German Institute Predicts Construction Boom in Portugal to 2020

23 November 2017

The Instituto Ifo and Euroconstruct project a 15% jump in construction in Portugal. The sector experienced deep recession over the last decade, and the jump in tourism is pulling it out.

Portugal will experience a period of strong expansion of the construction sector over the next three years, says the Munich-based Institute for Economic Research (Ifo).

The expected increase of 15% between the beginning of 2018 and the end of 2020 will be the fifth strongest in Europe (a group of 19 countries), Ifo/Euroconstruct calculated. The boom already seems to have commenced.

“The volume of construction in the 19 countries of the euro zone will increase by 3.5% this year,” which is “the strongest growth rate in Europe since 2006, before the start of the financial crisis,” reported the study coordinated by Ludwig Dorffmeister, a researcher at the Euroconstruct research group, a research network that provides information and forecasts on European construction and engineering markets.

Portugal on the rise after a profound crisis

In three-year growth projections, from 2018 to 2020, Hungary leads with an projected expansion of 33%, “followed by Ireland (28%), Poland (25%), Czech Republic and Portugal (15%)”, the same source stated.

Portugal’s boom will continue to 2020, especially considering that the starting base was quite low. The sector experienced a very deep recession that began in 2002 and ended only in the middle of last year (analysis of the variation rates of sectoral value added measured at constant prices, data from the INE).

At current prices, the Portuguese construction sector lost almost 40% of its value in the last ten years, dragged by the crisis, austerity, rising unemployment and dwindling credit since 2007.

In Portugal, the sector employs about 295,000 people (3rd quarter of 2017, INE), 3.7% more than a year ago. Real estate activities employ another 39,000 workers, a figure that represents a significant year-on-year increase of 19%.

The increasing role played by the civil engineering component over pure construction has an explanation. The growing strength of the urban rehabilitation of city centres is closely linked with another boom: that of tourism. The cities of Porto and Lisbon are a prime example.

The Euroconstruct study focuses on the following countries: Belgium, Denmark, Germany, Finland, France, Great Britain, Ireland, Italy, Netherlands, Norway, Austria, Poland, Portugal, Sweden, Switzerland, Slovakia, Spain, Czech Republic and Hungary.

A European recovery

Dorffmeister says that “construction has rebounded this year in all 19 Euroconstruct member countries, with the residential segment providing the strongest stimulus.”

The first signs of recovery in the sector (at the European level) have been felt since 2014, the same source reported.

The same work indicates that “this situation should continue, with [aggregate] construction volume growing 6% by 2020”.

“In addition to state subsidies for residential construction, more consistent use of European Union funds for non-residential construction will also play an important role.”

“In residential construction and other segments, market growth rates will weaken considerably, while civil engineering becomes the medium-term market engine,” notes Dorffmeister.

“The civil engineering segment will grow more than 4% in 2018 and 2019, respectively. “This is also unprecedented,” he added.

“By 2020, the remodelling of existing buildings will grow stronger than the new construction for the first time since 2014.”

Original Story: Dinheiro Vivo – Luís Reis Ribeiro

Photo: Gustavo Bom / Global Imagens

Translation: Richard Turner