Exports to fall 19.5%, imports 12.4% in 2020

Exports are expected to fall 19.5% and imports 12.4% in 2020, according to the Economic Bulletin of the Bank of Portugal (BdP), released on Tuesday, which improves the outlook compared to June.

The “reduction in the elasticity of imports vis-à-vis overall demand weighted by import content, which tends to occur in periods of contraction, will result in greater rigidity of imports”, which the Bank of Portugal estimates at 12.4%.

In the previous Economic Bulletin, released in June, the BoP forecast a fall in exports of 25.3% and in imports of 22.4%.

“In this context, and taking into account that Portugal is a net exporter of tourism, a significant reduction in the balance of goods and services is anticipated, reflecting a strong negative volume effect, which is partly offset by a positive trade effect, associated with the sharp fall in oil prices”, the BdP said in the Bulletin.

The institution led by Mário Centeno, former finance minister, also pointed out that “the balance of goods and services is expected to become deficit, with this development being decisive for the deterioration of the current and capital account balance to -0.6% of GDP [Gross Domestic Product]”.

“In 2020 the Portuguese economy should record net borrowing compared with the rest of the world, interrupting the sequence of external surpluses recorded since the previous crisis”.

The central bank pointed out that “the short-term outlook for the Portuguese economy remains surrounded by the uncertainty associated with the evolution of the pandemic”, and that “the prolongation of the pandemic crisis may lead to a cycle of retrenchment of expenditure and supply”.

Bank of Portugal forecasts an economic recession of 8.1% in 2020 due to the Covid-19 pandemic, better than the 9.5% projected in June, according to the Economic Bulletin released on Tuesday.

“The Portuguese economy will fall by 8.1% in 2020, reflecting a year-on-year fall of 9.4% in the first half and a recovery in the second half of the year, which translates into a year-on-year change of -6.8%,” the paper reads.

The projection now presented revises the June forecast by 1.4 percentage points upwards, reflecting a smaller impact of the confinement in the Portuguese economy and a better-than-expected reaction by companies and households, the central bank said.

The Bank of Portugal also foresees an unemployment rate of 7.5% in 2020, a downward revision from the 10.1% projected in the June Economic Bulletin.