The Portuguese Public Finances Council (CFP) estimated on Wednesday that the country’s gross domestic product (GDP) may fall between 7.5 percent and 11.8 percent this year due to the effects of the COVID-19 pandemic.
In the report “Economic and Budget Outlook 2020-2022“, the CFP pointed out “high uncertainty and inherent risks” in the current context of health crisis and contraction in economic activity due to the impacts of confinement measures.
“The base scenario anticipates a contraction of the product in 2020 of 7.5 percent, while in the severe scenario the reduction is 11.8 percent,” forecast the official body which oversees budgetary rules and public finances in Portugal.
According to the CFP, “the reduction in GDP in 2020 reflects, on the one hand, the significant decrease in external demand directed at Portugal with an impact on total exports, in particular on exports of services, due to the fall in demand in the tourism sector and related activities”.
There is also “postponement of investment and consumption by economic agents in a scenario of high uncertainty”, adds the CFP.
What will determine which scenario will become reality, will be the size of the shocks in global and external demand and the pace of normalization of domestic and foreign economic activities during the second half of 2020, said the CFP.
In 2021, the official agency estimated an increase in GDP between 3 percent and 4.7 percent, while in 2022 the increase would be 3.2 percent.
The reason for the optimism regarding the next two years is the “expectation that the shock in the economy is transitory. However, the common and widespread shock at the global level intensifies the downside risks for Portugal”.