Worst slump since 1936

PORTUGAL last year recorded its steepest economic contraction since 1936 as both domestic and external demand weakened due to the Covid-19 pandemic, especially in tourism.

Gross Domestic Product fell 7.6% in 2020, the National Statistics Institute (INE) data showed, almost double the 4.1% fall in 2012 during an austerity programme linked to an international bailout.

“Domestic demand presented a significant negative contribution to the annual rate of change of GDP, mainly due to the decrease of private consumption,” INE said.

“The contribution of net external demand was more negative in 2020, mainly reflecting the unprecedented reduction of tourism exports.” Tourism accounts for 15% of GDP.

INE revised down growth in the last three months of the year to 0.2% from its flash estimate of 0.4%. That was sharply down from the third quarter’s 13.3% growth.

In its second GDP reading for the quarter, INE also said the economy contracted 6.1% from a year earlier, revising its flash estimate of a 5.9% decrease.

The government has projected a 5.4% rebound this year but the finance ministry has already warned that the current nationwide lockdown will have a negative impact in the first months of 2021.

Portugal imposed a night-time curfew and partial weekend lockdown in early November and tightened curbs in mid-january as the pandemic worsened.

Recently, it saw another nationwide lockdown extended until at least midmarch but its president told the government to put together a plan to gradually lift the strict rules.