While gloomy economic forecasts spell trouble for early-stage space firms in 2023, analysts say the industry as a whole should largely prove resilient to any downturn.

Space businesses are more agile than ever in responding to changing market conditions, and governments worldwide are expected to continue underpinning growth for many of them, even as private funding sources dry up.

However, even those able to weather harsh financial climates will face operational challenges and dampened growth prospects this year.

2022 was marred by economic uncertainty. Soaring inflation, supply chain disruption, energy price hikes, and other headwinds contributed to an unstable and uneven recovery for markets still battling the lingering effects of COVID-19.

And forecasters are painting another year of uncertainty for 2023 as the pandemic and ongoing war in Ukraine cloud the outlook.

In the U.S., which is easily the largest player in the space economy, signs of economic growth are complicated by sky-high inflation and extremely low consumer confidence.

After a series of interest rate hikes by the U.S. Federal Reserve to slow down the country’s runaway economy and keep the prices of goods in check, inflation has fallen from a 40-year high of 9% in June to around 7% in November — still far short of the Fed’s 2% target.

Lower inflation would be good news for consumers; however, successive interest rate rises in the U.S. and elsewhere could push the macroeconomy closer to a global recession.

Even if the U.S. manages to scrape through without entering a recession — technically two consecutive three-month periods of negative gross domestic product (GDP) — businesses will have to grapple with a constrained and challenging economic environment.

During an economic crisis, or when interest rates are rising, investors tend to pull out of riskier projects and focus on profitable or cash-generating businesses — which “is not the case for a number of companies in the space industry today,” notes Miguel Ouellette, a principal advisor at Euroconsult.

And like in other industries, small and recent businesses in the space sector are more exposed to macroeconomic declines than more established companies.

The cost of borrowing money is deeply tied to how young companies are valued, and Ouellette expects their projects to be under threat if interest rates stay high.

Credit: SpaceNews Midjourney illustration

It is “highly likely” early-stage investment rounds for these companies in 2023 will be fewer in number and smaller in size than in previous years.

According to Analysys Mason research director Brad Grady, pre-revenue startups are already having challenges, “especially those with overtly optimistic business plans requiring significant technology development” to create new markets with unproven business models.

“Any pre or early revenue company with a high cash burn rate looking to raise money is worried right now,” Grady says, “it doesn’t matter if the company is a launch company, an antenna manufacturer,” or one just providing space-related services.

There was a noticeable drop in the number of growth stage funding rounds for the space sector in the second half of 2022 and the capital they were able to raise.

The challenges young space companies face can also be seen in the poor stock performance of those that listed via merging with a special purpose acquisition company, or SPAC, as they trade well below their initial public offering (IPO) price.


Companies developing capital-intensive, hardware-heavy business models are probably more exposed to economic slumps than firms focusing on software, according to Grady.

Likewise, purely commercial space businesses are more vulnerable to a downturn than companies with an extensive pipeline of government opportunities.

Not only do governments offer a more robust source of funding to private players and academia, but they also act as customers of services for several commercial initiatives.

The war in Ukraine has only increased demand from governments for Earth observation, cybersecurity, and other defense-related applications championed by the space industry. China’s space advances are also encouraging governments to bolster these capabilities.

Meanwhile, the increasing political importance globally of finding ways to tackle climate change is expected to be another boon for space-based technology.

Credit: SpaceNews Midjourney illustration

In stark contrast to the share prices of young space companies that went public via a SPAC, traditional space firms in the aerospace and defense sector outperformed the broader stock market in 2022.

“Theoretically, when the global economy is going under uncertain times, governments tend to allocate their resources to their core functions, which sometimes lead to budgets cuts or delays for many projects,” Euroconsult’s Ouellette says.

“But when it comes to global government funding within the space sector, it grew by 8% between 2020 and 2021, which indicates a certain resilience for space projects.”

This growth rate could have potentially been even higher if it wasn’t for COVID-19, according to Ouellette, underlining how government stimuli and investments – or sound and flexible policies — can mitigate macroeconomic uncertainties for the private sector.

Despite economic conditions that might slow the industry’s growth, Euroconsult expects the global space economy to grow nearly 75% by 2030 to reach $642 billion.

That’s partly due to how quickly the U.S. economy has historically bounced back after a recession.


The pandemic clogged supply chains, disrupted workforces, hampered travel, and weighed heavily on the space industry’s commercial expansion.

However, it also helped accelerate the sector’s transition toward more digital solutions that save costs and makes businesses more nimble and responsive to customer demands.

Efforts to virtualize ground segment hardware, for example, are helping satellite operators operate their networks remotely via third-party data centers, reducing costs while increasing their efficiency and compatibility with other cloud-based services.

Phil Smith, a senior space analyst at BryceTech, believes the space industry’s capacity for reinvention is a key lesson for charting how it could respond to a macroeconomic shock.

In just 60 years the industry has evolved from being confined to just two governments to consisting of a plethora of players, including over 60 countries and tens of thousands of companies.

Credit: SpaceNews Midjourney illustration

Over the decades, the industry has seen recoveries from downturns following Apollo and the Space Shuttle, commercialization following the collapse of the Soviet Union — something that effectively ended during the later Putin era, and the resurrection of low Earth orbit (LEO) broadband constellations from a “before-their-time” collapse in the late 1990s.

The industry has recently also revisited reusability and mass production capabilities that were often talked about before, sometimes pursued, but only now proving successful commercially.

“This capacity for reinvention is bolstered by a greater number of players across the globe, a situation that promotes competition, striving for excellence, and many innovative approaches to problems,” Smith adds.

The proliferation of LEO broadband networks, and the commercial space industry’s general push into connectivity markets, also pose new opportunities and challenges.

As more systems are digitized across all industries, Grady notes how connectivity and technology are becoming “fundamental building blocks of value in far more sectors than ever before.”

Boosted by the progress made in 2022 to standardize and integrate satellite and terrestrial communications, space-based data has also never been more available in volume and price.

“Digitalization is far more advanced across more levels of the space-value chain which is helping drive down unit economics and time to market,” Grady says.

However, there are downsides to space becoming “less weird from the rest of the global economy,” he adds, such as the highly public cyberattacks seen amid Russia’s war in Ukraine.

“The more the industry moves to adopt terrestrial practices, the more it will see terrestrial problems impacting the sector,” Grady predicts.

COVID-19 showed how a wider uptake of space-based services could be a drag on the industry in markets once considered robust against terrestrial market trends, like inflight connectivity, where demand plummeted as travel restrictions came into force.


Much will depend on decisions made this year by central banks, the output of global GDP, and the impacts of geopolitical tensions that can serve as a double-edged sword for the industry’s growth trajectory.

Aside from business failures, challenging financial environments can lead to more mergers and acquisitions, which can improve business prospects but also dramatically change the state of play.

Deal activity is already in full swing with multibillion-dollar acquisitions coming in right at the end of 2022 for Maxar Technologies and Aerojet Rocketdyne.

More huge acquisitions are expected this year — particularly by large space companies seeking capabilities complementary to their own as price tags fall for many businesses.

Economic headwinds could also push more companies to buy out suppliers and partners to save costs and reap operational synergies by reducing intermediaries.

This article originally appeared in the January 2023 issue of SpaceNews magazine.

Jason Rainbow writes about satellite telecom, space finance and commercial markets for SpaceNews. He has spent more than a decade covering the global space industry as a business journalist. Previously, he was Group Editor-in-Chief for Finance Information...