Sponsored briefing: Looking ahead: What does 2023 hold for Portugal?

In past years, Portugal was on the radar for all the wrong reasons, primarily due to the accrued debt problem, but also due to the consequences of the lack of structural projects or investment. Now things seem to have changed and 2023 looks like a promising year.

Not only is Portugal the furthest European country from the war in Ukraine, but it is also one of the countries least impacted by that war, as it does not depend materially on Russian gas and has other sources of supply. As a consequence, energy prices have not climbed as much as in the rest of Europe and Portugal seems to be one place where energy prices will be more attractive in the future.

The country is in a unique position to face climate transition. It appears to be the best place in Europe to produce solar PV energy and green hydrogen (and other renewable gases), and to produce energy from renewable sources in general. Moreover, its geographical position links Europe to the Atlantic Ocean, and this is important not only because it can receive liquefied gas by sea, but also for intercontinental cable connections among many others. Lastly, following the Covid crisis, Portugal has put together a large investment plan that will begin in 2023, and it intends to push GDP up by more than 3%.

‘Where 2022 witnessed mostly studies and other ancillary activities, such as projects and the definition of investments and case bases, 2023 will most probably be a year of getting things done.’ Diogo Duarte Campos and João Marques Mendes, PLMJ

All of these circumstances lead us to believe that 2023 will be a year of heavy investment, both public and private, and that will bring some great opportunities. In fact, where 2022 witnessed mostly studies and other ancillary activities, such as projects and the definition of investments and case bases, 2023 will most probably be a year of getting things done.

In the public sector, among others, a more than €3bn investment plan in a high-speed train line connecting Porto to Lisbon was announced and it is divided into three different public-private partnerships. We expect the launch of the first public tender in the first half of 2023 and it will certainly raise the interest of project companies. Also in the public sector, we anticipate a boom in housing, with an expected investment of just over €1bn this year. The investment will be shared out between several municipalities across the country.

Another important development in 2023 is the expected launch of the plan to privatise Portugal’s flag carrier airline (TAP) and the regional Azores Airlines (SATA). Details are not known yet of the share capital to be sold, but we believe the bidders will include the leading international airlines and it will certainly involve a major investment.

In the private sector, energy is an obvious focal point. Portugal has great capacity to produce clean energy. It has a large number of hours of sunshine and excellent conditions for wind, both onshore and offshore, and 2023 will see the launch of the first offshore energy auction. Portugal also enjoys a climate that does not demand the same level of energy spending as in the northern and eastern parts of Europe. Moreover, the real estate sector, including tourism and logistics platforms, has already been growing from some years.

Against this background, there have been a large number of investment announcements for the production of green hydrogen, green ammonia, biomethane, among others, that can be used in Portuguese industrial facilities, but also exported to the rest of Europe. This is especially so after the announcement of a new trans-European pipeline connecting Portugal, Spain and France, and from France to the rest of Europe. This connection is, of course, strategic for Portugal and Spain as it might mean that Iberia is finally linked in terms of energy to the rest of Europe. But the ability to produce clean green energy on a large scale has also been crucial to other big projects such as a major green data centre that is already under construction to the south of Lisbon.

Naturally, there are still many hurdles to overcome, and we face a very challenging macroeconomic environment due to inflation and rising interest rates. Nevertheless, the future looks brighter for Portugal in 2023. Tourism is recovering and now, probably more than even before the pandemic, a significant number of ongoing investment and tenders are to be launched and they will undoubtedly enhance Portugal’s pull-on international investors and make the country a destination to consider in 2023.