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Analysis of the Portuguese Economy in times of COVID-19

The COVID-19 pandemic poses large challenges to the Portuguese economy and to economic and policy decision makers. CATÓLICA-LISBON has been developing, from the start of the pandemic, a series of initiatives including polls, data analysis, policy proposals and digital events, which we are disseminating through this webpage. These initiatives generate knowledge, share experiences, and demonstrate new relevant evidence towards citizens', companies' and institutions' economic decisions. The page is curated by Professor Joana Silva, director of the CATÓLICA-LISBON Center of Economics for Prosperity (PROSPER), and it relies on contributions from the economists and researchers at CATÓLICA-LISBON. 

With this project, we intend to contribute to a faster recovery for the Portuguese economy and a greater prosperity for all citizens.

We Stand UNITED!

Economic Analysis

Public Policy 




Economic Analysis

Covid-19 risks 17 to 31% of jobs in the private sector of the Portuguese economy (only in Portuguese)
Joana Silva, Kamil Kouhen, Madalena Gaspar and Martim Leitão

Sectors which have stopped or nearly stopped for reasons of public health (highly sensitive sectors), including restaurants and bars, lodging, travel and transportation, personal services, entertainment and leisure, wholesale and retail commerce, and sensitive transformative industry, represent around 20% of both structured employment and of the payroll in Portugal, which represents 3,9% of GDP. Overall, the direct and indirect effect of the contraction of highly sensitive sectors risks between 17 and 31% of private employment in the Portuguese economy. Therefore, these are sectors and jobs which will probably fare worse in recovering from losses associated with the Covid-19 pandemic.

Pandemic hits Portugal just as the economy and job market were reaching their pre-2008 levels (only in Portuguese)
Joana Silva, Kamil Kouhen, Madalena Gaspar and Martim Leitão

The COVID-19 pandemic comes at a time when economic and job market growth were getting back to their pre-crisis levels. The recent past in Portugal has been marked by low growth rates and severe economic crises. The average growth rate for the Portuguese economy was below 1% (World Development Indicators). Portugal was in a recession in 2003, was particularly affected by the financial crisis in 2008-2009 and the subsequent sovereign debt crisis of 2011-2013. 

Jobs and professions most at risk from the Covid-19 pandemic (only in Portuguese)
Joana Silva, Kamil Kouhen, Madalena Gaspar and Martim Leitão

A third of workers in Portugal can work remotely, which represents around 44% of payroll in Portugal. Among Portuguese workers, 58% are in industries considered essential and 30% are in industries which are non-essential and cannot be done remotely, a sign of high vulnerability. Of the workers who are unable to work remotely, 54% work in essential industries and 46% in non-essential ones. Moreover, 23% of all workers do jovs that require a lot of social interaction. Finally, around 36% of all private sector employment can be automated or machine-replaced. 

Pandemic should heighten socieconomic inequality in Portugal, especially for the younger generation (only in Portuguese)
Joana Silva, Kamil Kouhen, Madalena Gaspar and Martim Leitão

The Covid-19 pandemic will likely accentuate inequality in Portugal. The difficulties posed by the crisis will be felt the most by the most vulnerable sectors of the population. Young and less educated workers, who usually have less secure jobs with less pay, appear to be more fragile to this shock, with smaller companies and least developed regions taking the strongest losses. Evidence from past crises shows that the effects for these types of workers, companies and regions last the longest.

Following the Portuguese economy in real time
João Borges de Assunção and Pedro Afonso Fernandes

The information contained in forecasts made by multiple experienced entitites by March 30th suggest that April's instant GDP should be around 3% to 18% of the levels of the fourth quarter in 2019.

Does Corona virus choose between social classes? How a health crisis enhances inequality between rich and poor
Rita Coelho do Vale

In what respects participants expectations of how satisfied will they be with their life when pandemic is over, results suggest a lower level of satisfaction among poorer ones, compared with any of the other groups. 

A third of the Portuguese saw their income go down (opens in PDF; only in Portuguese) 
Ricardo Ferreira Reis and the team at CESOP - Católica Sondagens

Almost one out of every four workers is now working from home and a third of them saw their income go down. This study performed during the COVID-19 pandemic showcases the Portuguese responses and changes in lifestyle during the crisis. 

The percentage of Portuguese "staying home" peaked at the start of the second state of emergency (opens in PDF, only in Portuguese)
Instituto Nacional de Estatística with the support of Miguel Godinho de Matos

In its Síntese INE@COVID-19 from May 25th, the Instituto Nacional de Estatística includes data on regional population mobility based on data from the "Data for Good" Facebook initiative, showing that around 60% of the population was staying home at one point.

