27/03/2019 1
Investment, and Investment Constraintsin Portugal
Ricardo Santos
Lisbon26 March 2019
Introduction
Recovery in the Portuguese economy pursuing.
How to ensure it remains sustainable?
And that it contributes to rising potential growth?
Use both macro and granular information to analyse:
The investment recovery in Portugal and gaps (in volume and quality)
The impediments and the financing environment
The role of the EIB group
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Outline
1 – Investment recovery and gaps: overall picture
2 – Impediments and the financial environment
3 – The role of the EIB group
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1 - A remaining substantial investment gap in Portugal
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Real investment by sector Real Investment by asset
Note: Cumulative change of quarterly real investment relative to the 1Q08
level, with sector-level contributions.
Source: Econ calculations, Eurostat, national authorities
Note: Cumulative change of quarterly real investment relative to the 1Q08
level, with asset class contribution.
Source: Econ calculations, Eurostat
Cumulative change relative to 1Q08 Cumulative change relative to 1Q08
-40
-35
-30
-25
-20
-15
-10
-5
0
5
10
08Q2 09Q2 10Q2 11Q2 12Q2 13Q2 14Q2 15Q2 16Q2 17Q2 18Q2
Financial corporations Government
Households and NPISH Non-financial corporations
Total
-40
-35
-30
-25
-20
-15
-10
-5
-
5
08Q2 09Q2 10Q2 11Q2 12Q2 13Q2 14Q2 15Q2 16Q2 17Q2 18Q2
Bio resources Dwellings
IPP Machinery and equipment
Other buildings and structures Total
1 – Corporate investment is picking up…
27/03/2019 European Investment Bank Group 5
Note: Plots the net balance of firms set to expand investment over the percentage of firms having investment more than EUR 500 per employee.
relative to the share of firms investing, by sector or Member State; cross centered on EU 2016 average.
Source: Econ EIBIS
Investment cycle Short-term influences on investment
-30
-20
-10
0
10
20
30
40
50
60
InternalFinance
ExternalFinance
SectorOutlook
EconomicClimate
Political andRegulatory
ClimateEU PT
2017
AT
BE
BG
HR
CY
CZ DK
EE
FI
FR
DE
GR
HU
IE
IT
LV
LU
MT
NL
PLPT
RO
SK SI
ES
SE
UK
-10
-5
0
5
10
15
20
25
30
35
55 60 65 70 75 80 85 90 95 100
Low investment expanding
Lowinvestment contracting
High investment expanding
High investment contracting
Share of firms investing (in %)
Fir
ms e
xp
ecti
ng
to
in
cre
ase/d
ecre
ase in
vestm
en
t in
cu
rren
t fi
nan
cia
l year
(net
bala
nce, %
)
( net balance)
Perceived investment gap
share of firms
1 - How the level of investment is perceived?
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Note: Share of responses in per cent: Q. Looking back at your investment over the last 3 years, was it too much, too little, or about the right
amount?
Source: Econ EIBIS
0% 20% 40% 60% 80% 100%
Large
SME
Infrastructure
Services
Construction
Manufacturing
PT 2018
PT 2017
EU 2018
EU 2017
Invested too much About the right amount
Invested too little Don't Know/refused
Future investment priorities State-of-the-art machinery and equipment
share of firms share of total investment
1 - Why are firms investing?
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Source: Econ EIBIS
Note: Share of firms by main purpose of investment, in per cent. Q. Looking ahead to the
next 3 years, which is your investment priority (a) replacing existing buildings, machinery,
equipment, IT; (b) expanding capacity for existing products/services; (c) developing or
introducing new products, processes, services?
Source: Econ EIBIS
0%
20%
40%
60%
80%
100%
EU 2
017
EU 2
018
PT 2
017
PT 2
018
Man
ufa
ctu
rin
g
Co
nst
ruct
ion
Serv
ices
Infr
astr
uct
ure
SME
Larg
e
Capacity expansion Replacement New products No investment planned
0%
20%
40%
60%
80%
AT
DE SK HU LU ES IT
MT EE SI IE NL
LV FI BE
DK
HR SE PT
CZ
UK FR PL LT R
OB
G
State-of-the-art machinery and equipment 2017
Note: Average of responses in per cent: Q. What proportion, if any, of
your machinery and equipment, including ICT, would you say is state-of-
the-art?
Areas of investment
average share allocated
1 - Which investments are firms focusing on?
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Note: Average of responses for allocations by area in per cent: Q. In the last financial year, how much did your business invest in each of the following with the intention of
maintaining or increasing your company’s future earnings?
