Portugal risks a heavy toll on its economy but has shown resilience in the past.
The economic impact of Covid-19 on the Portuguese economy will be vast. As the global crisis unfolds, the number of deaths increases, standing currently over 24 thousand persons (60 in Portugal). The number may yet be small compared to other causes of death but has had a huge media impact, left millions and millions confined to their homes, and unable to mourn their loved ones. It affects everyone, everywhere: from Europe to North and Central America and passing by China and India. This will certainly impact how people conceive their lives and how they will behave as economic agents.
Prominent scholars such as Dani Rodrik, Harold James or Peter Bergeijk have warned that globalization may be waning. Covid-19 crisis may certainly fuel it. If this is the case/choice, Portugal as a small economy will pay a particularly heavy toll on its economy, both in terms of GDP and efficiency. If you consider a world post-Covid virus, particularly tourism, on which Portugal’s recent growth is highly dependent, will probably take a turn for the worse., Tourism revenues estimated at almost 9 percent of GDP in 2019 will most likely shrink in 2020, especially as Portugal has attracted elderly/retired both as tourists and immigrants.
The impact in GDP and employment will be somewhere between the effect of a catastrophe and a recession. After a catastrophe, and provided funds are available, the reconstruction often leads to growth soon enough. With recessions, it will take longer to recover. With the potential second wave of the pandemic in next winter(s) and the eventual change in behavior of different economic actors it is hard to say. But considering the implications of the quarantine, and the decline in trade and tourism, economists such as Daron Acemoglu and particularly the Portuguese Vasco Carvalho, director of Cambridge-INET Institute, suggest that intersectoral linkages will propagate economic problems (Acemoglu, Carvalho et al., 2012; see other Carvalho’s works). Unemployment is already going up and to smoothen the crisis, budget deficit and public debt will also.
All in all, challenges ahead are abundant and the situation will worsen before improving for the Portuguese economy. While the Portuguese economy has shown resilience in the past, unnecessary economic and social suffering calls for an articulated response as a case of a global public good. In a moment Europe faces many uncertainties and some certainties, as Brexit and climate change, the case for action is urgent. But under which conditions? Benefiting whom? The challenges and doubts are certain but it is a time for individual and collective courage and solidarity. The future is yet to be written.