European CFO Survey with Portugal Insights

Europe’s CFOs react defensively to the effects of inflation

Almost a year has passed since the beginning of Russia’s invasion of Ukraine and the world is still far from normality. The weak economic outlook is daunting businesses across Europe, with rising fears of an almost certain winter recession with high inflation during the first quarter of 2023. In line with the sentiment across Europe, Portugal’s CFOs reported the lowest level of confidence in their companies’ financial prospects since the beginning of this survey, surpassing the all-time high uncertainty level registered both in the beginning of the pandemic and immediately after Russia’s invasion of Ukraine.

Due to the weak economic outlook, geopolitical uncertainty with the conflict in Ukraine still being far from a resolution, and rising interest rates with the turnaround in monetary policy from the European Central Bank, CFOs in Portugal are now less confident about their operating margins and less prone to execute CAPEX investments, still believing it is not a good time to be taking greater risk to their balance sheets. Despite the global pessimistic sentiment, Portugal’s CFOs are amongst the most optimistic in Europe regarding revenue and employment prospects for the next 12-months.

To navigate through turbulent and uncertain times, CFOs in Portugal are rethinking their strategies in two timeframes.

On the short-run, Portugal’s CFOs are preparing defensive strategies to protect their businesses, including cost reduction and initiatives to mitigate inflation such as improving cash flow management, transferring costs to consumers by raising prices and increasing energy efficiency. On the long-run, CFOs highlight digitalisation as the key strategy to deliver sustained value to the business, being the top business strategy on the agendas of the CFOs in Portugal.

It is time for CFOs to be resilient, sharp and agile in rethinking their strategies to navigate through uncertain times, protect the business and leverage opportunities to drive sustained value for the future.

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