"After three years of continuous growth, the post-pandemic recovery of Foreign Direct Investment (FDI), in 2023 Portugal lost attraction in this area and welcomed 221 FDI projects, 11% less than in 2022, in line with the decrease recorded throughout Europe", states the EY study.

As such, "Portugal now occupies 7th place in the ranking of attractiveness (...) of European countries for FDI (in 2022 it was 6th)", the document reads.

According to the study, "this result was strongly influenced by slow economic growth, persistently high inflation, high energy prices and national political instability".

Portugal fell to 7th position "after being overtaken by Poland, which last year attracted the largest investment from the United States", the study states.

The EY Attractiveness Survey Portugal assesses foreign investors' perception of the country's attractiveness as an FDI destination, which is defined in this analysis as a combination of image, investor confidence and perception of a country or region's ability to offer the most competitive benefits for FDI, the document states.

"The EY Attractiveness Survey Portugal panel of participants is made up of decision-makers from all backgrounds, based on their opinions and experiences regarding Europe: Western Europe (54%), North America (19%), Northern Europe (17%), Asia (7%) and Brazil (3%)", with 63% of the 200 investors surveyed having operations in Portugal, EY states.

The area of ​​software and IT services [information technology] continues to lead FDI projects, "a sign of the strength of the attractiveness of the digital economy for Portugal, which between 2021 and 2023 was the 4th European country to attract the largest number of FDI projects (244) in this area".

Another conclusion of the study is that business services and professional services, "whose growth more than quadrupled compared to 2022, are at the forefront of FDI in Portugal".

Overall, according to the EY Attractiveness Survey Portugal, the country "remains attractive for FDI, with 84% of investors surveyed stating that they have plans to establish or expand operations in the country in 2025, an indicator above the European average of no more than 72%".

Around 77% of respondents "anticipate an improvement in Portugal's attractiveness for FDI over the next three years, a figure well above the 49% recorded in 2021", the study also points out.

"Despite the reduction in the number of FDI projects in 2023, Portugal continues to assert itself as a stable and highly attractive investment destination. Remaining in the Top 10 European countries that deserve the greatest trust from foreign investors is a clear sign of the country's progressive growth, which stands out internationally for the qualification of its workforce and for being at the forefront in terms of innovation, technological development and environmental sustainability", says Miguel Farinha, country manager partner of the EY Portuguese cluster.

The United States, France and Germany are the three countries that invest the most in Portugal.

"These countries account for more than 40% of FDI projects in Portugal, with the software & IT services sector accounting for the majority of investment and 40 projects originating from these regions", the study states.

The study points out that the "weight of European countries in FDI in Portugal has decreased significantly, contrary to the past trend in which the main investors were from the same continent".

While in 2022 investment from EU countries accounted for 73.4% of all FDI projects carried out, last year "it accounted for just over half of the total".

Brazil was responsible "for almost 7% of this investment in 2023 and is now one of the six main countries of origin of FDI projects in Portugal, establishing the fact that, in relative terms, Portugal attracts much more Brazilian investment than Europe", the study states.

It is worth noting that "the strong European economies, namely France and Spain, are responsible for a higher FDI from Brazil in Portugal".

Conversely, "China represents 4.5% of investment in Europe, but only 0.5% in Portugal, which indicates that Portugal's attractiveness has not yet been fully recognised by Chinese investors."