Economics in a picture
In 2020, developments in the Portuguese economy were primarily marked by disruptions in the supply side
In light of the general equilibrium PESSOA model, the Portuguese economy was particularly affected by the reduction in efficiency and total factor productivity (influencing both labor and capital). The fall in GDP, consumption and employment reflected the occurrence of multiple supply side restrictions, such as limitations to the mobility of workers, goods and services, the partial or total closure of enterprises and services, disruptions in supply chains or absenteeism caused by public health considerations. Demand disruptions also negatively affected the economy, although to a lesser extent. The decrease in external demand played an important role, determining a reduction in Portuguese exports, namely tourism exports.
In contrast, fiscal policy and favorable financial intermediation conditions mitigated the negative impacts on the economy. Fiscal policy measures were financed by higher public debt. Financial conditions were more favorable than expected given the economic environment. Both benefited from the contribution of public policy measures such as State guaranties and credit moratoria.
For more details see Box 4 “GDP, private consumption and employment: a general equilibrium perspective“, published in Economic Bulletin of Banco de Portugal, May 2021.
Prepared by Ana Correia, Carlos Gouveia, Paulo Júlio and José R. Maria. The analyses, opinions and findings expressed above represent the views of the authors and not necessarily those of Banco de Portugal or the Eurosystem.
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