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Successfully investing in Portugal

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last updated on 19 May 2021 | reading time approx. 3 minutes

 

 

 

How do you assess the current economic situation in Portugal?

In ad­di­tion to pub­lic health, which con­cerns us all, the eco­nom­ic situ­ation is the main con­cern of EU cit­izens; Por­tugal is no ex­cep­tion.


The coun­try’s eco­nomy has un­der­gone ma­jor changes in the last dec­ade but was ex­per­i­en­cing a very fa­vour­able mo­ment be­fore the start of the pan­dem­ic. Like many coun­tries, the eco­nom­ic­ally para­lys­is gen­er­ated neg­at­ive im­pacts on the eco­nomy that may take some time to fully re­cov­er. The fore­casts, however, are pos­it­ive in view of the glob­al crisis scen­ario.


It is cer­tain that the pan­dem­ic had an over­all im­pact on the na­tion­al eco­nomy, however it is un­deni­able that some sec­tors were more af­fected than oth­ers. Among the vari­ous sec­tors, Tour­ism and Trade ob­vi­ously stand out.


Tour­ism, which was grow­ing steeply un­til 2019 has been hit hard. The Bank of Por­tugal re­leased quick es­tim­ates of the res­ults for Janu­ary 2021, which point to a new con­trac­tion in tour­ist activ­ity, due to new con­fine­ments de­creed by the gov­ern­ments of vari­ous coun­tries. In Janu­ary 2021, the pre­lim­in­ary in­dic­at­or of travel and tour­ism points to a re­duc­tion of 64 per cent in ex­ports and 57 per cent in im­ports, com­pared to Janu­ary 2020, thus ex­tend­ing the de­clines that have been re­cor­ded since March 2020.


On the com­mer­cial side, re­tail sales fell by 21.6 per cent in April com­pared to the same month of 2019. Ex­cept for food re­tail­ers, such as su­per­mar­kets, the sec­tor should also feel the im­pact in the com­ing months. The Cov­id-19 pan­dem­ic posed enorm­ous chal­lenges to the Por­tuguese eco­nomy and to eco­nom­ic and polit­ic­al de­cision-makers. However, we can see this crisis as a cata­lyst to find new solu­tions and new op­por­tun­it­ies.


There are sev­er­al chal­lenges that Por­tugal must over­come, of which the lack of cap­it­al should be high­lighted. The coun­try must be able to at­tract for­eign cap­it­al to fin­ance rein­dus­tri­al­isa­tion, which re­quires at­tract­ive and stable fisc­al and reg­u­lat­ory con­di­tions.


Throughout its long his­tory Por­tugal has gone through sev­er­al eco­nom­ic crises and has al­ways known how to get out of dif­fi­culties –this time can­not be any dif­fer­ent.

 

In 2019, Por­tugal at­trac­ted 9.2 bil­lion Euro in For­eign Dir­ect In­vest­ment in­flows. The ser­vices sec­tor, par­tic­u­larly Por­tugal’s tour­ism in­dustry, served as an en­gine of eco­nom­ic re­cov­ery, while tex­tiles, foot­wear, and ag­ri­cul­ture moved up the value chain and be­came more ex­port-ori­ented over the last dec­ade. The auto sec­tor, to­geth­er with heavy in­dustry, tech­no­logy, ag­ri­cul­ture, con­struc­tion, and en­ergy re­main in­flu­en­tial clusters.
   
Cur­rently, Por­tugal has one of the most dy­nam­ic en­tre­pren­eur­i­al eco­sys­tems in Europe, res­ult­ing from the in­vest­ments made in the last dec­ade in hu­man re­sources, in­fra­struc­ture, and tech­no­logy qual­i­fic­a­tion, which provide great op­por­tun­it­ies for those wish­ing to launch or in­vest in new busi­nesses.


With the im­pact of the pan­dem­ic, it be­came ur­gent for states to in­ject cap­it­al in­to the eco­nomy, in­creas­ing pub­lic in­vest­ment and pub­lic spend­ing. Something that makes per­fect sense to be done in these situ­ations, put­ting the con­sequences of pub­lic debt in second place, since the ur­gency is to help the eco­nomy to re­gain its mo­mentum.


Sec­tors such as real es­tate, tech­no­logy and in­nov­a­tion, e-com­merce and the green en­ergy will surely be the areas with the greatest growth po­ten­tial in the com­ing years.
     
Des­pite the situ­ation caused by the pan­dem­ic, en­vir­on­ment­al con­cerns re­main on the agenda. Ac­cord­ing to a sur­vey in June, 76 per cent of the Por­tuguese con­tin­ue to be con­cerned about pro­tect­ing the en­vir­on­ment. This data shows that even in the face of the health crisis and an eco­nom­ic crisis 74 per cent of re­spond­ents con­sider that so­ci­ety's con­cern with cli­mate change will re­main, while 23 per cent as­sume that it may even in­crease.


