Recession could be 5.7%, 6.9% or 11.8% of GDP

Portugal’s expected recession could represent anywhere between a conservative estimate of 5.7% to a worse case scenario of 11.8% in terms of GDP contraction for 2020.

GDP contracted 2.3% in the first quarter of 2020 like-for-like on 2019 which is a taste of things to come from an economic crisis provoked by the nation’s economy being shut down for effectively three months and with many business sectors still operating at a fraction of their usual rate.
In terms of unemployment, which has been artificially managed through Government sponsored layoffs, the impact is still not visible, but is expected to rise as the number of SMEs are forced to either close or reduce staff numbers as business counts the cost of the pandemic.
Portugal’s public debt has now skyrocketed to its highest level for 5 years, just after the Government under Finance Minister Mário Centeno had made considerable headway by the end of last year bringing down the annual budget deficit for the first time since the Carnation Revolution of 1974.
However, the true cost to the economy, public finances, companies and families and Portugal’s GDP and overall debt will only be accounted for by the end of the last quarter of 2020 when it is expected to rise further.
And faced with these official statistics and ongoing uncertainty, the Ministry of Finances produced its State Budget 2020 Supplement which will be delivered to the Portuguese parliament on Tuesday (tomorrow).
On Monday, economy and management college ISEG (Instituto Superior de Economia e Gestão) painted an even worse scenario, predicting a fall in GDP of between 15% and 20% for the first half of 2020 on last year.
In recent months, the international institutions that follow the fortunes of Portugal’s economy have already issued their forecasts for the four main indicators: GDP, Unemployment rate, Public debt, and Budget deficit.
All of them call for caution when making forecasts because of the uncertainty and unpredictability of the situation caused by the pandemic.
And in the case of national institutions, such as the Bank of Portugal (in March) and the Council of Public Finances (June), these have opted for making two scenarios in terms of forecasts as is the case with the European Central Bank (ECB) which has not made specific forecasts for Portugal.
The International Monetary Fund (April) and the European Commission (May) made just one forecast, despite warning that the final results could be even worse.
It stresses that the time difference of the forecasts do not allow them to be compared directly given the rapidly changing situation.