Investment, and Investment Constraints in Portugal · Investment, and Investment Constraints in...

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

27/03/2019 European Investment Bank Group 2

Outline

1 – Investment recovery and gaps: overall picture

2 – Impediments and the financial environment

3 – The role of the EIB group


1 - A remaining substantial investment gap in Portugal


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…


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?


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?


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?


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?


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





Long-term barriers to investment

share of responses

2 - Uncertainty, regulation and energy costs major

impediments to investment, relatively more in Portugal


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


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

27/03/2019 13

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


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

27/03/2019 15

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


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.

.


Outline





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


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