The economy sank less than expected last year, but it is the largest in the history of democracy in the last 46 years. The fall of 7.6% in 2020 was more severe than the 1975 crisis, followed by a full-blown political upheaval and a 20% increase in oil prices. Moreover, in just 12 months, it goes deeper than the crisis between 2011 and 2013, during the tripartite program following the debt crisis.
2020 is also the year in which Portugal became the second largest epidemic in the last 120 years. But despite the very low number of deaths recorded, the crisis is severe. In 1918, with the rise of the Spanish flu, it reduced at least 59,000 Portuguese (official figures), and the economy shrank by 6.5% with the effects of World War I. Now it was worse, only with a ‘war’ front.
We have to go back 92 years to record the economic tragedy of what happened last year. The last time GDP (GDP) fell by 8% was in 1928. The most dramatic feature is the nearly 12% drop in private consumption. The year Oliveira Salazar became finance minister, he received a budget surplus that year from a set of austerity policies.
The mother of all crises
But neither 1928 nor 2020 has been at the forefront of economic disasters for the past 150 years, and we have annual data for that. The ‘mother’ of all crises was the 1873 recession, which was shaped by the global financial crisis that began with the collapse of the Vienna Stock Exchange and ended on Wall Street. The boom in the Portuguese economy was then 19%, the highest ever. Public debt rose 11% in a single year.
The picture of crises in a century and a half is 41 years with contractions in GDP. More or less, a crisis every four years. This balance is based on a series published by economists Nuno Valerio, Maria Eugenia Mata and Abel Matthias. Since 1961, the data have been published by the National Statistical Institute.
In the absolute number of crises, the monarchy has broken all records in the last 50 years. There was a 16-year slump in GDP, and there were five major recessions, mainly d. Louis and D. Including the reigns of Carlos. There were five recessions, which began in 1876 with the running of the banks, especially in Lisbon, which forced the cessation of payments amid a climate of panic.
But the crisis did not stop with the decision of the kings. The economy collapsed sixfold during the parliamentary republic. During World War I, there was a period of depression from 1915 to 1918, the third largest in the last century and a half.
Democracy will be overthrown by a military coup in 1926. Since then, the country has lived under a dictatorship, first by the military, then by Oliveira Salazar. There were 10 recessions and there were two major recessions. But Portugal escaped the global recession between 1929 and 1932 – by contrast, the Portuguese economy grew by 18%.
The first major depression of 1935 and 1936 followed. The ‘mistake’ was the beginning of the geopolitical crisis in Europe, which would lead to World War II three years later. It all started with the Italian invasion of Mussolini-led Ethiopia and later the Spanish Civil War. After World War II, there was a sharp crisis in the external equilibrium, with a deficit of almost 9% of GDP in 1948 and drastically reducing reserves of about 4.5 billion cantos between 1947 and 1949.
Then, from 1953 to 1973, there was no recession year. Two decades of continuous growth. According to economist Abel Matthias, GDP has tripled.
After April, a fall
In the post-April 25 period, there have already been nine recessions since 1975. On average, we contract every five years.
But the most serious ones, 1975 and 2012, are only in the worst year of the troika’s impact, and now in 2020, caused by an epidemic, preventing annual growth of more than 2% on average since 2014. A depression is responsible for the triangle, with a nearly 7% drop between 2011 and 2013.