K&H: prepare for a temporary but significant slowdown in 2023

By: Trademagazin Date: 2022. 11. 17. 11:45

In the short term, the analyst of K&H’s parent company, KBC, expects a significant slowdown in the world economy. Recession fears are also reflected in companies’ expectations: 9 out of 10 companies expect a sharp decline in the next year, according to the latest data of the K&H large company growth index research. The main burden is high inflation, the rise in energy prices, the worsening shortage of raw materials and the decrease in real wages, while exchange rate fluctuations also place an increasing burden on companies. According to K&H specialists, therefore, instead of a temporary cost reduction, a complete rethinking of energy consumption, supply chains and production technologies will be necessary in 2023, which must also be supported by financing solutions.

It is necessary to prepare for a temporary but significant slowdown of the international economy, in which some economies may even reach a technical recession, according to the analysis of K&H’s parent company KBC for 2023. Hans Dewachter, the chief economist of the KBC Group, and Dávid Németh, the chief analyst of K&H, both agree that geopolitical risks continue to pose a serious threat to growth, and energy supply problems and rising wages may further accelerate the rise in prices. Inflation will therefore remain at an exceptionally high level in the short term, and may moderate significantly only in the second half of 2023. At the same time, monetary policy is also entering a new phase. Central European central banks are waiting for the time being, while the world’s two largest central banks, the European Central Bank (ECB) and the American Federal Reserve (Fed), slow down their tightening. What is certain, however, is that higher interest rates will remain with us in the long term, and 10-year government bond yields in the USA and Europe will reach their maximum next year.

The growing uncertainty is also reflected in the expectations of large domestic companies. The macroeconomic sub-index of the K&H large company growth index, which examines the expectations of Hungarian companies with an annual turnover of over two billion forints for the next year, is currently at -42 points with a significant drop of 18 points. This is the worst value of the indicator so far, and moreover, there has never been an example of such a decline in one quarter.

“For a long time, the international and domestic economic environment has not been as uncertain as this year – and this hectic, unpredictable situation can only increase further in 2023. Over the past year, companies have also had to face soaring inflation, rising energy prices, worsening raw material shortages, and falling real wages. Added to this was the significant exchange rate fluctuation, which is causing difficulties for more and more companies. Planning for the year 2023 is therefore a huge challenge for companies,”

said Gábor Rajna, head of the K&H Customer Division.