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2008-2009: Child of the international financial crisis
This crisis was caused by problems in the international financial system, which began in the USA and spread to the world economy, quickly reaching Portugal.
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2008-2009: Child of the international financial crisis

The international financial crisis began in the USA in the summer of 2007, and became known as the subprime crisis. The American economy reached its most critical point in 2008, when Lehman Brothers, one of the main financial institutions in the country, filed for bankruptcy.

The effects of the recession on the American economy soon spread to the world economy and global exports fell almost 20% between 2007 and 2009.

Portugal, which had been struggling with stagnation in economic growth and with rising unemployment since the beginning of the century, soon saw the effects on its exports and bank credit.

The national financial system suffered a heavy blow and, in November 2008, Banco Português de Negócios was nationalised.

The European response to the international crisis came in a coordinated manner, relying mainly on fiscal policy and monetary policy. The governments with room to manoeuvre were advised to increase public spending, particularly investment. The European Central Bank went ahead with a swift cut in interest rates to stimulate the economy.

But the starting point was very different among the many European countries.

Portuguese public debt was already above 72% of the GDP in 2007 and public spending was rigid and persistent.

The next crisis was already beginning to take shape

Gross government debt (% of the GDP)

Between imbalances and public incentives

The economic downturn was swift and made itself felt in several countries. In Portugal, Gross Domestic Product started to fall in early 2008. Industrial production declined and economic sentiment deteriorated rapidly.


The economy, with high levels of debt and dependent on access to credit, suffered from the slowdown in lending and the widespread distrust in the interbank market. The Portuguese banking sector was also highly dependent on its ability to get loans from the international markets.


Public incentives were reinforced in 2009, with the launch of public works programmes, particularly roadbuilding, and a 2.9% salary increase for the civil service.

The main indicators

GDP per capita

The fall in the economy was 4.4% between the peak and trough in this business cycle. The maximum value was reached in the first quarter of 2008. The lowest value came over a year later, in the second quarter of 2009.


Euros (€), chain-weighted, base year 2011



Unemployment rate

The unemployment rate increased only slightly in the first three quarters of the recession. However, it continued to climb, well beyond the technical end of this recession.


Economic Sentiment Indicator

The fall in economic sentiment began shortly before the highest point in this business cycle, which is consistent with the uncertainty arising from the turbulence in the financial markets.


Indicator, 100=February 2008

Industrial production plunges, with a steep decline in exports

This crisis came with an increase in the unemployment rate, which in 2008 was at a relatively high level in Portuguese economic history, above 7%. Making matters worse, the end of the recession did not bring an end to the increase in the unemployment rate. While the GDP recovered in 2009 and 2010, the unemployment rate went up another 2.4 percentage points.

Exports plunged, in a global crisis where the country’s main trade partners also sank into a recession. Private investment fell. Mirroring this situation, industrial production fell steeply, around 20% and, after the recovery of the GDP, it made no significant recovery.

Coming out of this recession was no more than an interval before plummeting into the next crisis, which came just over a year later.


This crisis is associated with the problems in the American financial system.
Professor at the University of Porto School of Economics
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The 2008-2009 Recession by José Varejão, Professor at the University of Porto School of Economics