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“The same way the crisis appeared; we hope it will disappear”
25 March 2020 | Ana Tavares

It is still difficult to predict what the full impact of the Covid-19 emergency on the Portuguese economy will be, since «it is hard to predict how long this will last». Admitting losses of more than 4% for the economy, João Duque stated that «the same way the crisis appeared, we hope it will disappear».

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ISEG’s full professor was speaking during the "Conversas Diárias – Especial Covid-19" (Daily Talks – Special Covid-19), VI’s new section, sharing that «it is still too soon and the scenario is still too uncertain. There are those who predict catastrophic scenarios and those who think it is still possible to save the year. Opinions diverge immensely, differences of opinion which vary more than 10%». But he exemplifies that «even with a fully stopped quarter, with a 30% break that quarter will be worth 7.5% of the whole year».

The specialist believes that «we will have a very significant break which can be higher than the worse year during the previous crisis, when we had breaks of more than 4%», and that these can vary between 4% and 12%, according to him.

But the crisis foundations are different, and so the recovery may be faster, or at least different. It remains to be seen «whether the production remains intact after an inactive quarter. I doubt it and, as a consequence, the impact might go beyond the quarter».

Real estate: «Will we really go back to what we were?»

It is certainly the real estate will remain a refuge asset and safe investment after the crisis, as it has been within a context of great losses within the capital market. But how will the market be in a scenario of recovery?

João Duque stated that it is necessary to «see how the real estate market will be occupied. The yields might be different. Will we really go back to what we were? », he questioned, admitting that «many things will change in terms of our perception of life, mainly in terms of priorities and of where the value truly is».

He believes that teleworking will leave its mark: «we will start doing it more often after getting used to it now. The recovery of the economy might not be as we imagine it. People may have learned how to work from home, use less public transport, for example. But we have no idea of how this will end up».

«The most important now is to guarantee liquidity»

João Duque considers that «the most important is to guarantee liquidity», so that when the «Freedom Day arrives workers and companies still exist». He believes that «the first month is the hardest because the process isn’t set yet».

It is the State that should inject that liquidity, «and it will have to incur debt in order to do it. What the European Central Bank did was guarantee the purchase of many billions, around 18 billion for Portugal, twice what the Finance Minister announced as the immediate needs for the Portuguese economy at the moment. The ECB must guarantee that the member states place the money where it is needed, by emitting debt and having a bank that buys almost the full amount», explained the economist.

Guarantee the distribution channels

João Duque considered that it is currently fundamental to «maintain production and have the distribution channels working appropriately. We must also guarantee the import and export of what is necessary. If we keep the distribution working well, this will allow us to «have bread on the table». There are distribution channels which need to be absolutely guaranteed 24 hours per day».

«We must understand what it is that people need on a daily basis. Whether it is toilet paper, alcohol, bread. We must also realise what it is we don’t need, such as clothing. To understand what is truly essential», he considered.

If both variables work, «we guarantee that people have money to live and do their shopping, and we can hold up until this situation is over». Afterwards, «we will take care of the other patients, namely some companies»