State already sees “progressive recovery” of the economy

The Finance Minister, João Leão, acknowledges that the “very sharp” contraction of the Portuguese economy in the second quarter “reflects the impact caused by the Covid-19 pandemic and is associated with the longer period of the state of emergency. The good news is that the Ministry of Finance already sees signs of economic recovery in the leading indicators.

“In recent weeks, after the state of emergency, high-frequency economic indicators are already showing signs of a gradual recovery in economic activity,” the Ministry of Finance said in a statement published this Friday, referring to data on purchases using ATM cards and electricity consumption in Portugal.

This is the reaction to the fact that the Portuguese economy contracted 16.5%, in year-on-year terms, in the second quarter of 2020, in which it has already been affected by the pandemic. In comparison with the previous quarter, the drop was 14.1%, according to data released this Friday by the National Statistics Institute (INE).

The government argues that the numbers released by INE are “equivalent” to the most recent forecasts of the European Commission and “is in line with the fall in our main economic partners like Spain (22.1%), France (19%) and Italy (17.3%).” However, it should be noted that in the Euro Zone average the economic contraction (-15%) was less significant than in Portugal.

“This extraordinary situation interrupts a prolonged period of economic growth, which has allowed convergence with the Eurozone over the last 4 years and a reduction in unemployment to historically low levels (6.4% in February), at the same time as the consolidation of public accounts has taken place, within a framework of strengthening public services, and the balance of external accounts has been guaranteed,” says the government, arguing that Portugal is “better prepared” to respond to the pandemic crisis.