Income paid to non-residents reduces the Portuguese economy’s financing capacity

Corporations with foreign direct investment remunerate the capital invested by non-resident shareholders. These payments are recorded as “income paid to non-residents” and, between 2015 and 2025, amounted on average to 4% of GDP.

As they are paid to non-residents, this income contributes to reducing the Portuguese economy’s financing capacity vis-à-vis the rest of the world.

They account for a significant share of exports but import more than they export

Corporations with foreign direct investment also affect external accounts through their contribution to exports and imports of goods and services.

In Portugal, these corporations have a substantial share in exportsiIn this analysis, the balance of the travel and tourism component is not disaggregated between corporations with and without foreign direct investment, as the compilation process for this item does not allow for such a distinction. . Between 2015 and 2025, they accounted on average for 44% of the exports of goods and services, equivalent to 19% of GDP.

However, these corporations also represented a significant share of imports. Over the same period, they accounted on average for 55% of the imports of goods and services, corresponding to 24% of GDP.

As they imported more than they exported, they consistently recorded a negative balance in the trade balance over the period analysed. On average, this balance amounted to -4.6% of GDP. Among corporations without foreign direct investment, the balance was close to equilibrium, at around -0.4% of GDP.

The impact of corporations with foreign direct investment on the trade balance is therefore more significant, despite representing on average only about 20% of the corporations considered throughout the period.

In goods, they import more than they export. In services, the opposite holds

The behaviour of corporations with foreign direct investment differs across the goods and services accounts.

In the goods account, they imported more than they exported throughout the entire period analysed. This negative balance was more pronounced than that observed for corporations without foreign direct investment.

In the services account, the opposite occurred. Both corporations with foreign direct investment and other corporations recorded positive balances, i.e. they exported more services than they imported. In the case of corporations with foreign direct investment, this positive balance became particularly significant in recent years.

The sector of activity helps explain the differences

Sectoral analysis shows that corporations’ behaviour differs across sectors.

In the industrial sector, both corporations with foreign direct investment and other corporations recorded positive balances in the goods account. However, corporations with foreign direct investment recorded, on average, higher balances by 0.8 percentage points of GDP, indicating a stronger export orientation.

In the trade sector, the balance was always negative for both groups of corporations. This result is consistent with an activity more reliant on importing goods for domestic sale. The pattern was more pronounced among corporations with foreign direct investment, which showed higher levels of imports.

In the services account, the contribution of corporations with foreign direct investment differs from that of other corporations in consultancy, information and communication activities, and in the transport and storage sector.

In consultancy, information, and communication activities, corporations with foreign direct investment recorded higher positive balances than other corporations. This reinforced the positive balance in the services account, particularly from 2020 onwards, in line with the growth of these activities.

In the transport and storage sector, the opposite occurred. Although both groups recorded positive balances, the balance was higher for corporations without foreign direct investment. In this sector, these corporations contributed more to Portugal’s external financing capacity.

The impact of foreign direct investment corporations on external accounts depends on the dimension analysed

The role of corporations with foreign direct investment in the Portuguese economy is significant, but it cannot be assessed in a linear way. A comprehensive assessment of their impact on Portugal’s external accounts requires considering income paid to non-residents, trade in goods and services, and sectoral differences.

This analysis shows that corporations with foreign direct investment have a significant but heterogeneous impact on external accounts: they contribute substantially to exports, but overall run a negative trade balance and, in addition, reduce the economy’s financing capacity through income paid to non-residents. However, the sector in which they operate shapes their contribution to trade in goods and services: the industrial sector is a net exporter, whereas the trade sector is a net importer.

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