The PwC Economic Consensus lowers its growth estimate for the Spanish economy in 2022 from 4.3% to 4% and warns of the transfer of the increase in costs to the salary chain
The rebound in economic activity expected for this summer thanks to the pull of tourism could be just a mirage that ends up leading to a hard brake from September. There are more and more voices pointing to the feared "hot autumn" for which the PwC Economic Consensus has decided to cut its growth forecast for the Spanish economy from 4.3% to 4%, below the anticipated 4.3% also by the government.
The firm has prepared this quarterly survey of the situation since 1999 from a panel of more than 450 experts, businessmen and managers who, by 2023, estimate a growth of 3%, in this case already with a significant drop of almost nine tenths compared to the previous edition.
In the analysis of the results of the survey, PwC certifies that the effects of the war in Ukraine "threaten to take a heavy toll on growth." "The increase in energy prices, with the associated risk that they are transferred to the rest of the economy and to wages, pose a challenge for economic activity, employment and the competitiveness of companies," they add.
It is true that the experts' forecast for this summer quarter is in the direction of mild optimism. But the perception changes significantly when respondents are asked to judge the economic situation in a year. There the majority forecast is that the situation is going to worsen significantly. Up to 46% of them subscribe to that idea.
The challenge of inflation
The results of the survey confirm that the great problem of the Spanish economy is inflation. In a quarter, the estimate of the experts on this reference at the end of the year has increased by two points, from 4.69% to 6.64%. And from PwC they warn that, probably, this last forecast falls short "if we take into account that it was made without knowing the provisional data for June", with a historic increase in the CPI to 10.2%, with underlying inflation also triggered by 5.5% in the period.
One of the big problems arising from this inflationary environment is the rise in prices that companies are already undertaking to cover part of the rise in costs without completely destroying their margins. And here, the panorama anticipated by the managers surveyed is not very encouraging for consumers. Specifically, 63.7% of the experts are committed to further increasing prices in the coming months. This is the highest percentage of the entire historical series of the survey.
"The majority response, how could it be otherwise, is that the main cause is the increase in non-salary costs, fundamentally those related to energy," they indicate from PwC. Two out of three respondents explain it this way. But it is also significant that the percentage of those who relate the rise to salary costs has doubled (from 13% to 26%).
“This may be a serious indication of the transfer of price and cost increases to the wage chain, raising the probability of second-round effects, or at least it is a sign of the fear that this dangerous indirect impact can be achieved, "they warn.
This situation is what has aggravated the pessimism regarding growth forecasts, also based on "a worsening of the financial situation of families and a fall, in the next six months, both in consumption and in the demand for housing , according to 43.5% and 39.1% of those surveyed, respectively”, due to inflation and lower real disposable income.
Faced with this situation, and with the public accounts still affected by significant imbalances, three out of four respondents maintain that the Government must draw up a medium and long-term fiscal consolidation plan.
Among the other options, lowering taxes for all citizens is the least attractive. Only 23% agree with carrying out this policy as a solution to the impact of the crisis on families. On the other hand, they value more positively maintaining current taxes and taking advantage of the extra collection generated by inflation to reduce public debt and the deficit.