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Czech Firms Believe in Better Future, Credit Starts Flowing Again

The prospects for the next months are looking up for executives from leading Czech firms. According to the latest Deloitte Business Sentiment Index (BSI), which reflects the views of CEOs from some of the largest corporations in six Central European countries including the Czech Republic, most companies believe the economic environment is improving and feel that banks are now more willing to provide credit.

“The study shows how the recovery of the global economy is impacting the Czech Republic and the region. Positive sentiments about credit availability from banks are good news for the economy. Some markets are seeing that consumers are starting to spend again, while markets that were not overly hit by the crisis, such as those in Asia or Latin America, are helping to push forward product development and further yet slower growth,” says Luděk Niedermayer, Director in Deloitte’s Consulting function.

Over 43% of respondents believe that prospects for the Czech economy will improve in the next six months, which is a great increase compared to the less than 13% who expressed this opinion in the survey held in September. The Czech Republic showed the greatest increase in optimism compared to other countries surveyed. One-third of firms in the Czech Republic expect the economic conditions to remain more or less unchanged, while one-fifth of respondents think the economic environment will deteriorate.

The sentiments about financial prospects for companies have slightly improved. Most companies (60%) believe their situation is stable. The survey shows positive development of credit availability from banks. Almost 83% of companies believe that credit is now available to them whereas only 68% of respondents expressed this opinion in the previous survey.

“More positive sentiments about credit availability indicate that banks have sufficient resources for lending. While the lending process has not yet reached the pre-crisis level by far, the financial sector is ready to support the recovery of the Czech economy,” says Mr Niedermayer.

Prospects for revenues from sales over12 months’ time have improved significantly. Over 53% of corporate executives now believe their sales will increase compared to just 16% in the previous quarter, which according to Mr Niedermayer is “clearly due to the significant improvement in the German economy”.

Employment prospects remain relatively negative in the Czech Republic. Over 43% of companies believe workforce levels will stay roughly the same over the next 12 months; another 40% consider reducing their workforce. Most companies do not expect to acquire control over another company in the next 12 months. The Czech Republic is the only country surveyed where the number of companies that expect the regulatory environment to deteriorate has increased from 16% to 23%.

The most optimistic country from those surveyed was Poland, where 74% of respondents believe the situation will improve. The index thus confirms that Poland has felt the crisis the least in the region. Croatia remains very pessimistic with two-thirds of those surveyed believing the Croatian economy would deteriorate regardless of improvement compared to the previous quarter.

Deloitte’s Business Sentiment Index reflects the views of the most influential corporate leaders of the largest companies from Poland, Hungary, Czech Republic, Slovakia, Croatia and Romania.

More details about the surveying methodology and BSI are available at www.deloittece.com/bsi.

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