Almost all companies in Portugal consider that normal conditions of activity have already been restored following the pandemic. And while more than half of the businesses are reporting that they have already reached or even surpassed Covid-19 levels of activity, data from the National Statistics Institute (INE) show that the recovery in the accommodation and restaurant sector is being much slower, with only about four out of ten (37%) establishments reporting that they have recovered from the Covid shock.

“In the context of lifting the restrictions imposed due to the Covid-19 pandemic, 90% of companies report that, in May 2022, normal conditions of activity have already been restored”, adds the INE. For more than half of the companies (56%), the pre-pandemic activity level “has already been reached or exceeded”, while 34% say that “the level reached is still below pre-pandemic values”.

Among the companies that have already recovered from the impact of the pandemic, the majority are large companies (63%), while, for micro companies, this percentage dwindles to 47%.

Substantial differences

There are also substantial differences in terms of sectors of activity. “The construction and real estate activities sector has the highest percentage of companies that have already restored normal conditions of activity (93%) and in which activity has reached or exceeded the pre-pandemic level (65%). In contrast, in accommodation and catering, the percentage of companies in which activity has already resumed or surpassed the pre-pandemic level is lower (37%)", notes the statistics office.

On the other hand, more than half of the companies (54%) expect an increase in turnover in 2022 compared to the previous year, while only 14% estimate a reduction. In this context, the prospects are more encouraging for the accommodation and catering sector, with 75% predicting an increase in revenues. Already 44% of companies in the construction sector and real estate activities expect to maintain their turnover this year.

War in Ukraine

However, the current economic situation, aggravated by the war in Ukraine, is causing concern among the business community. Most companies (83%) consider that the current situation “has a negative or very negative impact on the evolution of turnover in 2022, with emphasis on Industry and energy, with a proportion of 90%”.

Increases in energy costs and other raw materials or intermediate goods are the factors most mentioned by companies (60%) as a potential negative impact on activity, followed by increased transport costs and problems in the supply of raw materials/ intermediate goods (53% and 43%, respectively).

Faced with rising production and raw material costs, 67% of companies expect to increase sales prices in 2022, with 48% anticipating increases of at least 5%. At the same time, of the companies that have already raised prices, more than half (60%) justified the price revision with the increase in raw material/intermediate (non-energy) costs.

As for wages, companies predict an increase of 5.2% in the average salary in 2022, against a rise of 4.2% in 2021. Among the reasons given for the salary increase, 28% of companies highlight the increase in the minimum wage while 27% invoke the need to retain workers.