SOFIA (Bulgaria), December 4 (SeeNews) – Business expectations clearly spell another tough year lying ahead for Bulgarian companies, Roland Berger Strategy Consultants said.
Despite first improvements, small growth rates in 2010 will not compensate for the high declines of 2009, the international consulting company said in a survey entitled The Road to Recovery in Central and Eastern Europe (CEE).
The survey was conducted this summer among over 380 senior company executives to find out their expectations about the current financial crisis and its consequences for the region. It covered 11 countries in CEE: Bulgaria, Romania, Croatia, Serbia, Slovenia, Slovakia, the Czech Republic, Hungary, Poland, Russia and Ukraine. Austria was used as the benchmark Western European economy.
Bulgarian companies need to focus on adapting their structures and implementing strategic measures, standing still is the most dangerous option, the survey indicated.
Construction, textile and engineering have been hit hardest by the economic downturn in Bulgaria since the beginning of the crisis in the last quarter of 2008. In Romania, real estate transactions halved over the same period, and investment plans were frozen. Most affected industries in Croatia were tourism, wood processing and food production.
The construction sector in CEE is careful but more optimistic than in March, when Roland Berger Strategy Consultants conducted its previous survey of entrepreneurs' expectations. Accordingly, half of the companies surveyed in the summer expect a recovery already in June next year. Financing difficulties, however, remain.
Since the previous survey the optimistic expectations for the economy in CEE have slightly increased, but uncertainty is significantly high at 50% of those polled.
A vast majority of Bulgarian managers (70%) believe an upturn would take place rather later and expect recovery in their industry output and company sales no earlier than the fourth quarter of 2010. Just like in March 2009, Bulgarian companies still have to fight declining sales, worse payment behavior and financing difficulties.
The survey reveals a consensus among the polled company executives on the timeline of the economic recovery with the peak at the end of 2010.
Bulgaria was no exception to the overall improving expectations in CEE, the survey showed. The general assessment of the current economic situation in Bulgaria has not changed significantly since March. In comparison with the overall CEE attitude, Bulgarian managers are still rather pessimistic and uncertain on the economic outlook.
Croatian managers remain the most pessimistic in CEE, while the too positive attitude of the Hungarian managers is more likely wishful thinking and less reflected in macroeconomic results.
The ranking of the popularity of actions of the Bulgarian companies in reaction to the crisis showed no change compared to the results in March 2009. The main focus is still on operative measures, implementation of strategic measures is still low but has developed already, Roland Berger Strategy Consultants said. With the exception of tightened cash management, all measures gained in popularity since the previous study.
Increased customer bankruptcies are still one of the major sector-specific problems in the banking and insurance industry. Interestingly, price pressure is experienced again as less important.
Declining sales is doubtless the most important issue on the management agenda in the retail sector. However, 70% of the companies hope already for some growth.
The mood in the energy and utilities sector is now neutral: "Let's wait and see". Even hiring was stopped at only 50% of the companies surveyed in the summer.
The IT/media/telecom industry is among the most pessimistic sectors. Accordingly, a real recovery from the crisis is expected later than in other industries. Over half of the companies in this sector continue their investments.
Due to increasing demand and better prices for commodities there is more optimism in the metals ans mining sector now. High share of lower sourcing costs seems to be a sector-specific effect of the crisis.
In the spring of 2009, the services sector was the only industry demonstrating some hope. This positive attitude was further strengthened until September.
Until 2007, CEE countries enjoyed remarkable GDP growth rates and have been the main growth spot of Europe. The region, however, was not immune to the crisis. Until March 2009, the stock market indices declined by up to 70%, most national currencies lost up to 30% of their value against the euro and GDP growth forecasts turned negative.
In September 2009, however, the indices were already in upswing, although still not reaching their former highs.
Among the stock indices in the CEE region, the Bulgarian blue-chip SOFIX index is still the worst performer, having recovered to just 38% of its former market capitalization, while the Hungarian BUX is soaring, Roland Berger Strategy Consultants said. The Romanian and Croatian blue-chip benchmarks, the BET and the CROBEX, regained 69% and 59%, respectively.
As for GDP growth, 2009 was a tough year for all countries. The situation worldwide was so turbulent that forecasts have been revised several times. Despite the first slightly positive projections for 2010, a real recovery is forecast in CEE only onwards 2011.
GDP in Bulgaria is expected to go down by another 2.5% in 2010 after a projected 6.5% decline in 2009, Roland Berger Strategy Consultants said. The survey predicts the Bulgarian economy will grow by 2.0% in 2011 and by 4.0% in 2012.
The survey also forecasts a divide between the companies in CEE in the next 12 months. Those who have implemented relevant strategic measures should quickly start looking forward – market consolidation, mergers and acquisitions, sales initiatives, penetration of new markets. Those still timid about adapting to the crisis will need significant restructuring, or will be restructured by someone else.