In addition, the depreciation of our peso, although an important incentive for the export sector, in the short term has negatively affected the imported components of domestic expenditure. Along with this, it is worth noting the decline in economic expectations in recent months, which, on one hand, are a reflection of this scenario of slower growth, but on the other, may end up negatively affecting domestic demand. Expectations for investment and consumption have been falling for quite some time already, and more sharply in the most recent past. The Economic Perceptions Index (IPEC) and the Monthly Business Confidence Indicator (IMCE) have posted continuous declines this year. As of July, the two are below their neutral levels (figure 1). Besides, they show significant deterioration in some specific items, most notably those related with the convenience of buying durable goods, the perception about employment and the appropriate level of inventories. Meanwhile, the Business Perceptions Report published by the Bank in August revealed that firms perceive an increase in uncertainty, which has influenced both their own and their customers’ investment and spending decisions. Increased uncertainty naturally results in investment projects being pushed back (the “wait-and-see” option in specialized jargon), which could partly explain the reduction in investment. As I said, monetary policy has responded strongly and decisively to the worsening of our domestic scenario, generating significant monetary impulse. By mid-2013 we expressed the  2  BIS central bankers’ speeches  need to adopt a more expansionary monetary stance that would ensure that inflation would converge to the target.
The National Plan to respond to the economic and social fallout of the war in Ukraine, approved by the Spanish Cabinet on 29 March,5 includes measures that will come at a direct cost of € billion in 2022, according to Government estimates.67 One area of fiscal policy where more resolute action would be desirable is the formulation of a credible commitment to budgetary stability over the medium term. This would help limit the risks of financial market tensions that could be fuelled by the current climate of high uncertainty. This commitment should take the form of a gradual fiscal consolidation programme, to be implemented once the recovery takes hold. A gradual adjustment process minimises the possibility of any abrupt changes in the budgetary policy stance that might hamper the recovery under way. Increasing the economy’s potential output would also help reduce the high level of government debt. This would require reforms that address the economy’s structural shortcomings. NGEU funds could also be particularly useful in implementing these reforms and the investments required to support the changes. 5  See Real Decreto-ley 6/2022 (available in Spanish only). 6  In addition to this amount, there is a contingent liability of € billion linked to the new ICO guarantee facility approved as part of the raft of measures to support business liquidity needs stemming from the temporary increase in energy and fuel costs.