Banco de Portugal - EIB conference in Porto: Investment and Investment Finance – the Portuguese case
As part of a series of events organised to debate current trends in investment in different EU Member States, the European Investment Bank (EIB) and Banco de Portugal hosted a conference entitled “Investment and Investment Finance: the Portuguese case” today in Porto.
The Governor of Banco de Portugal, Carlos Costa, and EIB Vice-President Román Escolano, opened the event, which also involved the participation of economists, policymakers and representatives from financial institutions and the business community.
At the event, a representative of the EIB presented the results of the annual EIB Investment Survey (EIBIS) which, together with the EIB annual report on “Investment and Investment Finance in Europe”, provides an overview of the cyclical and structural dynamics behind investment and investment financing in Europe, thereby facilitating an in-depth understanding of the investment situation in each EU economy.
The last EIB annual report on “Investment and Investment Finance in Europe” offered a detailed analysis of the slow investment recovery in the EU and revealed that public infrastructure investment is still significantly below long-term trends. Understanding the reasons behind the tepid recovery in investment is key to defining appropriate intervention policies.
In this context, in 2016 the EIB launched the EIBIS, a new initiative that surveys 12,500 firms with at least five employees from all the EU Member States. The questions are the same for all the companies and relate to firm characteristics and performance, past investment activities and future plans, sources of finance, and challenges that businesses face.
Overall, the survey results provide interesting information not available through quantity-based statistics (so-called hard data), such as details on investment plans, perceived gaps, the quality of the capital stock, the nature of the investment, financing conditions and the issues impeding investment.
The results of the 2017 round of the EIBIS are analysed in more detail in the 2017 EIB annual investment report but also in the country fiches, both available on the EIB’s website. In general, the report indicates that the corporate sector is driving the recovery in investment, identifies gaps in terms of the “quality” of the capital stock and suggests a need for more policies focusing on the diffusion and adoption of new technologies and innovation.
Portugal through the lens of the EIBIS
In Portugal, the survey covers 535 corporations. Its second round broadly confirms the results of the first one: access to external financing remains more problematic in Portugal. Compared to other EU countries, Portugal stands at the upper end of the distribution. However, the situation has somewhat improved since the previous survey.
The 2017 EIBIS report identifies uncertainty as the main issue impeding investment growth in the long-term in Portugal, followed by regulation (business and labour), and energy costs. The conclusions of the survey indicate that the negative impact of uncertainty has receded somewhat. This is true more generally, as most of the factors hampering investment in Portugal are perceived to be declining in intensity compared to the previous survey as the ongoing recovery strengthens. Indeed, Portuguese corporates appear more optimistic overall than their EU peers.
The results of the survey suggest the need to foster intangible investment, at a time when the economy is becoming increasingly knowledge-based. It is also necessary to improve the average share of state-of-the-art machinery and equipment, which is identified as being below the EU average in Portugal. Corporates also report the need for public policies dedicated at improving professional training and higher education, followed by policies focused on transport and health infrastructure.
During his closing remarks, EIB Vice-President Román Escolano emphasised “the positive impact of EIB activity on the Portuguese economy in terms of helping to foster investment, competitiveness and job creation. Since the EU bank started its activity in Portugal more than 40 years ago, it has contributed to financing not only relevant infrastructure but also SME projects, facilitating access to credit on favourable terms. I am confident that this EIB survey will help to provide very valuable and useful information for continuing our contribution to supporting the Portuguese economy.”