Source: Econ EIBIS
0%
20%
40%
60%
80%
100%
EU 2
017
EU 2
018
PT 2
017
PT 2
018
Man
ufac
turin
g
Cons
truc
tion
Serv
ices
Infr
astr
uctu
re
SME
Larg
e
Land, business buildings and infrastructure Machinery and equipment
R&D Software, data, IT, website
Training of employees Organisation/business processes
Innovation activity
Average share allocated
1 – How do companies innovate?
27/03/2019 European Investment Bank Group 9
Note: Average of responses in per cent: Q. What proportion of total investment was for developing or introducing new products, processes, services? Q. Were the
products, processes or services new to the company, new to the country, new to the global market?
Source: Econ EIBIS
0%
20%
40%
60%
80%
100%
EU 2
017
EU 2
018
PT 2
017
PT 2
018
Man
ufac
turin
g
Cons
truct
ion
Serv
ices
Infra
stru
ctur
e
SME
Larg
e
No Innovation New to the Company
New to the Country New to the World
Outline
1 – Investment recovery and gaps: overall picture
2 – Impediments and the financial environment
3 – The role of the EIB group
27/03/2019 European Investment Bank Group 10
Long-term barriers to investment
share of responses
2 - Uncertainty, regulation and energy costs major
impediments to investment, relatively more in Portugal
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Note: Share of responses in per cent: Q. Thinking about your investment activities, to what extent is each of the following an obstacle? Is a
major obstacle, a minor obstacle or not an obstacle at all?
Source: Econ EIBIS
0% 20% 40% 60% 80% 100%
Uncertainty about the future
Availability of finance
Adequate transport infrastructure
Business regulations
Labour market regulations
Access to digital infrastructure
Energy costs
Availability of skilled staff
Demand for product or service
EU 2018 PT 2018 2017
Source of investment finance
average proportion average proportion
2 - Source of finance
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Type of external investment financing
Note: Average of responses in per cent: Q. What proportion of your
investment was financed by each of the following?
Source: Econ EIBIS
Note: Q. Approximately what proportion of your external finance does
each of the following represent?
Source: Econ EIBIS
0%
20%
40%
60%
80%
100%
EU 2
017
EU 2
018
PT 2
017
PT 2
018
Man
ufac
turin
g
Cons
truc
tion
Serv
ices
Infra
stru
ctur
e
SME
Larg
e
External Internal Intra-group
0%
20%
40%
60%
80%
100%
EU
20
17
EU
20
18
PT
20
17
PT
20
18
Ma
nu
fact
uri
ng
Co
nst
ruct
ion
Serv
ice
s
Infr
ast
ruct
ure
SME
Larg
e
Bank loan Other bank financeBonds EquityLeasing FactoringNon-institutional loans GrantsOther
2 - Diversity of access to finance across the EU
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Financing cross
Source: EIBIS16, 17 and 18.
Notes: All firms. Firms indicating main reason for not applying for external finance was ‘happy to use internal finance/didn’t need finance’. Financial
Constraint indicator includes: rejected, too expensive and discouraged.
EU 18Per 18
PT 18
EU 17
Per 17 PT 17
EU 16
Per 16
PT 16
ManufacturingLarge
SME
Construction
Infrastructure
Services
4
6
8
10
12
14
16
18
20
0 2 4 6 8 10 12 14 16
Firm
s ha
ppy
to u
se in
tern
al f
inan
ce (%
)
Share or finance constrained firms (%)
Improvment
per cent share of responses
2 – Share of finance constrained firms is now the same as in
the EU
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Share of finance constrained firms Dissatisfaction with external finance
Note: Proportion of firms considering themselves finance constrained: Finance constrained
firms include: those dissatisfied with the amount of finance obtained (received less), firms
that sought external finance but did not receive it (rejected) and those who did not seek
external finance because they thought borrowing costs would be too high (too expensive)
or they would be turned down (discouraged)
Source: Econ EIBIS
Note: Average share of responses, in per cent Q. How satisfied or
dissatisfied are you with ….?
Source: Econ EIBIS
0% 5% 10% 15% 20%
Type of finance
Collateral
Length of time
Cost
Amount obtained
Portugal EU 2017
0% 2% 4% 6% 8% 10% 12% 14%
Large
SME
Infrastructure
Services
Construction
Manufacturing
PT 2018
PT 2017
EU 2018
EU 2017
Rejected Received less Too expensive Discouraged
2 – Innovative firms face higher financing constrains
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Differences between innovative and non innovative companies
Source: EIBIS16 and 17
Notes: Difference vs non innovative (=100)
Share of firms with financial constraintsDifference between Domestic and Foreign Owned
Firms share of responses share of responses in per cent
2 – Foreign owned firms face less constrains
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Note: Share of responses in per cent: Q. Thinking about your investment
activities, to what extent is each of the following is a major obstacle?