The potential effect of oil prices on Portuguese GDP (only in Portuguese) 
Miguel Gouveia

On the one hand, GDP is expected to drop by around 10%, but the reduction of oil prices may have a positive impact of close to 1,2% on GDP. 

The financial situation of the banking sector (only in Portuguese) 
João Luís César das Neves

The 2009 crisis only had a dramatic impact on five of fifteen countries: Greece, Ireland, Italy, Portugal, and, less so, Spain. Italy and, worse, Portugal still require serious attention.


National debt by percentage of GDP (only in Portuguese) 
João Luís César das Neves 

Our country which, in 2013, had the sixth highest national debt in the world has improved its standing, as we have been told. What we are usually not told is that this improvement has only brought us to ninth place worldwide. 

Gross and net public debt (only in Portuguese) 
João Luís César das Neves

When we joined the Euro in 1999, our gross debt was already up to 122% of GDP, and net debt at 32%; at the peak of the crisis they were 260% and 124% respectively; and today, after years of recovery, gross debt is at 215%, well over twice as much as we produce, and net debt equals our product at 104%.

Family savings in Portugal (only in Portuguese) 
João Luís César das Neves

As soon as the economy began to recover in 2013, our savings rate went back down, and in 2018 it hit a historical bottom of 6.4%, having risen since then to only 6.6% in 2019. Covid-19 arrives to a country with a very low savings rate. 

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Public Policy

COVID-19 economic crisis: Europe needs more than one instrument
Pedro Teles and coauthors

There are now several proposals for complementing the vigorous decision of the ECB to launch a mega ‘pandemic emergency purchase programme’ with fiscal and financial initiatives at the European level. These proposals sometimes overlap, which is a good sign of convergence. This column argues that they are also largely complementary to one another. Hence, it calls for a multi-instrument approach. 

Economic policy under the pandemic: A European perspective
Undersigned by Isabel Horta Correia

This column discusses the nature of the shock and the challenges for economic policy in Europe in the current and next phases of the crisis. In addition to outlining some basic principles for guiding domestic economic policy, it also calls for clear communication of policy to minimise uncertainty, for cooperation across countries along several dimensions, and for a clear and unified strategy in the management of national debts.

Facing the labor market dimension of the crisis (only in Portuguese)
Joana Silva, Kamil Kouhen, Madalena Gaspar and Martim Leitão

The total number of workers supported by the programme is larger than the total effect (direct and indirect) to employment in sectors considered as sensitive (around 500.000 workers affected) but smaller than half of the total effect in jobs associated with a contraction of demand in all sectors of the economy as has been reported by companies in the inquiry run by INE/BdP (around 1,8 million jobs directly and indirectly affeted). Many workers in Portugal are independent contractors or in unstable jobs. The success and measure to which "Programa de Layoff Simplificado" will be able to mitigate the negative effects of this shock on the most vulnerable is still undetermined. More than ever, the focus on a long-term development agenda, with jobs and economic transformations at the center of the political agenda, becomes particularly pressing. 

Expecting the unthinkable and preserving the essencial (only in Portuguese)
Filipe Santos

Our leaders will need to think outside the proverbial box of economic orthodoxy. This crisis won't be resolved with the usual solutions. Increasing the debt of companies and families is not a solution, it is a bandaid. 

Behavioral economics insights to prevent the spread of COVID-19
Anna Bernard

To be successful, public policies need to convince these conditional cooperators to comply with the restrictions. Behavioral economics identified several tools that policy makers can mobilize to sustain norm compliance. 

A proposal for a Covid Credit Line
Pedro Teles and coauthors

A Covid credit line in the European Stability Mechanism, with allocation across member states proportionate to the severity of the public health and economic challenges encountered, could help limit the impact of the crisis. 

The Impact of COVID-19 on the Sustainable Development Agenda: a Business Opportunity to Reframe Success
Nuno Moreira da Cruz and Center for Responsible Business & Leadership team 

While a slowdown may be possible, evidence is showing that COVID-19 provides a unique opportunity for companies that act responsibly and to make a long-lasting positive impact on stakeholder’s perceptions.

Responsible Business Leadership and the Path Towards Purpose: More than ever, now is the time!
Nuno Moreira da Cruz and Center for Responsible Business & Leadership team 

Based on a systematic review of the main RB and sustainability practices, this research note aims to shed light on the importance of businesses to act as Responsible Businesses and to understand what sort of Leadership should be expected from corporate leaders.

