The Portuguese economy contracted by 7.6% in 2020 due to the pandemic crisis, INE has confirmed. However, in the fourth quarter, GDP grew by less than previously estimated.
The pandemic caused a 7.6% drop in the Portuguese economy in 2020 compared to the previous year, confirmed by the National Statistics Institute’s (INE) second estimate released this Friday. The government’s last forecast made in October pointed to an annual contraction of 8.5 percent, but Finance Minister João Leão had already admitted that GDP performance had been better. The stronger than expected performance in the fourth quarter contributed to this result, continuing the economic recovery.
“In 2020, GDP contracted by 7.6% in volume (growth rate of 2.5% in 2019), reflecting the adverse effects of the Covid-19 pandemic on economic activity,” the statistics office reveals. This is the largest fall in GDP in Portugal’s democratic period and is below the latest forecasts released by the main entities: International Monetary Fund (-10%), European Commission (-9.3%), OECD (-8.4%) and Bank of Portugal (-8.1%).
The largest negative contribution (-4.6 percentage points) came from domestic demand, mainly due to the contraction of private consumption. Net external demand made a negative contribution of three percentage points, “mainly reflecting the unprecedented reduction of tourism exports.”
The Portuguese economy surprised in the fourth quarter by growing compared to the third quarter, even with the introduction of tougher restrictions to control the pandemic. Initially, INE pointed to a 0.4% quarter-on-quarter growth, but the figure has now been revised down by half (0.2%). In year-on-year terms, the decline went from 5.9% to 6.1%.