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Western Europe / Portugal

The state of play: FDI in Portugal

Portugal has looked to education and innovation to give itself an advantage in FDI markets, a move that appears to be paying off.

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Although the Covid-19 pandemic has hit Portugal’s FDI markets, the country’s strong performance in recent years means it is in a strong position to thrive in a post-Covid environment. (Photo by Patricia De Melo Moreira/AFP via Getty Images)

Ranking 39th in the World Bank’s Doing Business 2020 report, Portugal looks set to remain attractive to investors in a post-pandemic world after recording a record number of foreign direct investment (FDI) projects in 2019, according to EY’s Portugal Attractiveness Survey.

According to the survey, the country’s bet on putting education and innovation at the core of its growth strategy has been the key to the country’s impressive FDI performance in “areas of increasing incorporation of technology, talent and content integration in value chains”, with digital, transport and business services marked as principal beneficiaries of this drive. FDI in Portugal had a 17.6% compound annual growth rate of inward stocks between 2011 and 2018.

The survey also notes that in 2019, EY’s European Investment Monitor recorded 158 FDI projects, three times more than in 2015. According to the Portuguese Trade & Investment Agency, Portugal reached more than €1.1bn of investment, which translated into the creation of more than 7,200 jobs.

[Portugal has been] working on diversifying the geographic origin of investors, the sectors in which they invest and the regions where they choose to locate Pedro Siza Vieira

The survey also states that out of the 158 projects announced in 2019, investment projects at risk of revision were lower in Portugal, at 20%, than in the rest of Europe, where the figure stood at 35%.

Pedro Siza Vieira, Portugal’s minister of state for the economy and the digital transition, states in the survey that the country has been “working on diversifying the geographic origin of investors, the sectors in which they invest and the regions where they choose to locate”.

A more diverse FDI scene in Portugal

In 2019, FDI projects originating from Europe increased from 59 to 108, but the share of European projects coming into Portugal went down to 68%, from 80% in 2018. According to the EY survey, the country attracted three times more projects from non-European investors, a total of 50 in 2019, up from 15 in 2018, with the US being the largest investor, responsible for 26 projects.

The leading sectors for FDI in Portugal during 2019 were digital, transportation, manufacturing and supply, and business services, amounting to a total of 93 projects combined, representing 59% of total projects and 73% of jobs. The survey highlights that no sector experienced a decline in projects in 2019. Clean technologies, such as renewables, are expected to become the second-biggest growth driver in the country in the coming years, according to EY.

The Covid-19 outbreak has hit FDI in Portugal, as it has in most countries, but the continuous growth in foreign investment seen pre-Covid-19, and the government’s policy of diversifying the origin of its investors, as well as the sectors and regions within the country attracting this investment, means it is coping with the pandemic from a position of strength.

Marina Leiva

Marina Leiva

Senior reporter

Marina Leiva is a senior reporter at Investment Monitor, where she specialises in the agribusiness sector.