Investing in Portugal – 5 questions, 5 answers

published on February 19, 2018

 

 

1. What is your view of the current economic situation in Portugal?

The current indicators point to a brighter outlook and robust growth of the Portuguese economy.
 
During the first half of 2017, the Portuguese economy grew 2.9%, driven by exports and investment. This growth was faster than the European average and the highest seen during the last decade. According to BdP (Banco de Portugal), this performance encompassed all industry sectors and benefited from a favourable international climate. Exports of goods and services increased 8.9%, reflecting sharp gains in the market share of around 4.6%. It is worth mentioning that BdP revised its projected growth for the Portuguese economy to 2.5% in 2017 and 2.0% in 2018 above the European Union’s projection (1.8% and 1.6%, respectively), as well as the Eurozone forecast, that is 2.2% in 2017 and 1.8% in 2018.
 
After three years of the PAEF Program (Economic and Financial Assistance Program agreed with the EU and the IMF in May 2011), the Portuguese economy achieved significant progress in the correction of a number of macroeconomic imbalances by implementation of various structural measures. In April 2017 the Portuguese government submitted the “Programa Nacional de Reformas – PNR” (national reform program) and the “Programa de Estabilidade” (stability program) for the period 2017 to 2021. The PNR is a key element in defining the medium term strategy that will allow Portugal to launch a set of structural reforms destined to promote investment and contribute towards the sustainability of public finances.
 
Standard & Poor’s decision announced in September 2017 to raise Portugal’s rating to investment grade (BBB-) will contribute to a reduction in financing costs to the Portuguese economy, the future stability of the budget and increase the awareness of Portugal as a business destination. Portugal is ranked 25th (among 190 economies) in the “Ease of doing business” section of the report “Doing Business 2017”, carried out by the World Bank.
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Following the trend of its European partners, over the last decades one of the most important characteristics of the Portuguese economy is the growth of the services sector which in 2016 contributed 75.4% of gross value added (GVA) and employed 68.6% of the population. Agriculture, forestry and fishing generated only 2.2% of GVA and 6.9% of employment while industry, construction, energy and water represented 22.4% of GVA and 24.5% of employment.
 
In the last decade, apart from a greater focus and diversification of services, the Portuguese processing industry experienced significant change, becoming more competitive and with a greater degree of specialisation. A shift followed from traditional industrial activity to new, technology-intensive sectors such as automotive (including components), electronics, energy, pharmaceuticals as well IT and telecommunications.
 
Within the services sector, the importance of tourism should be emphasized, benefiting from Portugal’s geographical position. Portugal has also shown improvement in the development of an ecosystem of start-ups, in order to encourage foreign direct investment (FDI). This trend has been intensified with the 2015 transfer of the Web Summit Conference from Dublin to Lisbon, where the technology world has been meeting. In addition, an attractive tax program for individuals that move their residency to Portugal has been created.
 

Furthermore, Portugal offers a strategic position to access key worldwide markets (in Europe, Africa and Brazil) and an open door to a market of 250 million Portuguese speaking consumers. It is the natural bridge to the community of Portuguese-speaking countries as Brazil, Angola, Mozambique, São Tomé, Guinea, Cape Verde, East-Timor.

 

The Portuguese economy is naturally dependant on and influenced by external, international factors. Nonetheless, economic and political stability are crucial to drive investment. Portugal has achieved this stability. The structural reforms implemented since 2011 have created an economic and regulatory framework that is very receptive to foreign investment across all sectors. The main challenge for German entrepreneurs is to be familiar with all aspects of Portuguese business culture: the language, legal framework, social environment and further regulations and standards.

 

4. How will Portugal develop in the future from your point of view?

We think that Portugal is on the right path. It has a stable political environment with encouraging economic conditions, it has established itself as the new European technological hub and it has renewed its tourism infrastructure. Portugal will need to follow the technology path, attract dynamic foreign investment and invest in higher education and a skilled workforce, with the goal of boosting economic competitiveness. Portugal is not only an attractive investment destination but also a great place to live and enjoy – safe, sunny, with unique nature, rich leisure and cultural amenities and high quality healthcare facilities.

 

5. Looking at the energy sector, what kind of importance do renewable energies have in Portugal?

The renewable energy sector is very important for Portugal. The electricity market in Portugal has gone through a significant transformation, namely in recent years as a result of the unbundling of the power transmission network and the liberalisation of power generation and supply. Today, the Portuguese electricity market is a highly-deregulated market with a strong focus on promotion of renewable energy. Since 2006, electricity consumers in Portugal can freely choose their supplier. Regulated tariffs to end consumers ended in January 2013, which completed the liberalisation process for the electricity market. Portugal continues to be a world leader in renewable energy and is the 3rd country in the EU-28 with the highest percentage of incorporation of renewable energy sources. More than 50% of its energy comes from wind, solar and hydro power.
 

 Contact

Grit Campos Nave

+49 6196 7611 4722
+49 6196 7611 4704

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Filipe Lobo d’Avila

+351 213 8684 995 00

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