The pandemic crisis marked the 2020-21 period. Lockdowns and social distancing constrained the set of economic agents’ feasible choices.  

A recently estimated Dynamic Stochastic General Equilibrium model identifies worldwide supply-side perturbations as an important output driver during 2020 in Portugal. These also depict important demand effects working via income. The correlated downfall in all demand components alongside euro area output favors this shock, which affects domestic and foreign production alike. That is, the model identifies an inability of firms worldwide to produce goods during the first lockdown period. Demand-side perturbations, both domestic and external, also depicted important contributions to GDP developments. They mimic an inability of domestic and foreign agents to consume domestically produced goods and services.

Output volatility throughout 2021 relied more heavily on demand-side disturbances, against a background characterized by a gradual supply-side recovery and a constant adaptation of suppliers to the COVID-19 Pandemic. The larger decline in private consumption vis-à-vis other demand components in the first quarter (followed by a swift recovery in the second quarter) and the large expansion of exports during the second half favored sector-specific demand impacts.

For more details, see Júlio, P. and J.R. Maria (2022), “Pandemic shocks”, Banco de Portugal Economic Studies, Banco de Portugal, Vol. VIII, No. 3, pp 47-68.

Prepared by 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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