Inflation became the main concern in 2022. To counter the fallout, central banks are raising interest rates, and the fallout is significant. Government bond yields are higher around the world. Therefore, savings are more attractive than investments in projects or company shares, which explains the weak performance of stock markets recently.

This also extends to corporate financing and valuation, which in turn leads to higher discount rates and lower valuations as the opportunity cost of any project increases.

The impact of inflation on company costs is estimated in a report by strategy&, PwC’s global strategy department, which shows an impact of 5% to 20% on various company costs during 2022. For example, a 10-20% increase in % of internal IT services costs, 5-15% in office operation/maintenance costs, 10-15% in temporary workers, 8-10% in salaries and 5-10% in cost impact with contractors, for marketing or for IT solutions and services provided by third parties.

Read the rest of the article on the PwC Romania blog

The article was signed by Dina Bumbecha, Country Managing Partner

Article supported by PwC Romania