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Largest Czech Companies Remain Optimistic

Senior management of the largest Czech companies share positive expectations for the future, according to Deloitte’s Business Sentiment Index (BSI), which monitors the views of CEOs from the largest Czech, Polish, Hungarian, Slovak, Croatian and Romanian companies.

“After a period of decline, managers now expect the economy to improve. But given that complete adjustment to decreased demand did not take place, the prospect of new job creation, for example, is still unfavourable. It is also feared that regulatory changes will have a negative impact on businesses,” said Luděk Niedermayer, Director, Deloitte Consulting, in response to the survey results.

At the end of 2009 43% of Czech managers expected the Czech economy to improve in the next six months while that number has now dropped to 39%. At the same time, however, the percentage of negative answers remained the same (approximately 20%) and, compared to the previous index (39%), more Czech managers see the prospects of the Czech economy remaining the same.

For many leading Czech companies, the turn to more positive expectations can be seen in the area of financial prospects. While less than 33% of respondents provided optimistic statements in that regard at the end of last year, the number increased to 58% in March 2010.

“The expectations regarding the financial conditions of the companies in the Czech Republic show by far the quickest improvement in the countries included in the survey,” noted Niedermayer.

Optimism prevails among Czech managers also with regard to the current availability of loans, with 81% of respondents considering loans to be relatively or easily obtainable, which is a 1% increase compared to the previous index. “The situation in the Czech Republic is the result of the combination of a stable financial system and better prospects for the economy,” added Niedermayer.

Deloitte’s survey also confirmed that many large companies are experiencing worse payment discipline from debtors. Although fewer positive sentiments regarding maturity periods were reported in the Czech Republic and other countries, the respondents’ attitudes remained largely positive.

Most Czech respondents have neutral expectations in respect of revenues. “A significant share of the expected stability in the Czech Republic could be caused by a specific impact of the crisis in some industries and does not have to necessarily mean a bad result,” said Niedermayer, who referred to the visible decrease in negative answers from 23% to 13%.

With regard to other countries, the most optimistic respondents are entrepreneurs in Poland, where 75% (which is the same as last year) expect improvement. Croatia, by contrast, is the most pessimistic – 77% of respondents from Croatian companies expect the situation to worsen.

The third Business Sentiment Index (BSI) also showed the following trends:

• The Czech Republic and Hungary report the most significant increase in positive expectations with regard to the introduction of new products.
• Regarding expectations in the area of staffing, more Czech companies than last year expect an increase, while more than half expect stable employment.
• An aversion to acquisitions still prevails, only 13% of Czech managers consider them viable.
• Czech companies increasingly fear more stringent regulatory restrictions. This finding constitutes the highest increase in negative expectations within the monitored countries. A third of companies expects more restrictive regulations, while less than a quarter expected this at the end of 2009.

Basic information about the methodology used to conduct the survey and more details about the BSI can be found at www.deloittece.com/bsi.