Compared to previous recessions, the contraction in activity in 2020 was sharper and deeper. The recovery projected in the June 2021 Economic Bulletin (EB) is also swifter, with the medium-term consequences of the pandemic crisis expected to be limited. In 2023, GDP stands about 2% below that projected in a counterfactual no-pandemic scenario, which corresponds to the December 2019 EB projection. 

A breakdown of GDP deviations from the projected path prior to the pandemic shows that expenditure cuts in 2020 hit services disproportionately hard, an unprecedented pattern in recessions. The recovery of this type of expenditure is expected to be gradual, in tandem with the lifting of restrictions and reduced fears of contagion driven by the vaccine rollout. In turn, expenditure on goods is higher than previously projected, reflecting fewer restrictions to consumption and greater potential for pent-up demand following the pandemic. This increased demand for goods is broadly based across economies, implying that global manufacturing and international merchandise trade are more dynamic than expected before the crisis. However, the stronger rebound in goods is not enough to offset the gradual and incomplete recovery in services.

For more details see Box 1 “The medium-term economic impact of the pandemic crisis“, published in the Economic Bulletin of Banco de Portugal, June 2021.

Prepared by Cláudia Duarte and Cristina Manteu. 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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