remains the Achilles’ heel of the Portuguese economy,” the report said. “Upgrading human capital will require further reforms of education and occupational training systems, as well as of the functioning of the labor market.”

The OECD also called for measures to shift the burden of taxes away from labor by further broadening the tax base and increasing environmental taxes. It also said the state needed to strengthen its institutions to ensure sustainable fiscal management.