During the past year, most Portuguese companies have been affected by the pandemic. Based on accounting data for December 2020 and a simulation methodology, it is estimated that capitalization efforts will be more important for companies that were already in a financial fragility situation or that were especially affected by the reduction in sales. In the Quarterly Survey on Non-Financial Corporations (ITENF), the percentage of companies with negative equity increased from 4% in 2019 to 5% in 2020. It is estimated that there will be an additional 1 pp increase in 2021.

Given the different way in which the pandemic affected the sectors of activity, it is expected that the evolution will be quite uneven across sectors. The percentage of accommodation and food companies with negative equity increased from 4% in 2019 to 16% in 2020, and it is estimated to be 26% in 2021. Transport and administrative, consultancy and support services companies should also show a deterioration in their capitalization, but of a lower magnitude (6 and 4 pp, respectively).

However, not all companies have been negatively affected by the pandemic and most are on a recovery path. For more than 80% of ITENF companies it is estimated that there will be a reinforcement of equity capital through the accumulation of profits in 2021, in line with the projected recovery path for the Portuguese economy.

For more details see the Special Issue “The impact of the pandemic on firms’ equity", published in the Economic Bulletin of Banco de Portugal, May 2021.

Prepared by Diana Bonfim and António Santos. The analyses, opinions and findings expressed above represent the views of the authors and not necessarily those of Banco de Portugal or the Eurosystem.

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