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May 14th, 5PM

COVID-19 and the Portuguese: Results of the Católica University Study and the challenges for the Portuguese Economy | PART 2

Ricardo Reis, Professor at CATÓLICA-LISBON and Director of CESOP - Survey Center at Universidade Católica Portuguesa

In this session, we share the results of the 2nd phase of the Universidade Católica Portuguesa study on the social and economic impacts of the pandemic in the country. This study was developed in May by CESOP, so this will be the a very up to date snapshot of the Portuguese in times of COVID-19.

May 12th, 5PM

Dean’s Speaker Series | Carlos Moedas, Member of the Board of the Calouste Gulbenkian Foundation

The Dean Filipe Santos invites Carlos Moedas, Member of the Board of the Calouste Gulbenkian Foundation, to speak about economic recovery, the path forward for Europe and how to achieve positive societal impact.

May 6th, 5PM

Suddenly remote: Challenges and Opportunities in managing remote teams

Hugo Lopes, Executive Education Professor at CATÓLICA-LISBON

In this session, we summarize the state of remote work in the world and share data on the impact of the current lockdown on employee motivation and well-being. We address some of the key issues team leaders should be aware of at this time, with concrete proposals for quick-win actions to address them.

May 5th, 5PM

What sort of world do we want after Covid19: the key role of the SDGs

Nuno Moreira da Cruz, Executive Director of the Center for Responsible Business & Leadership at CATÓLICA-LISBON

In times profoundly affected by an unexpected global pandemic, the uncertainty about the future and the effects of global economic depression are raising alarm at the governmental, business and citizen level. The crisis is pushing millions into poverty, unemployment and worrying health conditions. In this context, the Sustainable Development Goals (SDGs) emerge, as never before, as the guiding light for company’s safer path towards an uncertain future, where one thing is certain: the well-being of our society is crucial for business success. The world post-COVID world needs to embrace the spirit of the SDGs and its noble mission of “leaving no one behind”.

April 28th, 5PM

The Portuguese in their Personal Emergency Plans

C-Lab: Clara Cardoso, Rui Dias Alves & Carlos Liz

With the imminent and then effective declaration of a state of emergency, the Portuguese aligned on the necessary contingency reactions. Each built its own Personal Emergency Plan [PEP] by mobilizing resources on two fronts - Survival and Operation. This session aims to give a general picture of the consumer who survives and functions but, mainly, to explore the main questions that this time of exception and disruption puts in a context of pre-return to the outside world. Understanding the morphology and strategies underlying these Plans will be fundamental to understanding how the Portuguese will return to "their world out there"! 

April 27th, 5PM

Innovation in times of Covid

René Bohnsack, Professor at CATÓLICA-LISBON
& Rita Romão, Partner at AKA Group

In this conference Professor René Bohnsack presents CATÓLICA-LISBON’S Business Model Design Lab, that aims to empower businesses to capitalize on business model innovation, and Rita Romão, partner of AKA Group – a Strategy and Branding Consulting company - presents some of the most creative companies and solutions that were born out of the COVID-19 crisis. 

April 23rd, 5PM

The Impact of COVID-19 pandemic on the Portuguese Society: Assessment of multiple indicators

Rita Coelho do Vale, Professora na CATÓLICA-LISBON

The Observatory of Portuguese Society of Católica-Lisbon has conducted in the last few days of March one of its regular studies, this time focusing on analyzing several indicators related with the health crisis we are all experiencing. The purpose of this study was to assess the impact of current situation in multiple indicators like Happiness, Well-Being, Consumption Behaviors, and Economic Impact, as also to assess multiple indicators related to what the Portuguese are expecting to happen in the next few months. Findings suggest many significant differences depending on citizen’s current economic conditions, as also depending on their current employment status, shedding some light on the different realities experienced by Portuguese. 

April 22nd, 5PM

Economy in Times of Plague

João César das Neves, Professor at CATÓLICA-LISBON

With the title "Economy in Times of Plague", this event is presented by Professor João César das Neves, who analyzes current data regarding the evolution of the economy, as well as the possible scenarios that may happen in the coming months. 

April 21st, 5PM

2020: The Odyssey of the Portuguese Economy in the Great Confinement

João Borges de Assunção, Professor at CATÓLICA-LISBON
The NECEP - Center for Economic Studies for the Portuguese Economy (Católica-Lisbon Forecasting Lab) - published on March 23rd the first analysis of the impact of the COVID-19 crisis on the Portuguese Economy. In this conference, the NECEP coordinator, Professor João Borges de Assunção, presents the latest data and estimates of the economic impact of the pandemic in Portugal, information that is very relevant for political and business decision-makers. 

