The Economist has just come out with a 1-page summary of which are, and which are not, the problems of the Portuguese economy. Get it here. I agree with 90% of what is in it, and from their writings here, I think most members of this blog do too.
Informed Portuguese readers of Portuguese newspapers will find this article boring---it just states succinctly what many economists (including some that write in this blog) have been writing in the Portuguese press for a long time. The article will only be useful to those insufferable people in the country who are continuously criticizing the Portuguese press and its hard-working journalists, but then bow uncritically to anything that comes out in a foreign publication. (The term for them, in Portuguese, is "parolos".)
English-speaking readers, however, get a lot of noisy signals. In the past week, these have included the blank statement: "Portugal is the next Greece," which is always mysterious, sometimes misleading, and in some contexts either spot on or just plainly factually incorrect. For those, this article might be useful.
Thursday, 22 April 2010
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The article also says that "wage increases outstripped productivity growth". But I don't think this is true. Real Compensation per employee has risen alongside with Real GDP por worker, according to the AMECO and INE databases.
ReplyDeleteThe graphic presented at the right hand of the article is, I thing, misleading. It shows nominal labour costs: nominal inscrease in compensation vs. deflated GDP. This is useful to compare different countries in a monetary union but is not the best indicator to compare productivity with compensation.
The reason why portuguese Labour Costs have risen above the euro area average does not therefore lie on wage increases above productivity but insted in inflation, which has been higher in Portugal than in Euro Area.
And this leads us (over and over...) to the same point: give that portuguese companies are "price takers" when it comes to sell their products abroad, the inflation gap is probably being produced by the non tradable sector. Maybe this has something to do with all those privatizations mentioned in Ricardo's previous post?