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

imageEconomyJul 31, 2020 05:55AM ET

(C) Reuters.

By Sergio Goncalves and Catarina Demony

LISBON (Reuters) – Portugal’s gross domestic product shrank 14.1% in the second quarter of 2020, the biggest contraction ever, as lockdowns imposed to contain the spread of the coronavirus 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 with the same period in 2019, affected by collapsed private consumption, investment and exports.

“It is a number which will be remembered in the history of Portuguese economy, a consequence of strong confinement, particularly between mid-March and the end of April, which affected almost all economic sectors,” said Filipe Garcia, economist at Informacao de Mercados Financeiros consultants.

Portugal’s two largest trading partners, Spain and Germany, also recorded major contractions in GDP in the second quarter of the year, 18.5% and 10.1% respectively.

In yet another sign of weak domestic demand, INE said consumer inflation fell 1.3% in July after growing 0.9% in June.

The country had seen some of its strongest growth streaks in the past few years after leaving behind the 2010-13 economic and debt crisis.

Last year, Portugal’s GDP grew 2.2% while unemployment was 6.5%, near record lows. But the economy depends on tourism, which accounts for up to 15% of GDP and has suffered from the coronavirus lockdowns in Portugal and abroad.

The coronavirus is set to leave long-lasting scars on the country’s economy, with the Bank of Portugal predicting Portuguese GDP will contract 9.5% in 2020, the biggest recession in a century. The government estimates it will fall 6.9%.

The pandemic is also threatening Portugal’s unemployment rate, which rose to 7% in June from a revised 5.9% in May as tens of thousands of jobs were wiped out by the coronavirus.

But the overall number is likely to be substantially higher. Many workers stopped looking for jobs in the lockdown, meaning they were left off unemployment statistics.

The southern Algarve region, usually packed with visitors but now nearly deserted, was badly hit, with the number of registered unemployed in June jumping 231% to more than 26,000 people.

Portugal, which has reported a total 50,868 coronavirus cases and 1,727 deaths, began lifting its lockdown on May 4, but localised outbreaks in and around the capital, Lisbon, have worried authorities at home and abroad.

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

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