Spirits low among CEE managers
Companies must implement structural measures
The mood among senior managers in Central and Eastern Europe (CEE) has soured considerably compared to the 4th quarter 2008. Of those surveyed, 63% expect further deterioration of the economic situation, whereas 30% find conditions to be just as uncertain as before. Only 5% have faith in an upswing this year. The crisis struck not only the automotive sector and manufacturing; the metal industry also took a deep hit. A 25-50% drop in sales is specifically projected for this industry. Regardless of country or industry, declining orders, lagging payment practices and financing problems are causing companies the most grief. Cost reductions and additional budget cutbacks are on the agenda of all managers surveyed, followed by freezes in hiring (83%) and investment (72%).
In Central and Eastern Europe, the financial crisis caught up with Austria in the third quarter of 2008, whereas other countries felt the impact several weeks later. The results of the survey illustrate just how dramatically the mood has shifted in the region. Thus, the number of self-proclaimed pessimists rose 8% to the current 63% of respondents. The number of managers who would describe the situation as uncertain dropped by 6 to 30% of respondents, whereas optimists dropped from 8% to 5%. The survey revealed that managers in Russia, the Ukraine and Romania were especially pessimistic, with managers in Austria and Poland being the most optimistic. The further east and south, the darker the mood.
Economic stimulus packages inadequately implemented
Generally, CEE managers are no longer assuming that they are dealing with an economic slowdown, but rather a decline in the GDP of up to 5% in their respective countries. To minimize the impact of the economic crisis, economic stimulus packages are being wrapped up to get economies back on their feet. However, in the opinions of the managers surveyed, the priorities are not set correctly or critical projects are being inadequately carried out if at all. The lack of tax measures and infrastructure programs are especially criticized. Executives in Romania, the Ukraine and Croatia in particular are highly dissatisfied with their government’s crisis management. Managers in Austria and Russia were the most positive in evaluating the nature and implementation of economic stimulus packages in their respective countries.
Regardless of the industry or country, companies in the CEE perceive declining orders (62%) and significantly worse payment practices (57.1%) to be direct consequences of the crisis. In most countries, financing problems ranked third, with Croatia (65.9%) ahead of Hungary (59.5%) and Poland (52.9%). In the Czech Republic, bankruptcies among customers (50%) ranked third, and they are also an issue that 56.1% of Romanian companies have to deal with. In Austria, "decreased procurement costs" (45.7%) are even a positive aspect and are ranked third.
In regard to the effects of the economic crisis on their own companies, managers in Poland were the most confident with 65% expecting to get through the current fiscal year taking into account a slowdown or zero growth. Romanian and Croatian managers remain optimistic (58% and 42%, respectively). However, many managers in both countries have yet to appreciate the gravity of the situation. Russian and Ukrainian managers were the most pessimistic with 82% of the former and 68% of the latter expecting a drop in sales of more than 10%. Austria was in third place with 51%.
Structural measures insufficiently considered
Recovery in the CEE within one to two years seems increasingly improbable. In some sectors, such as the manufacturing industry, a dry spell of three years or more is no longer a surprise. Most affected by the crisis are industries that make a substantial contribution to the GDP of their respective country. That further exacerbates the situation. Automobile manufacturers and their suppliers are the most severely affected. Of the surveyed companies in this sector, 38% are anticipating a decrease in sales of more than 50%. Also, 44% of the managers are expecting that the crisis will impact their industry over the next years. The situation is looks to be just as negative in the manufacturing industry, although here the crisis is projected to last less than three years. The retail and service sectors seem to be relatively untouched with slight growth even expected in the next few years.
Companies have responded quickly to the crisis by reducing expenditures, cutting budgets and delaying the acquisition of non-essential investments. A lot has already been done in operations. Yet companies have given little thought to structural measures to this day. Currently, less than 30% of the managers surveyed have considered topics such as changes in the capital structure, acquisitions in times of crisis, disinvestments or closing company business locations.
For 2009, three issues will have to be at the very top of the agenda among CEE managers: safeguarding liquidity in the short term, implementing a structural adaptation of operating procedures and looking for opportunities to take advantage of an initial market consolidation.
