Portugal’s GDP slumps 14.1% in Q2, biggest contraction ever recorded

Portugal’s gross domestic product shrank 14.1% in the second quarter of 2020, marking the biggest contraction ever, as lockdowns imposed to contain the spread of the coronavirus outbreak hit key sectors of the economy.

In a flash estimate, the National Institute of Statistics (INE) said that between April and June this year, the country’s GDP plunged 16.5% compared to the same period in 2019, affected by collapsed private consumption, investment and exports.

The Bank of Portugal predicts Portuguese GDP will contract 9.5% in 2020, the biggest recession in a century, while the government estimates it will fall 6.9%.

Last year, the country reported 2.2% growth and the first budget surplus in its 45-year democratic history.

The figures released this Friday for the second quarter mean that the current government estimate for the entire year, a contraction of GDP of 6.9% (less than the 9.8% estimated by the European Commission) will have to be reviewed, since it is practically impossible to reach in the six months left to complete the year. Of the EU Member States for which data is available for the second quarter, Portugal has the fourth worst drop, after Spain (-22.1%) – the European country with the greatest decline in the year-on-year change, France (-19% ) and Italy (-17.3%).

Pedro Siza Vieira, Minister of Economy, considered that the drop in GDP confirms “what was already known”, that Portugal had “in the months of April and May a very sharp drop in economic activity, with a big drop in private consumption, with a drop in investment, but above all with a big drop in exports”.

Siza Vieira stressed, however, that economic activity is having a “very slight recovery”. “In June, the economy already recovered slightly. We will remain attentive to the times ahead. It is to be expected that this quarter we will already have growth in relation to the second quarter. Let’s see what the pace of growth of the economy until the end of the year is, to try to understand what will conclude the year of 2020 as a whole, in terms of the impact of this pandemic on our economy.”

“A very abrupt break in the second quarter, and recovery in the third and fourth quarters. Now let’s see what the pace is”, he theorized.