Asked about 'how do you think it will be 2019 for business compared to 2018?', the total score of the answers expressed on a scale of 1 - totally unfavorable to 10 - totally favorable was 3.90 versus 4.40 year last.
"The evolution of business in 2019 means continuing the research that we started in 2013 on the business environment in Romania. This edition has the premiere of the comparability of the results of the last 3 years. Between 2017 and 2019, we can see in figures the evolution of business sentiment at the level of Romanian companies. Beyond speculation and hypothesis, altering business sentiment is becoming clearer. Investment appetite continues to erode, and in 2019 the growth projection of employees is conservative for a market that is facing a significant labor shortage, the confidence that this year will be more favorable than 2018 is at extreme odds low. Economic growth decelerates simultaneously with a similar context of similar international economic developments and will soon expose vulnerabilities generated by deficit-driven consumption. Perhaps the fiscal and legislative developments in these three years would have been benign if it were first pro-development and then pro-consumption, "says Constantin Magdalina, Expert Trends and Emerging Technologies, co-author of the research.
Forecast of Turnover Evolution
In the early 2017 and 2018 editions, the prospect of company growth is a little more conservative in 2019. We see a decline of 3pp (percentage points) of companies that expect higher turnover by 5% -10%, offset by a 2pp increase for those who forecast a 20% -30% increase in turnover and to keep those who expect more than 30% of their turnover in 2019. At industry level, the largest increase in 20% -30% turnover is predicted by food and agriculture firms, followed by 20% of IT firms, 27% of pharmaceutical and healthcare firms, and 37% of transports that expect an increase in turnover of 10% -20%.
Profit evolution forecast
Forecasts of earnings developments in early 2019 are somewhat more pessimistic than at the beginning of last year. Although 25% of companies (vs. 24% previously) expect their profit to grow by 5% -10% this year, we see stagnation on all levels of significant growth. It also holds about the same percentage of companies that say their profits will drop in 2019 as compared to 2018.
The most important increase in profit, 10% -20%, is expected by 20% of food and agriculture companies, as well as 32% of those in the pharmaceutical and healthcare industry.
Forecast of the evolution of investments
According to research, 23% of companies say they will not increase investment in 2019, compared to only 18% in 2018 and 10% in 2017. We also notice that 36% of businesses want to increase their investment by 1% -10% compared to 46% previously.
While only 11% of companies say they will increase their investment by 20% -30% and over 30% in 2019, compared with 15% in 2018 and 24% in 2017.
Most energy and utilities (45%) say they will increase their investments by 1% -5% this year, but most of their agriculture and food (23%) say they will increase their investment by 10% -20% .
Prognosis on the evolution of the number of employees and salaries
26% of Romanian companies do not expect any increase in the number of employees in 2019 compared to 24% in 2018 and 17% in 2017
At the same time, 41% of companies, compared to 48% in 2018 and 63% in 2017, say they expect their staff to grow between 1% and 10% this year. Moreover, 17% of companies expect their number of employees to decline in 2019, compared to 13% in 2018 and 4% in 2017.
On the other hand, 24% of the companies in the agriculture and food industry expect the number of employees to grow by 5% -10% over the next 12 months.
If at the beginning of 2017, 4% of companies did not forecast wage increases, in 2018 the percentage rises to 17%, for 2019 the percentage rises to 22%. It drops by 4pp the percentage of companies that will raise wages by 10% -20% in 2019, compared to 2018 and by 13% compared to 2017.
Top 5 Challenges and Opportunities
The most important challenges for companies in the early 2019 are: attracting and retaining the workforce (72% in 2019 compared to 59% in 2018), frequent tax changes (56% in 2019 vs. 62% in 2018), increasing competition 47% in 2019 compared to 18% in 2018), rising costs (32% in 2019 compared to 21% in 2018) and economic and social instability (24% in 2019 vs. 19% in 2018).
The most important opportunities for Romanian companies in 2019 are: economic growth (52% in 2019 compared to 72% in 2018), increased consumption (60% this year versus 69% last year), increased exports and opening up other markets 50% vs. 52%), digitization and online opportunities (57% vs. 41%) and access to European funds and SME funding (42% vs. 36%).
"The Business Evolution Research in 2019 is the way in which the business environment in Romania makes its voice heard. The decision makers estimate their performance based on risk perception, economic context, proposed goals, and emotional and cognitive influences. Country risk, industry risk and company risk guide investment decisions, staff policy, salary levels. This research captures the dynamics of decision-makers' perceptions in 2019 about these indicators.
The context of fiscal and legislative measures over the past 3 years seems to have affected the risk perception of decision makers and led to the depreciation of business sentiment. The exacerbation of consumption stimulates decisions to capitalize on the moment, but also recalls the pre-crisis period, inducing cautious decision-making behaviors. On this background, the results of the research show the deepening of the lack of confidence in the favorability of economic developments in 2019 compared to 2018, "says Elena Badea, Managing Partner Valoria.
