As part of the survey, respondents in nine CEE countries – Romania, Bosnia and Herzegovina, Croatia, Czech Republic, Estonia, Latvia, Lithuania, Poland, and Slovakia – were polled to elaborate on current economic trends in these markets.
“In several areas, this year’s survey results overlap with those from 2014. At a time when Europe is facing many economic challenges, the most important and encouraging conclusion is that respondents largely see a healthy economic environment for 2016,” said Stephen Spill, COO, KPMG in Central & Eastern Europe.
On average 51% of the respondents in the region believe that the economic situation will improve somewhat or even significantly, while 34% do not see any particular changes and only 15% expect worse times ahead. Executives in Romania are among the most optimistic in the region, as 63% of the respondents expect an improvement of the economic situation in 2016.
“Tax policies remain high on the decision-makers’ agenda, and simplified tax payment and administration procedures are anticipated from governments, according to 79% of the entrepreneurs and managers who participated in the survey. Moreover, strong sentiment was expressed in favour of a flat personal income tax system, clearly winning over a progressive income tax system,” said Ramona Jurubita, Partner, Head of Tax & Legal, KPMG in Romania.
Business leaders in the CEE countries believe that the public spending priorities for the next three years should include: 1) education, science and innovation (39%); 2) infrastructure (23%); and 3) health and demography. A majority of respondents from Romania (55%) consider that infrastructure should prevail, followed by education and innovation and by health.
Well in line with the last year’s outcome, 53% of respondents in the CEE countries do not plan any notable changes in employee numbers. The CEE average of those companies planning to hire stands at 36% and only 12% of respondents in the region plan redundancies. For employees, the salary outlook for 2016 appears rather promising, with 58% of CEE respondents planning increases in staff remuneration, slightly lower than the 69% registered in the previous survey.
“To remain competitive both in the domestic and international markets, skilled labour is of the greatest importance, according to 60% of respondents overall, compared to 62% a year ago. Business leaders thus reckon that retaining good staff is a key aspect companies should focus on,” said Serban Toader, Senior Partner, KPMG in Romania and Moldova.
Of those surveyed in CEE, 45% contend that stiff competition is a key issue that restricts their turnover growth through to the end of 2016. For those 83% of the respondents who are expecting turnover growth in 2016, higher staff productivity (according to 42% of respondents) and growth in domestic demand (40%) would be the main drivers.
Seventy-three per cent of respondents in the CEE countries indicate that the shadow economy is a problem in their respective countries (75% in 2014), while 98% of the respondents in Romania believe this is an issue. Thirty-nine per cent of the respondents say tax avoidance by concealing real income is the main source of concern, followed by envelope wages (23%) and VAT fraud (21%).
Investments are a vital part of remaining competitive, according to 66% of survey respondents who indicate their companies are planning investments in the period from 2016 to 2018. For 37%, the home market is their primary target.
Only 31% of the respondents say that their company turnover depends on EU funding or public procurements for EU-funded projects. Another fact revealed by the survey is that, while Romania has not expressed a firm commitment to adopt the euro currency, business leaders in Romania have a greater confidence in the positive evolution of euro than respondents in other countries in the CEE region.
In September 2015, KPMG surveyed business leaders in nine CEE countries, including Bosnia and Herzegovina and Croatia in this year's edition, to query their opinions on their national economies, the euro, foreign investments, tax environment and on companies' remuneration and staffing policies. The web-based survey collected responses from 731 executive managers and company owners in the countries included in the survey.
