Growth in business investment to accelerate to 4.4% this year

  • ECO News
  • 25 January 2019

Business investment is set to increase by 4.4% in 2019, in comparison to the 1.9% increase witnessed last year, which fell below the 5.1% estimates for that year.

Business investment in Portugal is set to increase by 4.4% this year, driven by spending by larger companies, so accelerating from the 1.9% increase seen in 2018, which fell short of the 5.1% projected, the National Institute of Statistics (INE) said on Friday.

“According to the results found in the October 2018 survey of investment (for the period for 1 October 2018 to 17 January 2019), business investment in nominal terms should show growth of 4.4% in 2019,” the INE said. “The results of this survey also point to a 1.9% increase in investment in 2018, reflecting a downgrade in the outlook revealed in the previous survey (of growth of 5.1%), particularly in larger companies (with 500 or more staff).”

According to the INE, the projected growth of 4.4% of the investment this year is due to the positive contribution of bigger companies.

The investment diffusion indicator – the percentage of companies who report making investments or the intention to invest) – fell in 2017, 2018 and 2019, to 89.4%, 80.2% and 77.9% respectively.

The “main limiting factor” of business investment identified by companies in 2018 and 2019 was a deterioration of the sales prospects, predicting for this year “an increase in the relative weight of insufficient self-financing capacity and the deterioration of sales prospects”. They also cite “a reduction in the relative weight of the difficulty in obtaining bank credit and the difficulty in hiring qualified personnel. ”

For this year, there has been a shift in investment objectives towards greater relative importance of investment geared towards rationalisation and restructuring, while the relative weight of investment associated with expanding production capacity should decrease, INE says.