Portugal's investment slide seen easing in 2013

LISBON Thu Jan 31, 2013 1:53pm GMT

LISBON Jan 31 (Reuters) - Portuguese firms expect investment to dip about 4 percent this year after last year's estimated record 26 percent slump, a survey showed on Thursday.

The figures lend some credit to the government's pledges to leave three years of painful recession behind by 2014, with a turnaround expected later this year.

A debt crisis and austerity dictated by a 2011 EU-IMF bailout stoked the worst recession in Portugal since the 1970s.

The National Statistics Institute (INE) said in its first survey for 2013 of 3,676 firms that the biggest drop in investment, of almost 36 percent, was projected for the hard-hit construction sector, which shed 45 percent last year.

A handful of sectors even expect investment to rise this year, among them the real estate businesses, followed by electricity and water treatment.

While new construction is still heavily depressed, a housing rent reform implemented under the terms of the EU-IMF bailout is expected to lure investment into urban rehabilitation projects and boost the supply of rented property.

The largest firms with 500 workers or more expected, on average, a 1 percent increase in investment, but the smallest, with less than 50 employees, projected declines of as much as 16 percent, INE said. Investment in equipment in general is expected to rise almost 1 percent.

Self-financing was the main source of investment for companies, accounting for 65.7 percent of the total in 2012 and 67.9 percent projected for 2013, while reliance on bank loans has diminished as a result of the recession and sovereign debt crisis that has strained funding conditions, INE said.

Difficulty in obtaining bank loans was the main reason for the investment decline at just about 9 percent of companies surveyed, while the bulk said it was due to worsening sales prospects.

MIXED OUTLOOK

On the plus side, Portugal's business and consumer confidence edged up from record lows in January after Lisbon returned to the bond market for the first time since its bailout..

And credit insurers Cosec expect the number of Portuguese firms going bust to ebb this year after a seven-year rise.

Yet the economy continues to struggle with the broad fall in demand across the euro zone and the impact of budget cuts aimed at stabilising public finances. This year the government will launch the largest tax hikes in living memory.

New investment is not seen boosting jobs either, according to INE, and the prospect is for another rise in unemployment in 2013 with the government forecasting that the jobless rate will peak at 16.4 percent this year when it expects the economy to shrink 1 percent after 2012's estimated 3 percent slide.

The Bank of Portugal has forecast a much steeper contraction of 1.9 percent this year while Citi economists expect a drop of as much as 3.7 percent. (Reporting By Andrei Khalip; editing by Ron Askew)

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