A remarkable rebound and transformation have marked the development of the Portuguese economy in the last decade. Yet, overall investment levels in Portugal, from public and private sectors combined, are among the lowest in the European Union (EU). Further investment is necessary to support Portugal’s long‑term productivity growth and transition to a carbon-neutral society by 2050. Foreign direct investment (FDI) can play an important role in attaining these objectives, promoting growth and recovery from the economic repercussions of the COVID‑19 pandemic and Russia’s war of aggression against Ukraine.
Portugal has already taken steps to open its economy to foreign investment and has one of the lowest levels of statutory restrictions to FDI among OECD countries. However, a better understanding of how broader regulatory aspects and the overall business climate contribute to Portugal’s FDI attractiveness is needed to keep improving the environment for foreign investment. Through targeted policy recommendations, this report suggests avenues for Portugal to strengthen its investment climate and ensure a continued positive impact of FDI on its economy.
Building on previous OECD Investment Regulatory Reviews, designed purposedly for assessing the impact of regulation on international investment and deriving policy recommendations to create more conducive business environments, this report assesses recent FDI trends and the broader economic and social benefits of foreign investment in Portugal. It benchmarks Portugal’s investment regulatory environment against a group of peer economies to identify possible bottlenecks and explores, through an econometric analysis, the potential impact that some relatively stringent policies can have on foreign investment activity. Foreign investors’ views, collected via a business consultation, complement the findings and help provide a comprehensive picture of Portugal’s business environment.
The work leading to this publication was funded by the EU via the Technical Support Instrument, and implemented by the OECD, in co-operation with the Directorate-General for Structural Reform Support of the European Commission. An Advisory Group composed of representatives from DG REFORM, AICEP Portugal Global, Portugal’s Ministry of Foreign Affairs and the Ministry of Economy and Maritime Affairs provided oversight and support in the project development. The extraordinarily active engagement of numerous Portuguese Government stakeholders throughout this project is testament to Portugal’s recognition of the importance of FDI for its economy and its strong commitment to making of Portugal an increasingly attractive destination for foreign investors.