LISBON (Reuters) – Portugal’s exports fell by 13% in March after a near 1% rise the previous month as the coronavirus crisis shut down large parts of the economy, data from the National Statistics Institute (INE) showed on Friday.
The pandemic is set to leave long-lasting scars on Portugal’s economy which was propelled back to growth by exports and booming tourism after the 2010-14 economic and debt crisis.
The INE said the steep drop was mainly caused by a 33.5% slump in exports of cars and auto parts to two of the country’s main markets, Spain and France. The food and beverages sector was the only one to post an increase in exports, of nearly 4%.
Still, the country’s trade deficit shrank by nearly 9% from the same month a year ago to 1.586 billion euros ($1.72 billion), as imports also fell by nearly 12%, the INE said.
Overall in the first quarter, exports slipped 3% and imports fell 4%, bringing the deficit 7% lower to 4.65 billion euros.
In March, Portugal’s central bank said exports would fall by around 12-19% this year.
The International Monetary Fund expects Portugal’s gross domestic product to contract by 8% this year, above the European Commission’s predictions this week of a 6.8% drop. The Fund said Portugal should return to economic growth next year.
Portugal, which has so far reported 26,715 confirmed cases of the coronavirus and 1,105 deaths, started cautiously easing its lockdown restrictions this week.
However, the Bank of Portugal predicted on Friday in its economic bulletin that many companies may choose to close permanently.
It said the government’s layoff measures, suspending social security payments and assuming 70% of salary costs for companies whose activities were halted by the outbreak, would have a significant impact but not totally offset the shock.
Just under 1.3 million workers have been laid off temporarily so far, government data showed, with 95,000 newly unemployed since the start of the lockdown on March 18.
Before the pandemic, half of families were in a position to finance a maximum of 3.5 months of short-term expenditure and debt obligations in the absence of any income, the central bank said, with the poorest 20% able to last just 1.2 months.
(Reporting by Catarina Demony, Victoria Waldersee and Gdansk Newsroom, Editing by Andrei Khalip, Kirsten Donovan)