Portugal: Economy logs worst contraction in history in Q1 amid Covid-19 blow
May 15, 2020
According to preliminary estimates released by the country’s Statistical Institute (INE) on 15 May, economic activity plunged 3.9% in quarter-on-quarter, seasonally-adjusted terms in the first quarter, marking the worst result on record as Covid-19 took its toll (Q4 2019: +0.7% quarter-on-quarter). Similarly, on an annual basis, GDP shrank 2.4%—the steepest decline in seven years (Q4 2019: +2.2% year-on-year).
While a detailed breakdown will not be released until 29 May, the preliminary estimate indicated that hefty contractions in both domestic and external demand led the historic fall in activity as the Covid-19 pandemic and measures implemented to combat its spread shut down general economic activity.
The economic outlook has darkened with a deep contraction now forecast for 2020. Shrinking fixed investment is set to spearhead the downturn, while deferred private consumption will also weigh on domestic demand. The country’s reliance on tourism and exports poses a key risk, with the external sector expected to contract sharply on a reduced flow of people and trade.
Author: Javier Colato, Economist