Portugal to suffer ‘greatest contraction of economy’ in EU during first three months of 2021

This is the news from the European Commission today, relating to the next three months in which Portugal remains ‘locked down’ with no clear roadmap out of the labyrinth of pandemic-related restrictions.

Explain reports, all Europe’s economies are set to shrink during the first trimester because of restrictions imposed by their governments – but Portugal’s is likely to suffer the most, with GDP falling by a further 2.1% since the three month period leading up to the New Year.

However, once this miserable period is over, Brussels expects the EU economy as a whole to grow by around 3.7% – with Portugal’s doing quite a bit better.

Forecasts are for GDP in Portugal to increase by 4.1%. This is lower than the forecast made back in November (of 5.4%) when a second period of lockdown was still ‘unthinkable’ (click here).

The Commission has nonetheless tempered its latest analysis with the warning that Portugal’s ‘risks’ remain ‘significant’ due to the great dependency of the country on external tourism.

As we have seen in the case of UK (where travelling abroad has been effectively outlawed, and those that manage to get away face draconian hurdles to get back) external tourism “faces uncertainties related to the evolution of the pandemic”, says Brussels – adding that “hopes are that an increase in consumer demand and an improvement in business confidence will promote the Portuguese economy”.

Elsewhere, the European Commission sees the Spanish economy ‘growing the most’ through 2021 (by 5.6%); with German and Italian economies also falling short of November’s forecasts.

By contrast, the Bank of Portugal has come out with a DEI today (daily economic indicator) which points to the national economy ‘recovering’ during the first week of February (compared to the earlier weeks of January) “in spite of confinement”.

The indicator, explains ECO online, “incorporates various series of information, “like the movement of heavy goods vehicles on motorways, postal traffic through airports and purchases made using bank cards”.

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