The great accelerator of economic growth in Spain, crucial in the face of the impact of the war in Ukraine, arouses little interest among companies. The latest survey by the Bank of Spain shows that only 16.6% of the companies in the sample (5,798 specifically) are interested “in attending calls related to projects financed with European funds”.
The Government opens to extend aid for the war beyond June
This proportion, according to data collected between February 23 and March 10 – Russia began the invasion of Ukraine on February 24 – is 7 points lower than the previous survey, conducted at the end of the last quarter of 2021, according to says the institution. A decrease in the willingness of companies to take advantage of the Next Generation of the European Union (EU) that could reflect less attractiveness due to the more adjusted profitability of these projects due to the rise in costs, mainly due to the rise in energy prices, and the current uncertainty itself.
The limited interest of companies in European funds contrasts with the Government’s intention to increase the pace of calls in response to the blow of the war on economic activity, together with the Shock Plan approved last week. Exactly, the Executive has the objective of mobilizing 24,600 million euros with the calls for the first semester, like the last one announced by President Pedro Sánchez: 11,000 million to boost the production of chips.
The absorption of European funds stood before the war as one of the main accelerators of economic growth, with a positive impact of about 1.5 points, according to the Bank of Spain’s forecast at the end of 2021, and that the Government It reached 2.5 points. Right now, all forecasts are questioned, and the fiscal margin remains very narrow to combat the peak of inflation. One of the latest estimates, that of Funcas, left growth this year at 4.2%.
A path of increased economic activity that is sustained by the strong recovery that came from 2021, after the shock of the pandemic, and that will be reflected mainly in the first quarter, since in the forecast of the analysis center, the GDP only it will advance 1.1% in the three remaining quarters of 2022, “although a recision will be avoided.”
The survey also reflects “an intensification of the increase in the cost of intermediate consumption to which companies are being subjected, in a context in which a growing percentage of them will be affected by the persistence of supply difficulties throughout this year. ”.
“Nearly 82% of companies declare that they have detected an increase in the prices of their intermediate consumption, almost 7 percentage points above the figure for the previous quarter,” continues Mario Izquierdo, an economist at the Bank’s General Directorate of Economy and Statistics. of Spain, who signs the analysis of the survey and observes that, “regarding the price of goods and services produced by the companies surveyed […]more than 40% of companies say they have raised their prices, an increase of more than 10 points compared to the previous quarter […]”.
In the case of labor costs [salarios y cotizaciones], forecasts one year ahead have increased slightly compared to last quarter. Almost 70% of companies currently expect growth in this variable to occur, some 5 points more than at the end of 2021”, he adds.
Less ERTE and less ICO
Among the good news that the survey collects, in general, the use of the measures most closely related to the management of the health crisis, such as the request for ERTE or ICO loans, has been losing relevance.
“On the other hand, those actions aimed at favoring the adaptation of companies to the new economic environment after the pandemic maintain a high incidence in this edition. Thus, 36% of the companies plan to make new investments in technology, 22% think of expanding their activities to new markets or with new products, and just under 20% intend to implement new sales channels, percentages that, in all cases, they have been somewhat reduced in the last quarter”, says Mario Izquierdo.
“On the other hand, the measures aimed at mitigating the impact on the company’s liquidity or equity position, such as the reduction of investments already planned, the cut in labor costs (either through salary levels or the number of hours worked) or capital increases, have maintained a slightly downward trend, in line with the improvement in the economic situation”, he concludes.