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The depressed tourism sector dragged down the entire Portuguese economy. Diversifying beyond tourism is an ongoing challenge for tons of economies around the world.

Portugal’s tourism-dependent economy is expected to shrink by nearly 7% this year due to the effects of the coronavirus outbreak, the government said in its economic and financial stability programme published late on Saturday.

“A strong contraction of the Portuguese economy is expected as a result of the economic shock caused by the COVID-19 pandemic and the containment measures implemented,” it said, describing the 6.9% predicted fall as the “biggest contraction registered in recent decades”.

The economy is expected to return to growth in 2021, with the country’s gross domestic product expanding 4.3%.

The figures are 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.

Portugal has reported 34,351 confirmed cases of coronavirus, with 1,474 deaths, a relatively low tally especially when compared to hard-hit neighbouring Spain. But its export-oriented economy, reliant on tourism for nearly 15% of GDP, has suffered heavy losses.

The country locked down in mid-March and is now gradually easing restrictions. Its tourism sector collapsed in April as lockdowns grounded flights and kept visitors from the largest tourist market, Britain, away.

The number of overnight stays by foreign tourists in Portugal dropped 98.3% to nearly 71,000 in April from the previous year, official data showed.

In its programme, the government also said the unemployment rate, which had been falling as Portugal slowly recovered from the debt crisis, could hit around 9.6% this year and 8.7% in 2021.

Exports are also expected to fall, dropping 15.4% this year and 8.4% in 2021 due to the pandemic, the government added. Exports grew 3.7% in 2019.

“Part of this reflects a reduction in exports of services related to the tourism sector, where the impact of the pandemic is expected to be particularly severe,” it said.

(Reporting by Catarina Demony Editing by Jason Neely and Frances Kerry)

This article was written by Catarina Demony from Reuters and was legally licensed through the NewsCred publisher network. Please direct all licensing questions to [email protected].


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Tags: coronavirus, portugal, tourism

Photo credit: People have a meal at Ribeira Market in Lisbon, Portugal, July 15, 2015. In April 2020, stays in Portugal fell 98 percent because of the Covid-19 pandemic. Hugo Correia / Reuters

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