Western Mainland Europe Construction Market Report 1Q 2023
Portugal
Gross domestic product and inflation
Despite multiple challenges, Portugal’s gross domestic product (GDP) growth at the end of 2022 was nearly 7% — the best seen in over thirty years. Although GDP in construction has steadily declined since 2Q 2022, overall, the industry has experienced continued growth since 2015.
Inflation has experienced a steady decline after peaking in October 2022. The Organisation for Economic Co-operation (OECD) maintains a 1Q 2023 forecast of 9.9% while other outlets report current inflation at 8.2%. By year-end, the OECD expects inflation to be at 3.6%.
Construction materials
At the end of last year, the industrial producer price index showed small recoveries in glass products, structural metals, electrical and HVAC supply.
The European Union (EU) gas price cap mechanism, approved in 2022, will continue through to the end of this year. One of the many benefits expected is controlling the effects of inflation on factory production costs.
Construction market
Portugal continues to maintain steady construction production, having not experienced any significant changes during 2022 and remaining above figures seen in 2019.
The current outlook for the construction sector points to growth between 2.4% and 4.4%, in line with earlier 2022 predictions.
Market forecast
Respondents to the monthly construction survey indicate a small uptick in work expectations over the next three months, although still citing pricing and materials shortages as challenges.
Measures taken by European Central Bank (ECB) to reduce inflation by increasing interest rates, combined with local initiatives to favour long-term rental housing schemes, will likely result in decreased residential projects. Growth in demand was previously anticipated with a local “golden visa” plan, designed to attract foreign investment in housing.
In contrast, other sectors not necessarily reliant on bank financing such as infrastructure, retail, mission critical and hotels and leisure are picking up.
As always, Gleeds advises regular project budget updates that take into account recent market pricing and local risk factors which may impact programmes and costs. Risk analysis studies are recommended to better evaluate and prepare appropriate contingencies for your particular project conditions and risk exposure.
