Market Report 3Q/4Q 2022
Portugal
Gross domestic product
The latest estimates on the Portuguese market are forecasting economy growth of circa 6% in 2022, mostly driven by a recovery in post-pandemic tourism. Investment has grown by around 3%, albeit slower than 2021. The country continues to experience increasing inflation, most recently reported above 10% during the last trimester, not meeting the Organisation for Economic Co-operation and Development’s (OECD) projections although other forecasts indicate a recovery starting in 1Q 2023.
Construction market
The country continues to maintain steady construction production, having not experienced any significant changes during 2022 and remaining above figures seen in 2019. The European Union construction survey reports low confidence in the industry, largely attributed to contractors reporting low employment expectations for what remains of the year. As with many countries, this statistic can be favourable to investors, as contractors will be more inclined to bid competitively within ongoing supply chain challenges.
Construction materials
As we approach the end of the year, electricity, gas, steam and HVAC supply producer prices have experienced the biggest recovery since 1Q 2022, dropping 30 points in the NACE index.
As prices continue to rise in Portugal, the general sense is that stability has not been achieved, leading contractors to continue insisting on price review clauses in their contracts.
In an effort to curb energy price increases for companies and large consumers, the government has proposed a €3 billion plan to achieve an average of 30% savings in gas and electricity. The intention is for savings to be passed down through reduced consumer prices, which have seen inflationary increases throughout the year. Gleeds will be closely monitoring the industrial producer price index for early indications of project cost stability.
Market forecast
The International Monetary Fund has updated and increased gross domestic product (GDP) growth projections to 6.2% for 2022, from its previous estimate of 4% reported at the end of 2Q 2022. Although very low at 0.7%, a positive GPD growth rate is still set for 2023.
Despite global challenges, Portugal experienced a significant number of licensing requests in 2022, which, together with previously initiated construction, should keep contractors engaged in the coming months.
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.
