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Unemployment rate could hit 10% by end of 2020, says finance minister

35unemployment soarPortuguese Finance Minister Mario Centeno said on Thursday the unemployment rate could hit around 10% by the end of the year, compared to 6.7% reported during the first quarter of 2020, because of the impact of the COVID-19 pandemic.

“We think the unemployment rate may increase by three to four percentage points by the end of 2020,” Centeno, also Eurogroup’s chief, said during an interview with RTP television.

Centeno’s forecast is below a prediction for Portugal by the International Monetary Fund (IMF), which sees unemployment more than doubling to 13.9% this year. Unemployment had been falling before the pandemic as the economy was recovering from a severe debt and economic crisis.

A total of 91,500 people registered as unemployed between the beginning of Portugal’s lockdown on March 18 and the end of April, official figures showed, bringing total unemployment to just under 370,000 people.

Around one in five workers in Portugal, which completed a strict EU bailout programme in 2014 in the wake of the 2008 global financial crisis, haVE been laid off since the pandemic. The IMF expects Portugal’s gross domestic product to contract by 8% this year, above the European Commission’s predictions this week of a 6.8% drop.

The Fund also said Portugal should return to economic growth next year.

Helped by solid economic growth of 2.2% last year, the government reported a budget surplus of 0.2% of GDP in 2019 – its first in 45 years of Portugal’s democratic history – after a deficit of 0.4% in 2018.

“We have to fight the crisis,” Centeno said. “If this is a temporary situation we will have to adapt measures for the economic recovery period.”

With his Eurogroup hat on, Centeno said he expected the European Union to be able to respond strongly to the crisis, saying the new European Recovery Fund will help the bloc tackle the economic consequences of the coronavirus.

European leaders are negotiating over the creation of a fund worth at least 1 trillion euros to give damaged economies a boost.

“I have no doubt there will be an agreement,” Centeno said. “It will be a lasting commitment. The key is to stretch these costs over time.”