One of the six pri­or­it­ies of the European Com­mis­sion for 2019 to 2024 is to make the European Uni­on eco­nomy sus­tain­able by boost­ing re­source ef­fi­ciency through the trans­ition to a clean and cir­cu­lar eco­nomy, re­store biod­iversity and re­duce pol­lu­tion (European Green Pact).


Busi­nesses have the op­por­tun­ity here to strengthen their role as agents of trans­form­a­tion and to stra­tegic­ally po­s­i­tion them­selves in line with sus­tain­able growth. To do so, com­pan­ies will need to align their pur­pose by ad­apt­ing their busi­ness mod­el for the trans­ition to a green, cir­cu­lar and car­bon-neut­ral eco­nomy.


The di­git­al­isa­tion of the eco­nomy brings with its dis­rupt­ive trans­form­a­tions at the level of busi­ness mod­els, op­er­at­ing mod­els, and cus­tom­er re­la­tion­ship mod­els. These trans­form­a­tions will bring unique op­por­tun­it­ies for com­pan­ies to po­s­i­tion them­selves as pi­on­eers in the eco­nomy of the fu­ture, to be­ne­fit from new of­fer­ings and to cap­ture new mar­kets. The di­git­al trans­form­a­tion of the eco­nomy will also bring great in­cre­ment­al be­ne­fits in pro­ductiv­ity, which well cap­it­al­ised will place Por­tuguese com­pan­ies in more ad­vant­age­ous com­pet­it­ive po­s­i­tions in re­la­tion to the ex­ter­i­or.


Des­pite the crisis caused by the pan­dem­ic, Por­tugal is quite con­fid­ent about the fu­ture. There is an en­vir­on­ment in the coun­try and a will to take ad­vant­age of re­sources, cre­ate jobs and at­tract in­vest­ment.

 

What challenges do German companies face during their business ventures into Portugal?

The pan­dem­ic has had a ma­jor im­pact on the glob­al and European eco­nomy. Ac­cord­ing to the European Com­mis­sion's Au­tumn 2020 eco­nom­ic fore­casts, the European Uni­on's eco­nomy will con­tract by 7.4 per cent in 2020 be­fore re­cov­er­ing by 4.1 per cent in 2021.   


The Por­tuguese eco­nomy is in­ev­it­ably very de­pend­ent on ex­tern­al mar­kets and eco­nom­ies and, from this per­spect­ive, the great chal­lenge fa­cing Por­tugal will be the great­er com­pet­it­ive­ness and ad­ded value of its com­pan­ies.


One of com­pan­ies’ chal­lenges is to in­crease pro­duct­ive in­vest­ment, in a con­text of high in­debted­ness com­pared to the po­ten­tial for wealth gen­er­a­tion, which re­quires that the scarce re­sources avail­able be used more ef­fi­ciently and ef­fect­ively.

 

Portugal wants to push for the signing of the Mercosur (EU with latin america) trade agreement during its EU presidency. What opportunities arise?

A dia­logue is on­go­ing on strength­en­ing co­oper­a­tion on the sus­tain­able de­vel­op­ment di­men­sion of the agree­ment, con­sid­er­ing the im­ple­ment­a­tion of the Par­is agree­ment and the is­sue of de­for­est­a­tion.   


The trade agree­ment reached in June 2019 between the EU and the Mer­cos­ur coun­tries (Brazil, Ar­gen­tina, Paraguay and Ur­uguay), after two dec­ades of ne­go­ti­ations, is cur­rently in the trans­la­tion and leg­al re­view phase, at the end of which, with a polit­ic­al agree­ment of the 27, the coun­tries of both blocs will have to rat­i­fy it.


The Por­tuguese Pres­id­ency of the European Uni­on con­siders the trade agree­ment that the Uni­on has signed with Mer­cos­ur to be of fun­da­ment­al stra­tegic, geo­pol­it­ic­al and eco­nom­ic im­port­ance for the European Uni­on. The pres­id­ency's in­ten­tion is to move to­wards fi­nal­ising the agree­ment, which it is es­sen­tial to have rat­i­fied by all 27 coun­tries, i.a. to main­tain Europe's cred­ib­il­ity in on­go­ing ne­go­ti­ations with oth­er part­ner­ships.


In that con­text, the agree­ment with Mer­cos­ur is not primar­ily eco­nom­ic, al­though it is the most im­port­ant eco­nom­ic agree­ment that Europe can con­clude. But it is primar­ily an agree­ment for Europe's geo­pol­it­ics, be­cause in this new glob­al world the At­lantic can­not lose its im­port­ance, while the new cent­ral­isa­tion of the world fo­cuses on the Indo-Pa­cific.

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