The European Commission improved this year's Portuguese GDP forecast, anticipating a slightly less severe recession than in July.
It is still one of the largest recessions ever, but should be slightly lower. The European Commission has improved the forecast for the Portuguese economy’s contraction this year from 9.8% in July to 9.3%, according to the Autumn 2020 Economic Forecast released this Thursday. However, the recovery in 2021 will be lower than the GDP growth of 6% previously estimated, now standing at 5.4%.
The 9.3% recession forecast for Portugal in 2020 is higher than the 8.5% drop forecast by the Ministry of Finance in the proposed State Budget for 2021 (OE 2021), but is below the 10% drop anticipated by the International Monetary Fund (IMF) in October. Still, these figures are above the Euro Zone average where GDP is expected to shrink 7.8%.
In its analysis of the Portuguese economy, the European Commission acknowledges the economic recovery during the summer months, but warns that the tourism sector remains “far below” the levels prior to the pandemic and should “recover only gradually” from this crisis. “The outlook for the sector [tourism] has been further darkened by a rise of infections this autumn,” Brussels experts point out, which represents a risk for the economy since it relies heavily on foreign tourists.
Within the Eurozone, only Spain (-12.4%), Italy (-9.9%) and France (-9.4%) will have a worse recession than the Portuguese economy, according to European Commission forecasts. Looking at the European Union as a whole, only Croatia (-9.6%) will join this group.
On the opposite side is Lithuania with a contraction of only 2.2%, the smallest in the whole European Union. It is followed by Ireland (-2.3%) and then Sweden (-3.3%) and Denmark (-3.9%). In the EU as a whole, GDP is expected to fall by 7.4%.
In 2021, Portugal should register the third-highest recovery in GDP, only surpassed by France (5.8%) and Croatia (5.7%). On average, Eurozone countries should grow by 5.2%.