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Healthcare

UPDATE 1-Portugal's economy shrinks 3.3% in Q1 after coronavirus lockdown

(Adds finance minister quotes)

LISBON, May 31 (Reuters) - Portugal’s economy shrank 3.3% in the first quarter from the preceding three months, as consumption and tourism were hit by a lockdown imposed in January, data showed on Monday but Finance Minister Joao Leao said more recent signs pointed to an upturn.

To fight a surge in COVID-19 infections in mid-January, which at the time was the deadliest outbreak per capita in the world, Portugal imposed a strict three-month lockdown, which has since been gradually lifted.

Statistics agency INE said gross domestic product shrank 5.4% from the first quarter last year, when the country’s first lockdown did not kick in until mid-March.

In October-December 2020, gross domestic product had expanded 0.2% quarter-on-quarter and contracted 6.1% from a year before.

“GDP decreased by 3.3% (...) reflecting the impact of mobility limitations as a result of the worsening of the pandemic crisis...(and a) severe reduction of non-resident tourism,” INE said in a statement.

However, Leao said economic indicators for the second quarter “confirm that the economy is already in a turning point, with a strong recovery”.

Leao echoed Economy Minister Pedro Siza Vieira, who last week told Reuters that Portugal’s economic recovery has been fast and strong since it started easing its COVID-19 lockdown in mid-March, and growth this year may exceed the government’s forecast of 4%.

“We are really convinced that growth this year may exceed our forecast and we expect that, over the next two years, 2021 and 2022, our economy will cumulatively grow by more than 9%”, Leao said.

Monday’s figures showed private consumption fell by 6.9% in the first three months of 2021 compared with the same period a year earlier and total exports fell by 9.4%, dragged down by exports of services, which fell 38% “highly related to the sharp decline of tourism”.

The tourism sector represented around 15% of GDP before the pandemic hit.

Portugal’s economy shrank 7.6% in 2020, its biggest annual slump since 1936.

On a positive note, investment rose 3.7% in the first quarter compared with a year ago, with investment in machinery soaring by more than 12%. (Reporting by Sergio Goncalves and Anita Kobylinska; Editing by Hugh Lawson and Christina Fincher)

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