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Portuguese firms increased their liquidity reserves in 2020, despite the sharp slowdown in economic activity caused by the pandemic

20.05.2022

Economics in a picture: Portuguese firms increased their liquidity reserves in 2020, despite the sharp slowdown in economic activity caused by the pandemic

 

 

In 2020 there was a significant decrease in Portuguese firms’ revenues. Even so, companies increased their liquidity as a result of a decrease in operating costs and investment. The reduction in operating costs was mainly due to a decrease in the costs of supplies and external services. Employee expenses decreased only slightly, which is likely related to the furlough schemes implemented. The decrease in investment occurred mainly in large firms.

The increase in liquidity was slightly less pronounced in the sectors most affected by the pandemic, reflecting a greater decrease in revenues. However, these firms had a strong contribution from cash flow from financing activities, mainly as a result of an increase in credit.

 

Further details in Special Issue –“The evolution of firms' liquidity and leverage in 2020” (in Portuguese only), May 2022 Economic Bulletin (Banco de Portugal).

 

Prepared by Nuno Silva and Pedro Moreira. 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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