Business takes stock of prospects for 2023

Sovereign debt, market bubbles, the impact of inflation, the consequences of the continuing war in Ukraine and keeping up with changes in technology are the challenges facing Portugal at State and company levels in 2023 according to a distinguished panel of economic and business leaders.

Speaking at a breakfast debate entitled ‘The Expectations and Prospects for Business and the Portuguese Economy’ organised by the American Chamber of Commerce in Portugal (AmCham) on Friday at the Lisboa Hotel & Spa, Joaquim Miranda Sarmento (academic), Madalena Cascais Tomé (company executive), Maria João Carioca (academic) and Pedro Siza Vieira (ex-minister) shared their reflections, opinions and forecasts for 2023
In a debate sponsored by Accenture and AON and moderated by Pedro Penalva (CEO Aon Iberia, Africa and Israel), the panel discussed the current risks which in their opinions could effect business and the economy in 2023 as well as US relations with China, Europe, and the role of India. In addition the focus fell on opportunities and challenges for Portugal, and Portugal’s sovereign debt.
Maria João Carioca believed that now was not the time to expect a lot of innovation. The supervisory board member at Lisbon’s Universidade Nova pointed to signs of “volatility and challenges” which had hung over from 2021 and 2022 as the reason.
“Inflation is a deciding factor for the macro-economic scenario, with the European Central Bank having a fundamental role, but a snapshot of the market gives us reason to be more confident regarding which way inflation is going, and a different one from what we’ve seen happening on the other side of the Atlantic,” she said.
The Executive Board Member at Portugal’s public bank CGD said that while the bank was focused on the long term, it was presently very aware of the short term, and concentrating on ensuring that the shocks caused by the increase in interest rates “do not have long term impacts for families and companies”

Portugal – facing challenges admirably

Former minister of the Economy, Pedro Siza Vieira said that when canvassing opinions from companies, financial institutions and International organisations, everyone was unanimous in agreeing that the Portuguese economy has risen to the challenges admirably.
“Seven months ago, with the increases in the price of gas and energy, the rates of inflation, and the disruption in supply chains, the expectations for 2022 and 2023 were rather pessimistic,” said the lawyer and partner at PLMJ.
The resilience on consumption all over Europe, and the extraordinary reaction of European political policy-makers (the EU bazooka package) and the way that Europe led by example over energy prices whilst not holding out a brilliant 2023, allowed for “better expectations than we had some months ago, and give us the confidence in Europe’s collective capacity to resolve other problems that may arise”, he said.
Siza Vieira pointed out that many sectors had enjoyed a good 2022 (metallurgy, wine, tourism, textiles and clothing are just some), with exports achieving a historic record of 50% of GDP and companies gaining margin.
“We will begin to see inflation falling significantly, but this will not be translated into a fall in the price of products, but my the middle of the year interest rates are expected to stabilise”, he said.
The former minister of the Economy explained that Portugal had stood to gain from investors and companies re-shoring some or all of their operations away from Eastern Europe. “We have received a lot of industrial orders, and companies no longer need to compete in terms of prices and that we offer quality. These factors in themselves will increase productivity.”

Continued uncertainty

Madalena Cascais Tomé, Chair of the Board at SIBS Romania and CEO of SIBS Portugal (a Portuguese multinational payments solution company), said: “Uncertainty was the order of the day within the current international climate” but that there had been “a resilience and a great capacity to adapt, albeit asymmetrically”.

“Last year ended up as a very good year for Portugal, with growth of 5.8% and consumption at surprising levels,” she said.
The management executive pointed to three trends with challenges for companies given that growth was the main aim. These were: 1) Innovation – Portugal lacked scale, but nevertheless had managed to stand out on the European stage. 2) Artificial Intelligence and Data Treatment – if companies didn’t want to lag behind, they needed to leverage the potential of these technologies, understand their benefits, but also their limits and risks, as well as knowing the skills (and skilled staff) that they had to adopt in their companies. 3) Sustainability – companies that are more sustainable were also more resilient and brought added value.
“Technology has to serve a purpose and improve people’s daily lives, while guaranteeing inclusion” she said, warning that on the minus side, cyber security was vital to deal with cybercrime, which was already becoming a second world economy”.
Cascais Tomé said that relations between Europe and the USA were very strong, based on relations of cooperation and stimulation, which often forced Europe to react and accelerate. In the US there are already 300 unicorns in the AI area alone, and Europe would have to work hard to keep up.

2023 – a barometer for the decade?

Joaquim Miranda Sarmento, a lecturer at Lisbon’s School of Economics and Business (ISEG) believed that whatever happed this year would be a barometer for the next 10 years.
“After the 2008 crisis we created the idea that we would enjoy a long period of monetary liquidity and low interest rates, which in many cases were even at zero. The question is if we will be able to control inflation through monetary policy or suffer a decade with high levels of inflation?”
“Europe, the US and China are all countries whose companies and families are suffering high levels of debt rather like in the 1960s”, he added, warning that this might not be sustainable.
He also warned about the appearance of “bubbles in the market”, particularly the cryptocurrencies market, while suggesting that sovereign debt, including that of Portugal, was now at a “critical point” and asked what countries or companies would be “too big to fail or save” in the future.