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International frontier research on the effects of COVID-19

The Macroeconomics of Epidemics
Martin S. Eichenbaum, Sérgio Rebelo, Mathias Trabandt
(April 2020)

We extend the canonical epidemiology model to study the interaction between economic decisions and epidemics. Our model implies that people’s decision to cut back on consumption and work reduces the severity of the epidemic, as measured by total deaths. These decisions exacerbate the size of the recession caused by the epidemic. The competitive equilibrium is not socially optimal because infected people do not fully internalize the effect of their economic decisions on the spread of the virus. In our benchmark model, the best simple containment policy increases the severity of the recession but saves roughly half a million lives in the U.S.

A Simple Planning Problem for COVID-19 Lockdown 
Fernando Alvarez, David Argente, Francesco Lippi
(April 2020)

We study the optimal lockdown policy for a planner who wants to control the fatalities of a pandemic while minimizing the output costs of the lockdown. (...) The optimal policy prescribes a severe lockdown beginning two weeks after the outbreak, covers 60% of the population after a month, and is gradually withdrawn covering 20% of the population after 3 months. The intensity of the lockdown depends on the gradient of the fatality rate as a function of the infected, and on the assumed value of a statistical life. The absence of testing increases the economic costs of the lockdown, leads to worse welfare outcomes and shortens the duration of the optimal lockdown.

Are we #stayinghome to Flatten the Curve?
James Sears, J. Miguel Villas-Boas, Vasco Villas-Boas, and Sofia Berto Villas-Boas
(May 2020)

The recent spread of COVID-19 across the U.S. led to concerted efforts by states
to “flatten the curve” through the adoption of stay-at-home mandates that encourage individuals to reduce travel and maintain social distance. Using data on
travel activity we find that residents indeed start reducing mobility early in most
states. Combining data on changes in travel activity with COVID-19 health outcomes and variation in state policy adoption, we characterize the direct impact of stay-at-home mandates on mobility and social distancing and link these behavioral changes to health benefits. We find evidence of dramatic declines in mobility.

What will be the economic impact of COVID-19 in the US? Rough estimates of disease scenarios
Andrew Atkeson
(March 2020)

This note is intended to introduce economists to a simple SIR model of the progression of COVID-19 in the United States over the next 12-18 months. (...) Special attention is given to the question of if and when the fraction of active infections in the population exceeds 1% (at which point the health system is forecast to be severely challenged) and 10% (which may result in severe staffing shortages for key financial and economic infrastructure) as well as the cumulative burden of the disease over an 18 month horizon.

Assessment of COVID-19’s Impact on Small and Medium-Sized Enterprises: Implications from China
Jennifer Bouey
(March 2020)

As the first country hit by the new coronavirus, China’s epidemic patterns and actions and the combined impact on China’s SMEs may provide some useful insights for the U.S. government and businesses. I will first briefly introduce the characteristics of the coronavirus disease 2019 (COVID-19) and the epidemic it is causing. Next, I will describe the epidemic patterns in China, China’s actions, and the combined impact on China’s economy in three stages. Last, I will summarize the epidemic’s impact on the global supply chain and a few recommendations on the control of the epidemic and assistance for U.S. SMEs facing the epidemic.


Research on the effects of previous crises

All the City Was Dying: The Spanish Flu Pandemic of 1918-1919 Was a Major Social and Economic Shock
Jessie Romero
(April 2017)

In less than a year, the flu would kill an estimated 675,000 Americans, a share of the population equivalent to nearly 2 million people today. Worldwide, the death toll may have been as high as 100 million — an economic and social shock from which scientists and economists are still trying to learn. 

Pandemic Economics: The 1918 Influenza and Its Modern-Day Implications (PDF)
Thomas A. Garrett
(April 2008)

Many predictions of the economic and social costs of a modern-day pandemic are based on the effects of the influenza pandemic of 1918. Despite killing 675,000 people in the United States and 40 million worldwide, the influenza of 1918 has been nearly forgotten. The purpose of this paper is to provide an overview of the influenza pandemic of 1918 in the United States, its economic effects, and its implications for a modern-day pandemic. The paper provides a brief historical background as well as detailed influenza mortality statistics for cities and states, including those in the Eighth Federal Reserve District, that account for differences in race, income, and place of residence. Information is obtained from two sources: (i) newspaper articles published during the pandemic and (ii) a survey of economic research on the subject. 

