Portugal's central bank warns of COVID-19's severe economic impact this year

LISBON - Portugal's central bank, the Banco de Portugal (BdP), warned on Thursday that the COVID-19 pandemic would severely impact economic growth and unemployment in 2020, namely an over 3 percent reduction in Gross Domestic Products (GDP) and more than 10 percent unemployment.

"In the baseline scenario, a 3.7 percent reduction in real GDP is expected in 2020. It is assumed that the economic impact of the pandemic is relatively limited, which partly stems from the hypothesis that the measures taken by the authorities are successful in containing damage to the economy," the BdP said in a statement.

In the adverse scenario, "the economic impact of the pandemic is assumed to be more significant due to the more prolonged paralysis of economic activity in several countries, leading to greater destruction of capital and job loss," said the BdP, adding that this scenario predicts a recession of 5.7 percent.

According to the Portuguese National Statistics Institute (INE), Portugal registered a 2.2 percent increase in GDP in 2019.

Meanwhile, the unemployment rate is expected to rise above 10 percent in 2020, according to the BdP.

In the baseline scenario, BdP forecasted an unemployment rate of 10.1 percent in 2020, with a progressive decline to 9.5 percent in 2021 and 8.0 percent in 2022.

The central bank warned that in the baseline scenario, "the projected evolution for unemployment depends crucially on the configuration and magnitude of policy measures that can be implemented immediately."

In the adverse scenario, the unemployment rate will skyrocket to 11.7 percent this year, falling to 10.7 percent in 2021 and 8.3 percent in 2022.

"Both scenarios contemplate a recession in the Portuguese economy in 2020, differing in the assumed magnitude for the global pandemic's economic impact," the BdP said.

In 2019, the unemployment rate was 6.5 percent, according to the INE.

Portugal has reported 60 deaths associated with COVID-19 and 3,544 cases of infection, according to the daily bulletin of the country's Directorate-General for Health on Thursday.