Portugal's economy tanks 3.9% in first quarter amid pandemic

Portugal's economy reversed its growth trajectory to contract a steep 3.9% in the first quarter from the preceding three-month period as the effects of the coronavirus epidemic started taking their toll, mainly in March, official data showed on Friday.

The National Statistics Institute (INE) also said in its flash estimate that gross domestic product shrank 2.4% compared to the same period a year earlier. The figures come as a blow to a country that posted 2.2% growth year-on-year and 0.7% quarter-on-quarter in the last three months of 2019, the year it achieved its first budget surplus in 45 years of its democratic history.

"Even before [restrictive measures], there were disturbances to the normal functioning of some activities and demand, namely in restaurants and hotels, affecting economic activity since practically the beginning of March," the statement said. Portugal has reported a relatively low coronavirus toll of 28,319 confirmed cases and 1,184 deaths, especially when compared to neighboring Spain with more than 27,000 fatalities, but its export-oriented, tourism-dependent economy has been hit hard.

The country enacted a state of emergency on March 18 when its death toll was still in single digits, closing non-essential services and restricting movement of people. On May 3, the government lifted restrictions to launch a sector-by-sector plan to reopen the economy. The second phase, opening restaurants, larger shops, creches and schools for some year groups, will launch on Monday.

The contribution of internal demand to GDP was a negative one percentage point, turning negative for the first time since 2013 as private investment and consumption collapsed. Exports slumped by 7.3% compared to the previous quarter, INE's flash estimate showed, largely attributed to a drastic drop in tourism, the industry credited with lifting Portugal out of the last crisis in 2011-2014. Imports fell 2.9%.

The International Monetary Fund predicted Portugal's economy would contract by 8% this year, while the European Commission estimated 6.8%. More than 110,000 people have registered as unemployed since the beginning of Portugal's lockdown on March 18, official figures showed.