Foreign direct investment (FDI) plays a pivotal role in Portugal’s economic landscape, significantly contributing to employment, productivity, and overall economic growth. As of 2024, Portugal hosts 10,705 branches of foreign companies, accounting for 2.1% of the total number of non-financial companies in the country. Despite their relatively small number, these entities have a substantial impact on the economy.
Economic Contributions
- Gross Value Added (GVA): Foreign subsidiaries contribute €38 billion to Portugal’s GDP, representing 27.8% of the GVA of non-financial companies.
- Revenue: These companies generate €154 billion in revenue, accounting for 29% of the total revenue in the non-financial sector.
- Employment: Employing approximately 682,000 individuals, foreign companies represent 18.5% of total employment in the non-financial sector.
Productivity and Compensation
- Labor Productivity: The apparent labor productivity in foreign subsidiaries is €55,674, which is 67% higher than that of domestic firms.
- Average Remuneration: Employees in foreign-owned companies receive an average monthly salary of €1,745, which is 42.5% higher than the average remuneration in national companies.
Trends in Foreign Direct Investment
Portugal has experienced a steady increase in FDI over recent years. In 2023, foreign direct investment reached €180.4 billion, marking a 6.24% increase from the previous year, with Lisbon receiving more than half of these investments.
By the second quarter of 2024, the stock of FDI rose to €183.9 billion, equivalent to 69% of Portugal’s GDP.
Sectoral Distribution
Foreign investment is predominantly directed towards sectors such as technology, renewable energy, and manufacturing. The manufacturing industry, representing 99% of the gross value added of the industrial sector, is particularly oriented towards the foreign market, attracting significant FDI.
Government Initiatives
The Portuguese government has implemented policies to create a more favorable business environment for foreign investors. Agencies like the Portuguese Trade and Investment Agency (AICEP) play a pivotal role in attracting foreign capital by providing guidance and support to international businesses considering entry into the Portuguese market.
Conclusion
Foreign companies are integral to Portugal’s economic fabric, contributing significantly to GDP, employment, and productivity. The government’s ongoing efforts to attract and retain foreign investment continue to enhance Portugal’s position as a competitive and attractive destination for international business.