Enterprise recovery following natural disasters
Suresh De Mel, David McKenzie, Christopher Woodruff
(October 2011)

Using unique, panel data and a randomised experiment, we assess the effects of relief aid and access to capital on the recovery of Sri Lankan microenterprises following the December 2004 tsunami. Our results show that a lack of access to capital inhibits the recovery process; firms receiving randomly allocated grants recover profit levels almost 2 years before other damaged firms. Access to capital is particularly important for the retail sector; the role of capital in recovery for manufacturing and services sectors may be limited by disruptions in supply chains. Our data show that business recovery is much slower than commonly assumed, underscoring the role targeted aid may play in hastening microenterprise recovery following such disasters.

Postdisaster Subsidies for Small and Medium Firms: Insights for Effective Targeting
Yuzuka Kashiwagi
(October 2019) 

This paper explores the effect of postdisaster capital subsidies on the recovery of small and medium-sized enterprises (SMEs) and how policymakers could target public support to them more effectively. The paper examines the effects of the subsidies the government provided for SMEs after the Great East Japan Earthquake of 2011. It finds that these were effective in the retail sector but made no significant difference in the manufacturing and other service sectors. The results suggest that this difference arose from variations in the degree of private support across sectors rather than from variations in supply chain disruption.

Employment Hysteresis from the Great Recession (PDF)
Danny Yagan
(September 2019)

This paper uses US local areas as a laboratory to test for long-term impacts of the Great Recession. In administrative longitudinal data, I estimate that exposure to a 1 percentage point larger 2007–9 local unemployment shock reduced 2015 working-age employment rates by over 0.3 percentage points. Rescaled, this long-term recession impact accounts for over half of the 2007–15 US age-adjusted employment decline. Impacts were larger among older and lower-earning individuals and typically involved a layoff but are present even in a mass-layoffs sample. Disability insurance and out-migration yielded little income replacement. These findings reveal that the Great Recession imposed employment and income losses even after unemployment rates signaled recovery.

Did export promotion help firms weather the crisis?
Johannes Van Biesebroeck, Jozef Konings, Christian Volpe Martincus
(September 2016) 

In the global recession of 2009, exports declined precipitously in many countries. We illustrate with firm-level data for Belgium and Peru that the decline was very sudden and almost entirely due to lower export sales by existing exporters. After the recession, exports rebounded almost equally quickly and we evaluate whether export promotion programs were an effective tool aiding this recovery. We show that firms taking advantage of this type of support did better during the crisis, controlling flexibly for systematic differences between supported and control firms. The primary mechanism we identify is that supported firms are generally more likely to survive on the export market and, in particular, are more likely to continue exporting to countries hit by the financial crisis. In terms of absolute magnitudes, the mid-point of the range of estimates suggest a 6% to 11%, respectively for Belgium and Peru, higher probability of survival on the export market for supported firms and approximately 20% to 10% higher exports for surviving exporters.

The global crisis and firms’ investments in innovation
Caroline Paunov
(February 2012) 

The longer term impact of the global crisis depends on how business innovation capacities were affected. Understanding which firms suffered most is essential for developing adequate post-crisis recovery policies. This paper provides first quantitative evidence on these questions based on an original firm-level dataset for eight Latin American countries in 2008–2009. We find the crisis led many firms to stop ongoing innovation projects. Probit regression results show that firms with access to public funding were less likely to abandon these investments. Younger firms and businesses supplying foreign multinationals or suffering export shocks were more likely to do so.

The sources of the wage losses of displaced workers: the role of the reallocation of workers into firms, matches, and job titles
Pedro Raposo, Pedro Portugal, Anabela Carneiro 
(September 2019)

This paper evaluates the sources of wage losses of workers displaced due to firm closure based on the comparison of workers' wages before and after displacement. We decompose the sources of the wage losses into the contribution of firm, match quality, and job title fixed effects. Sorting into lower paying job titles represents the largest component of the monthly wage loss of displaced workers, accounting for 37 percent of the total average monthly wage loss compared to 31 percent for the firm and 32 percent for the match effects. With respect to the hourly wage losses, job title effects account for 46 percent of the total loss, while firm and match effects contribute in equal shares representing each 27 percent of the loss. 

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Participating CATÓLICA-LISBON Professors: 

João Borges de Assunção; Anna BernardIsabel Horta Correia; Pedro Afonso FernandesMiguel Godinho de MatosMiguel GouveiaLeonor ModestoJoão César das NevesPedro RaposoRicardo ReisFilipe SantosJoana SilvaPedro TelesRita Coelho do Vale


If you have any questions about the material presented here or you wish to contribute, please reach out to our curator, Professor Joana Silva

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