Uncertainty postpones company investment in 2025

Continued global and economic uncertainty has made Portuguese companies shy to invest in 2025.

Only one-third of companies operating in the country say they are planning to invest more next year – 30.1% of services companies and 19.2% of manufacturing industries say they will as Portugal’s economy and exports show signs of slowing.

And the problem is that 80% of the government’s forecasts are underpinned by total investments for 2024 and 2025.

The current forecast is for an investment growth rate of 3.2% this year and 3.5% next year. But the main sectors are expecting a stabilisation of investment this year and next, and less than a third of companies say they will up investment.

The government had expected record investment with the total fixed capital investment for the economy (private and public sector) exceeding €49Bn this year – the highest amount ever, and in 2025 a total investment of €50.7Bn.

Private company pessimism is seen in the data from half-year surveys collated by the National Statistics Institute (INE) and shows that the majority of manufacturing and services companies – sectors that together make up 80% of Portugal’s GDP – are planning to keep investment levels as they are next year.

In the case of services – 60% of Portugal’s economy – 54.6% of companies are keeping investment the same this year as last, and 12.4% say they’ll cut investment.

Investment shyness is even worse in the manufacturing sector where the INE reveals 65.1% of industrial companies say that investment in 2024 renamed unchanged from 2023 and 12.6% said they would reduce it, with next year not being much better.

And it means that a stabilisation or reduction in investment could impact the government’s targets for investment.

Portugal’s Budget Technical Support Unit (UTAO) – a body linked to the Portuguese parliament – also says that in the case of public investment, figures and projections from the Ministry of Finance should be “read with caution” since in previous years there had systematically been underspends.

And with the application of Recovery & Resilience (RRP) funds less than expected, the UTAO warns that there may be downside risks in expenditure forecasting and investment support and loans to companies.

Those companies that will invest will do so on technology and equipment to support digitalisation and energy transition with companies modernising their stock capital.