The percentage of companies expecting negative profits is now 20% compared to only 6% at the beginning of the year, while the percentage of companies which do not make investments in 2017 reaches 26% in the second half of the year versus 10% in the first half.
"Business evolution in 2017 is a research on the Romanian business environment. We ask managers the most important questions, which eventually find their answer in the company's profit and loss account or cash flow. This analysis shows how the business outlook of the Romanian companies evolved in the second half of 2017. Unfortunately, the comparative data indicate a change in the business sentiment, the appetite for investment being the one that eroded the most, indicating a preservation instinct already activated by tax and legislative developments in recent months", says Constantin Magdalina, Emerging Trends and Emerging Technologies Expert, co-author of the research.
Forecasts on the evolution of turnover
Compared to the first half of 2017, the company growth forecasts get even more conservative. In the last 6 months, we see a slight percentage increase of companies expecting a fall in turnover this year, from 13% to 17%. There are negative adjustments of 1-4 percentage points in the percentage of companies expecting their turnover to grow in 2017, offset by an additional 8 percentage points over the range of 5% -10%.
In construction and real estate, the number of companies that forecast a turnover increase in 2017 is 65% in the second half of the year versus 83% previously. For IT companies, only 65% expect increases now, compared with 89% at the beginning of the year, and for professional service firms, the percentage drops to 65% from 94% previously.
Forecasts on the evolution of profit
The profit forecasts for the second half of 2017 are pessimistic. Although 31% of companies (vs. 32% previously) expect their profit to grow by 1% -5%, 19% expect the company's profit to be higher by 5% -10% and 10% forecast an increase from 20% to over 30%. The highest drop is seen on the 10% -20% range where the percentage drops from 21% to 12%. Also, in September 2017, 28% of companies (compared to 12% previously) have negative expectations about their profits in 2017.
At industry level, 20% of IT firms expect a profit growth of 10-20%, while 40% of industrial production firms expect their profit to grow by 1% -5%, just like 50 % of tourism, 64% of transport and 83% of utilities and energy companies.
Forecasts on the evolution of investments
According to the survey results, 26% of companies (compared to 10% in the first part of the year) say they will not make investments in 2017. Moreover, companies wanting to increase investments this year fall from 79% in March to 68% in September 2017. We also notice that only 15% of companies want to increase their investments by 10% -30% versus 36% previously. Most companies in telecommunications (50%), construction and real estate (38%) and professional services (25%) say they do not make investments this year.
Evolution of the number of employees
The percentage of companies that expect the number of employees to stay the same in 2017 increase from 17% in March to 24% in September 2017. At the same time, 28% of companies versus 39% previously say they expect staff numbers to increase by 1% -5% this year. Only 15% of companies (compared to 24% in March 2017) expect the number of employees to grow by 5% -10%.
Of all 12 industries included in the compared analysis, only in the telecommunications and professional services industries are most companies (50% and 31% respectively) who say they maintain the same number of employees in 2017 as in 2016.
Forecasts on the evolution of salary levels
If at the beginning of the year 93% of companies predicted wage increases, only 6 months later their percent dropped to 84%. The 9 percentage points of the difference is transferred to companies that say they will not raise wages in 2017. Another important adjustment is for companies that expected wages to grow between 5% and 10%. Their percentage drops to 31% in September from 41% in March 2017. Also, companies predicting wages rising by 10% -20% are down 5 percentage points in these six months.
The industries where most companies say that wages will increase by 10% -20% this year are: pharmaceuticals and healthcare (38%), construction and real estate (35%), research and development (33%) and agriculture (30%).
Top 5 Challenges and Opportunities
The most important challenges for companies in the second half of 2017 are: political and legislative instability (54% vs. 28% in the first part of the year), the general state of the economy (49% vs. 41%), the problems with the labour force (35% vs. 17%), the steep increase of the salary level (27% vs. 13%) and the decrease of internal investments (21% vs. 23%).
The most important opportunities for companies in the second half of 2017 are: consumption growth (65% vs. 19% in the first part of the year), export and opening of other markets (59% vs. 33%), digitalization and opportunities online (42% vs. 37%), partnerships with other companies (31% vs. 27%) and access to European funds (30% vs. 17%).
"This analysis is the consequence of the need to understand the economic environment in Romania. It records the opinion of the respondent companies on the evolution of turnover, profit, investments, number of employees, salaries. At the beginning of 2017, companies' responses indicated some optimism. Even if the realities of each industry are specific, the comparative analysis presented in the autumn edition of the Valoria study shows an important negative adjustment of these indicators operated by companies in a year that put great pressure on the business environment in Romania. We will see how these trends will be reflected next year in the next blitz survey of March 2018", says Elena Badea, Managing Partner Valoria.
