Portugal’s pandemic deficit is ‘enormous’ – but still smaller than deficits of Sócrates government

Portugal’s public deficit for the first year of the pandemic exceeded €10.3 billion – but even so is less than the last two deficits of the final government of José Sócrates (the government that ended up requesting a €79 billion bailout which sent Portugal into crippling years of economic austerity).

That said, there is worse to come. As all financial commentators predicted before the decision for Portugal’s second lockdown, the economy’s recovery in 2021 will be much more problematic now that the country has been plunged into a second national lockdown with no immediate end in sight (PM António Costa said yesterday that it will almost certainly be continuing ‘for some weeks to come’).

Says Dinheiro Vivo, finance minister João Leão (pictured above) admits that the: “second wave of the pandemic, more intense than expected with all the associated restrictive measures of confinement, with larger government support to families and businesses will require a negative revision of the macro-economic scenario and budgetary balance”.

Analysing the data, DV says Portugal’s deficit has essentially taken public debt 17 times above values registered in 2019. 

It’s not simply the pandemic that caused this (in terms of direct measures to combat the effects of Covid-19 and the restrictions and confinements) but indirect expenditure like of hiring 9.078 additional health professionals and the reinforcement of the SNS health service budget with another 65% of investment.

Expresso has also been making an analysis of ‘economic indicators’, stressing that all signs for 2021 “although scarce are once again negative”.

GDP fell sharply again during the last three months of 2020 (by how much statistic institute INE will be reporting next week), thus with the latest restrictions in place, Portugal faces a new ‘technical recession’ (two consecutive three month periods where GDP falls in relation to the previous three months) on top of the one in which GDP had already fallen by 16.4% in relation to 2019.

Says Expresso, what this is all boiling down to is that the ‘hoped for recovery in 2021 could suffer a setback’.

This is almost certainly one of the greatest understatements of the day, particularly as the paper refers to the IMF’s projections for the world economy this year, in which it revised downwards (by 1%) growth in the eurozone.

The IMF predicts eurozone growth now of only 4.2% – and this, says Expresso, “will be decisive for the national economy”.

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