LISBON: Portugal’s government announced on Wednesday (Mar 18) a €9.2 billion package to support workers and provide liquidity for companies affected by the coronavirus outbreak.
The package is worth 4.3 per cent of GDP and consists of 5.2 billion in fiscal stimulus, 3 billion in state-backed credit guarantees and 1 billion related to social security payments.
“Now is the time to combat the pandemic, but also to keep our economy functioning,” Finance Minister Mario Centeno said.
Centeno did not spell out what impact the coronavirus and the measures taken to combat it would have on the economy, but said that the unexpected expenditure represented 17.3 per cent of quarterly GDP.
This could threaten to interrupt Portugal’s growth trajectory since 2014.
After achieving 2.2 per cent growth in 2019, the Socialist government had forecast achieving the country’s first budget surplus in its democratic history in 2020, and 1.9 per cent GDP growth.
But the country’s export-oriented, tourism-dependent economy is feeling the effects of the coronavirus slowdown, as holidaymakers cancel bookings amidst increasingly stringent travel restrictions and fears of contagion.
Just over half of the €3 billion in credit lines announced by Centeno is aimed at companies working in tourism, hotels and restaurants. The other half goes to industries like textiles, clothing and wood. Around a third is set aside for micro and small enterprises.
An additional €5.2 billion are fiscal measures such as flexible payment schedules for tax payments and social contributions in the second trimester, and a reduction of social security contributions between March and May.
The government is also in talks with the Bank of Portugal and the Portuguese Association of Banks about a temporary moratorium on loan repayment schedules, due to come into effect by the end of the month, Centeno said.
Portugal has reported 448 confirmed cases of coronavirus and two deaths, far below neighbouring Spain’s 13,716 cases and 558 deaths. Commercial centres, offices and factories have closed or reduced services after the government urged people to self-isolate and work from home.
President Marcelo Rebelo de Sousa is due to announce later on Wednesday whether the country will go into a state of emergency, expected to reduce people’s movements nationwide.
Speaking alongside Centeno, Economy Minister Siza Vieira said it was more important than ever for workers to carry on despite the change in circumstances.
“This is like a war. And a war needs soldiers. Our soldiers are our health workers, but the people ensuring we have all we need are also the soldiers of this war,” Economy Minister Pedro Siza Vieira said.
Minister of Work Ana Mendes Godinho had said on Monday that the support already earmarked for parents and workers would cost the government 2 billion euros per month.