Portugal second-quarter budget deficit spikes to 10.5% due to pandemic

FILE PHOTO: Tourist guides wait for customers at Comercio square, amid the coronavirus disease (COVID-19) outbreak, in Lisbon, Portugal, July 13, 2020. REUTERS/Rafael Marchante/File Photo

LISBON (Reuters) - Portugal’s budget deficit soared to 10.5% of gross domestic product in the second quarter of 2020 from 2.2% a year earlier because of the coronavirus pandemic, official data showed on Wednesday.

The National Statistics Institute also said the country expected a budget deficit of 7% of GDP in 2020 as a whole compared with a surplus of 0.1% last year, which was the first in more than four decades of Portuguese democracy.

“The effects of the COVID-19 pandemic have a significant impact on the current results,” INE said. “The second quarter of 2020 constitutes the first quarter where the pandemic effect was felt throughout the period.”

Portugal’s 2020 government budget predicted a 6.3% of GDP deficit this year, but Finance Minister Joao Leao has already said that it could be around 7% as the government spends more to help families and companies hurt by the virus.

Forecasts of how much the country’s tourism-dependent economy will contract this year because of the coronavirus outbreak range from the government’s own 6.9% to Bank of Portugal’s 9.5%.

Portugal, which has recorded 60,200 confirmed COVID-19 cases and 1,920 deaths, began lifting a handful of restrictions imposed during a six-week lockdown from May 4.

Reporting by Catarina Demony and Sergio Goncalves, Editing by Andrei Khalip