Medina: “All will be affected by rising interest rates”

Portugal’s Finance minister said on Thursday that interest rate hikes by the ECB to curb inflation, were “quicker and higher” than had been expected for this year, and would also affect 2023.

Addressing delegates in his closing speech at the ‘Money Conference’ organised by Dinheiro Vivo, Diário de Notícias, and TSF radio, Fernando Medina told the delegates, mostly made up of bankers, that “everyone would have to face rising interest rates which could be seen as a normalisation in terms of monetary policy”.
“The way in which we collectively deal with this challenge largely decide how 2023 goes,” he said.
Regarding 2023, the finance minister warned that Portugal would be influenced by “external environment” which would affect the country.
“We will be faced with challenges over which we have not control”, he added referring to the war in Ukraine which has been going on since 24 February with no end in sight would continue to dominate the agenda along with the attendant “ total uncertainty as to when and under what conditions the conflict would end”.
It remains to “bring energy prices back to normal and accept that these successive increases are of a structural nature, but maintain the hope in the European movement towards energy independence”.
“We will have high inflation for a longer period” even if studies point to much lower percentages than the current ones,” said Fernando Medina.
Apart from “reducing energy dependence” Portugal would have its “public finances under control” , with a deficit forecast of 0.9%; a debt of 111%, and a primary account balance of 1.6% of GDP; and a boost in public investment.
However, he said on the down side Portugal was, like other countries, “transferring wealth to energy exporting countries” leading to a “deterioration of the overseas balance of payments”.
On the up side, Portugal had a “robust and resilient financial system”, as a result of the work that had been done (offloading impairments, strengthening core capital, and restructuring plans) by the financial institutions that had contributed towards Portugal being in the “solid and robust” position it is in today, serving the economy and the Portuguese.