Portuguese economy shrinks in first quarter amid lockdown

Portugal's economy contracted 3.3% in the first quarter from the preceding three months, hit by a nationwide lockdown imposed in mid-January to combat what was then the world's worst surge of COVID-19 infections, official data showed on Friday.

Portugal's economy contracted 3.3% in the first quarter from the preceding three months, hit by a nationwide lockdown imposed in mid-January to combat what was then the world's worst surge of COVID-19 infections, official data showed on Friday. The economy was hit by a decline in both external and internal demand, the National Statistics Institute said in its flash estimate. The gross domestic product also shrank 5.4% from a year earlier, when the country's first lockdown had not kicked in until mid-March.

In the October-December period of 2020, the gross domestic product had expanded 0.2% quarter-on-quarter and contracted 6.1% from a year before. Economist Filipe Garcia, from Informacao de Mercados Financieros consultancy, said "the numbers showed a worse contraction because tourism was closed the entire quarter of 2021, while in 2020 it only closed in March, and the lockdown this year also hit private consumption throughout the quarter."

Portugal's economy, in which the tourism sector represented around 15% of GDP before the pandemic hit, shrank 7.6% in 2020, its biggest annual slump since 1936. "The prospects are that starting this spring, the economy will start to recover very strongly although it is not clear how tourism will behave this year," Garcia said.

Most of Portugal's territory will proceed to the final phase of a gradual easing of COVID-19 restrictions from May 1, and the land border with Spain will reopen for normal travel after a three-month hiatus. Earlier this month, the government cut its 2021 economic growth forecast to 4% from 5.4% due to the tough restrictions imposed in January that are now being lifted.

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