OECD improves GDP forecast for Portugal with a drop of 8,4% this year

In the latest forecasts, in June, the OECD predicted a fall in GDP of 9,4% in 2020

The Organization for Economic Cooperation and Development (OECD) today improved the forecast for the Portuguese economy for this year, predicting a drop in Gross Domestic Product (GDP) of 8,4% in 2020.

In the economic forecasts released today, the OECD estimates GDP growth of 1,7% in 2021 and 1,9% in 2022.

In the latest forecasts, in June, the OECD predicted a fall in GDP of 9,4% in 2020, so it improved its outlook.

For this year, the Government estimates a drop in GDP of 8,5% and for 2021 it estimates a growth of 5,4%.

According to the OECD, the economic recovery from the current crisis caused by the Covid-19 pandemic will be supported by consumption.

After that, according to the organization, there may be a broader recovery, with the recovery of the sectors most affected by the crisis, such as tourism and accommodation, and "assuming that the health situation improves with the development of an effective vaccine."

The unemployment rate will continue to rise in 2021, to 9,5%, and will remain above the pre-crisis level in 2022.

Public debt (according to the Maastricht definition) is expected to reach 139% of GDP by 2022, with the OECD predicting that the deficit will recover as economic recovery progresses and extraordinary support measures are withdrawn.

According to the OECD, to avoid the derailment of the recovery, the return of fiscal prudence should only occur after the pace of recovery is consolidated.

"Scaling up lifelong learning programs and strengthening work-based learning can facilitate the relocation of workers in the economy," he says.

In order to combat the trend it predicts towards unemployment, the OECD admits that workers in the tourism sector may have to find alternatives in sectors with greater demand.

The organization also warns about the "unequal" recovery between the various sectors, noting that the "high uncertainty about the evolution of the pandemic and the high weight of tourism in GDP" are factors that penalize Portugal's economic recovery capacity and will not be surpassed before there were vaccines on the market.

The institution also warns of a "slower" recovery of the tourism sector than had been anticipated and warns that weak economic growth could "aggravate the secondary effects in the financial sector through a significant increase in bad debts".

Already a quick and effective "absorption" of European funds that will be made available to the country could improve the scenario, he says.

The OECD signals that the number of daily infections in Portugal is again increasing rapidly and that the Government has imposed measures to stop the spread of the pandemic, such as limiting gatherings of more than five people, mandatory use of masks in all public places and incentive to telework.