ExpertEye European Automotive Report Q2 2016 | Page 22

Portugal – High levels of NPLs a concern for banks Whilst not as badly impacted as the likes of Greece and Italy, the banking systems within Portugal, along with some large German banks, reflect structural problems of excess bank capacity, high levels of Non-Performing Loans “NPLs”, and poorly adapted business models. However the underlying Economic Sentiment Indicator remained at a high level with all components except industry stabilising. Despite the positive ESI, unemployment levels remain high as does debt levels which put household savings under pressure. In fact Portugal’s high combined debt levels are currently the largest in the euro zone. Nevertheless, private consumption is still expected to provide some short-term growth. New car sales rose 10.9% in June 2016 and are up 17.9% YTD, whilst . Economic Forecasts - Portugal 2014 2015 2016 2017 Inflation (%, yoy) (0.2) 0.5 0.7 1.2 Public budget balance (% of GDP) (7.2) GDP growth (%, yoy) Unemployment (%) Gross public debt (% of GDP) Current account balance (% of GDP) 120 115 105 250,000 p.a. as the market recovers the sales lost over 2011-12 before 100 It’s been two years since the European Commission first accused Portugal of having a used vehicle import tax which violated the rules on the free movement of goods and in June this year that view was upheld by the European Union Court of Justice “EUCJ”. This import tax has created a semi-closed market for used vehicles which has European Automotive Report - 2016 Quarter 2 130.2 0.0 12.6 (4.4) 129.0 (0.1) 1.5 11.6 (2.7) 126.0 0.3 1.7 10.7 (2.3) 124.5 0.5 RV Index: 36 months / 90,000 kms Average Portugal 95 90 2010 01 2010 04 2010 07 2010 10 2011 01 2011 04 2011 07 2011 10 2012 01 2012 04 2012 07 2012 10 2013 01 2013 04 2013 07 2013 10 2014 01 2014 04 2014 07 2014 10 2015 01 2015 04 2015 07 2015 10 2016 01 2016 04 falling away again in 2019. 14.1 1.5 110 LCV sales rose 16.1% in June and putting them 16.2% up for the first half of the year. Over the next 2 years we believe car sales could top 0.9 Sources: European Commission – Economic Forecasts Experteye AG - RV Index Bowkett Auto Consulting Ltd - Forecast vehicle sales 21