The mood among senior managers in Central and Eastern Europe (CEE) has soured considerably compared to the 4th quarter 2008. Of those surveyed, 63% expect further deterioration of the economic situation, whereas 30% find conditions to be just as uncertain as before. Only 5% have faith in an upswing this year. The crisis struck not only the automotive sector and manufacturing; the metal industry also took a deep hit. A 25-50% drop in sales is specifically projected for this industry. Regardless of country or industry, declining orders, lagging payment practices and financing problems are causing companies the most grief. Cost reductions and additional budget cutbacks are on the agenda of all managers surveyed, followed by freezes in hiring (83%) and investment (72%).
In Central and Eastern Europe, the financial crisis caught up with Austria in the third quarter of 2008, whereas other countries felt the impact several weeks later. The results of the survey illustrate just how dramatically the mood has shifted in the region. Thus, the number of self-proclaimed pessimists rose 8% to the current 63% of respondents. The number of managers who would describe the situation as uncertain dropped by 6 to 30% of respondents, whereas optimists dropped from 8% to 5%. The survey revealed that managers in Russia, the Ukraine and Romania were especially pessimistic, with managers in Austria and Poland being the most optimistic. The further east and south, the darker the mood.
Economic stimulus packages inadequately implemented
Generally, CEE managers are no longer assuming that they are dealing with an economic slowdown, but rather a decline in the GDP of up to 5% in their respective countries. To minimize the impact of the economic crisis, economic stimulus packages are being wrapped up to get economies back on their feet. However, in the opinions of the managers surveyed, the priorities are not set correctly or critical projects are being inadequately carried out if at all. The lack of tax measures and infrastructure programs are especially criticized. Executives in Romania, the Ukraine and Croatia in particular are highly dissatisfied with their government’s crisis management. Managers in Austria and Russia were the most positive in evaluating the nature and implementation of economic stimulus packages in their respective countries.
Regardless of the industry or country, companies in the CEE perceive declining orders (62%) and significantly worse payment practices (57.1%) to be direct consequences of the crisis. In most countries, financing problems ranked third, with Croatia (65.9%) ahead of Hungary (59.5%) and Poland (52.9%). In the Czech Republic, bankruptcies among customers (50%) ranked third, and they are also an issue that 56.1% of Romanian companies have to deal with. In Austria, "decreased procurement costs" (45.7%) are even a positive aspect and are ranked third.
In regard to the effects of the economic crisis on their own companies, managers in Poland were the most confident with 65% expecting to get through the current fiscal year taking into account a slowdown or zero growth. Romanian and Croatian managers remain optimistic (58% and 42%, respectively). However, many managers in both countries have yet to appreciate the gravity of the situation. Russian and Ukrainian managers were the most pessimistic with 82% of the former and 68% of the latter expecting a drop in sales of more than 10%. Austria was in third place with 51%.
Structural measures insufficiently considered
Recovery in the CEE within one to two years seems increasingly improbable. In some sectors, such as the manufacturing industry, a dry spell of three years or more is no longer a surprise. Most affected by the crisis are industries that make a substantial contribution to the GDP of their respective country. That further exacerbates the situation. Automobile manufacturers and their suppliers are the most severely affected. Of the surveyed companies in this sector, 38% are anticipating a decrease in sales of more than 50%. Also, 44% of the managers are expecting that the crisis will impact their industry over the next years. The situation is looks to be just as negative in the manufacturing industry, although here the crisis is projected to last less than three years. The retail and service sectors seem to be relatively untouched with slight growth even expected in the next few years.
Companies have responded quickly to the crisis by reducing expenditures, cutting budgets and delaying the acquisition of non-essential investments. A lot has already been done in operations. Yet companies have given little thought to structural measures to this day. Currently, less than 30% of the managers surveyed have considered topics such as changes in the capital structure, acquisitions in times of crisis, disinvestments or closing company business locations.
For 2009, three issues will have to be at the very top of the agenda among CEE managers: safeguarding liquidity in the short term, implementing a structural adaptation of operating procedures and looking for opportunities to take advantage of an initial market consolidation.
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