Portugal Bets on Safe-Haven Status to Spur Coronavirus Comeback

(Bloomberg) --

Portugal is hoping its track record as a safe haven will help attract foreign investors and tourists who will help spur a “sharp” recovery once confinement measures to tackle the coronavirus are eased.

Economy Minister Pedro Siza Vieira said Portugal, where a lockdown has been less severe than in many European countries, will start allowing small shops and other services to reopen in coming weeks. He said his outlook for the economy is in line with the International Monetary Fund’s, which projects a contraction in gross domestic product of 8% this year before a rebound in 2021 with growth of 5%.

“Any recovery, when we have such a drastic containment, is going to be sharp,” Siza Vieira said in a telephone interview Friday. “We expect a recession this year, and a recovery in the second half of the year, with a pick-up in pace next year.”

Portugal has managed to maintain a relatively low rate of coronavirus infections and deaths even as several sectors of the economy remained open for business after the government declared a state of emergency on March 18.

The southern European nation of 10 million people had recorded 820 fatalities as of Thursday, compared with more than 22,000 in neighboring Spain, which has a population about five times bigger. Portugal has extended its state of emergency through May 2.

The fact that the government acted swiftly by imposing confinement measures at an early stage of the epidemic helped contain the outbreak, said Siza Vieira. Spain had 133 fatalities when it first declared a state of emergency on March 14, while Portugal had recorded just two deaths when it announced its own emergency four days later.

“We acted earlier than most countries,” said Siza Vieira. “The disturbance to activity has been less than in other nations which acted later, and we have still been able to maintain very low levels of contagion and especially very low levels of fatality.”

Portugal is ranked as the third-safest country in the world by the Global Peace Index and Siza Vieira said the country’s image as a peaceful and open society will continue to attract visitors and investment.

Still, Portugal’s tourism industry, which helped the country stage an impressive comeback after seeking an international bailout in 2011, may take some time to recover. About 85% of hotel workers are expected to be temporarily laid off in April, according to the Portuguese Hotel Association.

Tourism accounts for one in every five jobs in Portugal and 19.1% of gross domestic product -- the third highest in the European Union, according to the World Travel & Tourism Council.

Siza Vieira said the government is discussing ways to reactivate the sector while imposing restrictions, including limiting the number of people at restaurants and ensuring hotels follow best practice to protect guests and staff.

“It’s going to be rough” in 2020, said Siza Vieira, referring to the tourism sector. He said the industry will likely rely more on local tourists, while looking to traditional markets like Spain, France, the U.K. and northern Europe for bookings.

“We will probably be looking at the Nordics and marketing ourselves as a very safe place where the health system is strong and where tourists can expect very high health and safety standards,” he said.

©2020 Bloomberg L.P.