Source: Econ EIBIS
Note: Share of responses in per cent: Q. Thinking about your investment
activities, to what extent is availability of finance a constrain?
Source: Econ EIBIS
0
4
8
12
16
16 17 18
Home owned Foreign owned Total-20 -15 -10 -5 0 5 10 15 20
Demand
Availability staff
Energy
Digital access
LM reg
Business reg
Transport
Availability finance
Uncertainty
EU28 Portugal
Summary
Still a 20% investment gap but more firms increased than reduced investment in the last
financial year. A large part of the gap reflects still weak investment by the government and
households.
Firms hold a positive investment outlook for the current financial year, with large
firms and infrastructure sector firms being the most positive. However, short term tailwinds
are weaker than in last year.
15% of firms report investing too little in the last three years, similar to the EU
average and below the previous wave.
Stands in the lower part of the EU distribution in terms of intangible investment. The
average share of state-of-the art machinery and equipment in firms is also below the EU
average (37% versus 45%).
Uncertainty about the future is the main barrier to investment, followed by energy costs
and regulation (both business and labour market) and– all more so in Portugal than EU-
wide. Foreign owned firms are less constrained than those domestically owned.
Only 5% of firms are finance constrained, down from 12% in the previous wave, and
now in line with the EU average.
.
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Outline
1 – Investment recovery and gaps: overall picture
2 – Impediments and the financial environment
3 – The role of the EIB group
27/03/2019 European Investment Bank Group 18
1 453
1 832 1 7801 906 1 979
0
500
1 000
1 500
2 000
2 500
2014 2015 2016 2017 2018 4
Signatures2014-2018 (Mn EUR)
+36%
3 – EIB group activity in Portugal
20 20
14,5% 18,9% 25,4%9,2%
12,0%
25,2%9,2%
15,5%
3,7%
67,2%53,6% 45,7%
0%
20%
40%
60%
80%
100%
2016 2017 2018
Ambiente Infraestrutura Inovação PMEs
3 – EIB group activity in Portugal
Share of total signatures
21
Pre- seedStage of developmentStartup SMEs and Small
MidCaps
<250 employees
Small MidCaps
and MidCaps
250-500
Large MidCaps
500-3,000
Emerging Large Caps
Seed stage
First “Valley of Death”
Second “Valley of Death”
Acce
ss to
fin
an
ce
Fu
nd
ing
s
ize
(E
UR
m)
Intermediaries (Funds)
Intermediaries (Banks)
Mandates/ SLAGlobal Loans
Investment Loans
Contingent Loans
Qu
asi-
eq
uit
y
Co
-in
vest
me
nts
/Dir
ect
Eq
uit
y
Tech
Tra
nsf
er
/ V
C
VC
/ S
ME
Fun
ds
VC
/ S
ME
Fun
ds
PE
/ M
idC
apFu
nd
s
< 1.0m
< 7.5m
< 10m
< 25m
Innovation finance gap
Growth Finance Gap – expansion capital EUR 7.5m-25m
3 – EIB group products – how we finance firms
22
Equity e equity-like Dívida Assessoria
o O Grupo BEI é o maior
investidor da Europa de Fundo
de Fundos
o Investimentos intermediados
(via TT, VC e PE funds) em
todos os setores e geografias
o Um novo instrumento «venture
debt» para jovens empresas
inovadoras disponível
diretamente no BEI
o Dívida senior e subordinada
disponível para empresas com
maior maturidade (visibilidade
de liquidez)
o Disponível tanto no BEI,
diretamente, como através dos
seus parceiros intermediários
o Condições mais flexíveis e, em
geral, mais favoráveis
o Suporte às empresas
inovadoras – melhorar a sua
preparação para o
investimento
o Explorar as diferentes opções
de financiamento dentro e fora
do Grupo BEI
o Ajudar a desenvolver uma
narrativa de crédito / equity
para investidores
o Avaliar a estratégia de negócio
e de financiamento e
identificar e mitigar as
«bottlenecks» no investimento
o Apoiar a empresa no reforço
de outras áreas cruciais do
negócio (ex. governo da
sociedade, etc)
InnovFin e
European Fund for Strategic Investments (EFSI)
3 – Instruments for innovation and entrepreneurship
Thank you
27/03/2019 European Investment Bank Group 23
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