Three out of four companies will increase their sales this year despite the uncertainty, according to KPMG | Economy

A mechanic works in an automotive workshop.
A mechanic works in an automotive workshop.Biel Aliño (EFE)

The uncertainty generated by the invasion of Ukraine has partly overshadowed the recovery that the end of the pandemic had brought. The conflict has compounded the challenges that were already slowing the pace of growth: supply chain disruptions, rising commodity prices and rising inflation. However, the worsening of these tensions has not affected the business forecasts of Spanish companies, which remain stable. 77% of them expect to increase their turnover in 2022 and almost half expect to do so by more than 5%, according to the new edition of the Spain Outlook 2022 report, carried out by KPMG in collaboration with the Spanish Confederation of Business Organizations (CEOE).

Similarly, hiring forecasts remain largely optimistic. 46% of the companies surveyed will increase their workforce throughout 2022. A slight moderation compared to the previous survey, published in December last year, in which this figure reached 52%. Technology, Health and private equity These are the sectors in which new hires will increase, while construction, real estate and banking are at the bottom.

Although most managers keep their prospects for growth and hiring almost unchanged, they have become more pessimistic about the consequences unleashed by the war. The change is evident in the 12-month outlook. The percentage of respondents who estimate that the Spanish economy will get better or much better has been halved between December 2021 and April 2022, going from 43% to 21%. For their part, those who anticipate that it will evolve for the worse or much worse grow 26 points, from 19% to 45%.

The Spanish company is aware that, when facing adverse situations, adaptation is the key to survival, according to the president of KPMG in Spain, Juanjo Cano. “There is no doubt that the Spanish business fabric is facing a complex period, in which the negative factors that threatened growth will take time to dissipate. But we also have the certainty of counting on their adaptability and resilience”, he points out.

The level of confidence in the future is not the same when looking at autonomous communities. The Balearic and Canary Islands are the most optimistic about the evolution of the economy, which highlights the recovery of tourism, a key sector in the economic structure of both archipelagos. In March, the number of hotel overnight stays increased by 391% compared to the same month in 2021, according to data from the National Institute of Statistics, and in terms of employment, according to Turespaña, the sector would have already touched the levels prior to the pandemic.

Given the escalation that inflation has experienced in recent months, which has triggered production costs and reduced consumers’ purchasing power, it is not surprising that three out of four managers, 77%, consider inflation as one of the main threats to the Spanish economy, according to the KPMG survey. The latest estimates from the Bank of Spain place the average CPI for 2022 at 7.5%, compared to 3.1% last year. Among other possible drags on growth, one in three respondents notes the weakening of the global economy and the possible increase in taxes. Antonio Garamendi, president of CEOE, stresses at this difficult time that companies need additional measures to consolidate the recovery and face the threat posed by uncontrolled inflation. “We must continue to take steps to transform our economy and make it more efficient and productive, digital and sustainable, with a greater capacity to adapt,” he adds.

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Geopolitical tensions are also in the sights of managers: 30% of the survey participants mark it as one of the most worrying challenges, 18 percentage points more than before the outbreak of the conflict in Ukraine. All these concerns are reflected in the companies’ risk map. Commodity price volatility stands out as the first threat to your business, followed by demand risk and regulatory risks.

Conflict increases uncertainty

The invasion of Ukraine has dealt a severe blow to the economic recovery by prolonging some of the factors that were already slowing its pace. As a result of the war, one in three firms surveyed has reviewed its strategy for this year or is doing so, while two out of five have not yet done so because they are waiting to see how the conflict evolves.

Companies underline production costs, supply problems and energy shortages among the aspects of their activity on which the war will have the greatest impact. Only one in five respondents weighs that the sanctions imposed on the Russian Government and the counter-sanctions decreed by it are harming their business. Within this group, the measures that are damaging more companies are of a financial nature: the closure of the SWIFT payment system, the prohibition of carrying out transactions with some Russian banks and the Kremlin’s restrictions on transfers of funds abroad.

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