PwC cuts the GDP for Spain by almost two points in 2023 and places it at 1.1%


Experts and directors of the PwC Economic and Business Consensus have cut their growth forecasts for the year by one tenth. Spanish Gross Domestic Product (GDP) this year, to 3.9%, and have lowered their estimates for 2023 almost two points, from 3% to 1.1%. This follows from the latest report of the Economic and Business Consensus of PwC, for the fourth quarter of the yearin which the experts and directors worsen their opinion on the evolution of the activity in Spain a year ahead.

51.3% of experts describe the current situation of the Spanish economy as regular, and their positions become more pessimistic when asked about the first quarter of next year, since 71.8% ensures that it will get worse. For this reason, the panelists have significantly cut their growth forecasts for the Gross Domestic Product of 2023 from 3% to 1.1%, placing them below the forecasts of the Bank of Spain (1.4%), from the International Monetary Fund (1.2%) and from the Government itself (2.1%).

67.8% foresee a decrease in the productive investment of companies

The slowdown in economic activity will be given, according to the report, by the fall in demand from families, both for consumption and, especially, for home purchases. 59.3% of the panelists assure that the economic situation of families is regular and 70.3% expect it to get worse in the first quarter of next year. In fact, 74.6% expect that in the next six months the consumption decreasesand 85.6% that the same thing happens with the purchase of housing, probably due to the rise in interest rates and the increase in mortgage prices.

Regarding the companies, their economic and financial situation is qualified as regular by 70.1% of the experts and managers surveyed who, in addition, expect that deteriorate in the short term. Looking ahead to the next six months, 67.8% foresee a decrease in productive investment by companies and 75.4% in job creation. However, their better relative situation compared to that of the families is based on the evolution of exports. In this sense, 47.5% of experts affirm that they will remain stable, at least, until mid-2023, a situation that is benefiting from the depreciation of the euro against the dollar.

Less price stress

Inflationary pressures begin to subside and fall -from 63.4% to 58.4%-, the percentage of experts who consider that their companies or those in your sector of activity will continue to increase prices in the coming months, mainly due to the increase in other costs, beyond wages. On their side, they increase by five points, up to 40.6% who think that will keep them stable as a consequence, in this case, of the stagnation of demand. All this translates into an improvement in the inflation forecast for 2022, compared to the previous consensus, from 6.6% to 5.5%, and estimates that place price growth in June 2023 at 4%.

In the case of the eurozone, 64.4% of the experts consider that we are in an inflationary context not seen since the seventies, which transcends the work of the European Central Bank (ECB), and ask that the measures be accelerated within the European Union. In addition, 52.9% warn that the ECB would have to adjust the increases in interest rates to the evolution of the economic situation and only 25.2% believe that it should accelerate the monetary policy tighteninggiven the negative evolution of core inflation and the greater risks of second-round effects.

In the short term, 49.1% of the panellists expect prices in the euro zone to remain at high levels, around 6%, considering that the resolution of the energy crisis will take years, although 37.1% does not rule out that the economic recession could lead to a greater slowdown.

Measures to deal with rising prices

Regarding the type of actions that could be carried out to combat inflation, the panelists -85.7%-, are committed to structural reforms and offer that drive innovation and productivityand advocate -64.7%- promoting dialogue with companies to find out what measures can help reduce their exposure to widespread rebound of production costs.

Experts do not have a clear opinion on what would be the evolution of prices in Europe in a scenario marked by the end of the war in Ukraine. 39.8% believe that there will be a new phase marked by geopolitical tensions and trade wars; 31.4% expect them to continue equal to the moderation of the process of economic globalization and transition, and an identical percentage to structural reforms, the success of monetary and fiscal policy, the digitization and energy efficiency promote price control. Of course, only 11% believe that, once the war is over, inflation will return to the path prior to the pandemic.

Impact of tax increases on PGE

As for Spain, 71% of the experts, managers and businessmen interviewed consider that it is still too early to know if the increase in Inflation will acquire a more structural character. And when asked about the factors that most concern them regarding the future evolution of the CPI, they highlight, firstly, the increase in energy prices and, secondly, the rise in wage costs.

Regarding the effect that the 2023 General Budgets may have on the evolution of prices, 68.1% believe that the rise in tax pressure and social contributions add new costs to companies and, consequently, to the inflation. And 73.3% miss that the public accounts are not accompanied by a fiscal consolidation plan.


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