Balancing optimism with risk aversion - Central Europe CFO Survey 2018 | 9th edition - Deloitte
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Balancing optimism with risk aversion Central Europe CFO Survey 2018 | 9th edition
Balancing optimism with risk aversion | Central Europe CFO Survey 2018 We would like to thank all participating CFOs for their efforts in completing our survey. We hope the report makes an interesting read, clearly highlighting the challenges facing CFOs, and providing an important benchmark to understand how your organization rates among peers. 2
Balancing optimism with risk aversion | Central Europe CFO Survey 2018
Contents
Foreword 5
Key findings 6
Methodology 8
CFO Confidence Index is up 11
Economic outlook 13
Business environment outlook 25
Company growth outlook 43
Automation 55
Contacts 66
3Brochure / report title goes here |
Section title goes here
4Balancing optimism with risk aversion | Central Europe CFO Survey 2018
Foreword
The broad picture arising from this year’s expectations are for GDP growth of at least
survey of CFOs across Central Europe these levels. For example, CEEMEA Business
is a complicated one. On the one hand, Group thinks the Slovak economy will grow
the majority of CFOs anticipate favourable by 3.6% in 2018.
macroeconomic conditions in 2018.
On the other, some economies (such In the Chapter "Business environment
as the Czech Republic and Poland) have outlook" we cover CFOs’ perspectives
already achieved their historically low rates on the business climate in which they
of unemployment. They are therefore reliant operate. Similarly to last year, a majority
on inbound workers to keep their economies of CFOs are not willing to take more risk
growing. onto the balance sheet as they fear external
uncertainty at both a country and a company
The CFO Confidence Index reaches level. The largest proportion of respondents
a three-year high in this edition of the survey, think that the most pressing challenges they
but economic and financial uncertainty still face in 2018 will include attracting highly
Gavin Flook appears to be a significant factor in how skilled employees and managing an overall
CFO Programme Leader participating CFOs perceive the economy. increase in costs.
Deloitte Central Europe Next time, it would be interesting to ask
what would need to happen for them Chapter "Company growth outlook"
to view the external uncertainty facing is all about company perspectives. These
their countries and companies as ‘low’. are broadly unchanged since last year, which
Maybe policy makers could then deliver is shown by the fact that the Company
the measures needed to make this happen, Perspective Confidence Index is positive
allowing companies to make more long-term, and only slightly higher than in our last
innovative investments. survey. We see this as an indication that
CFOs are confident their companies’ financial
This year, our special questions focused prospects for the next twelve months
on interest rates. It came as no surprise that are good, with a high likelihood of revenues
CFOs expect rates to remain stable or to rise: increasing.
rates are already very low, and it would
be unusual for central banks to reduce In the final Chapter "Automation"
them in a positive environment for inflation we consider the prospects for robotic
and GDP growth. Whether or not rates go process automation (RPA). CFOs realise
up, CFOs are not anticipating much change that implementing more and more process
in company strategies. automation – not only in the finance
department but across the whole
Chapter "Economic outlook" deals organisation – is inevitable in this age
with the macro-economic perspective, of company digitalisation. However,
covering CFOs’ expectations for change many CFOs have difficulty in estimating
across a series of main indicators (GDP, the possible savings to be gained from RPA.
unemployment, inflation and interest rates).
CFOs are more confident than last year To sum up, CFOs across Central Europe
that the next twelve months will bring GDP are looking forward to 2018 with optimism.
growth, with mean predictions ranging from At the same time, they are well aware
1.8% in the Ukraine to 2.9% in Slovakia. This of the possible obstacles and will restrict
optimism seems to be supported by GDP the risks they take.
forecasts of independent economists, whose
5Balancing optimism with risk aversion | Central Europe CFO Survey 2018
Key findings
Economic outlook
85%
of CFOs think inflation
will increase in 2018
CFOs are predicting average GDP growth of
in their countries (0.5 percentage points
2.4%
more than in 2017)
55%
expect interest rates
to rise during the year
6Balancing optimism with risk aversion | Central Europe CFO Survey 2018
Business environment outlook
69% 44%
A significant majority – 69% of respondents 44% believe the impact of interest rates
– do not think 2018 will be a good time on their business is too small to influence
for companies to take on more risk company strategy
Company growth outlook
91% of CFOs expect Only a small fraction Nearly half (46%) of CFOs
workforce costs of CFOs, 13%, expects CAPEX* expect their workforce
to increase in 2018 to fall in 2018 to expand in 2018, slightly
more than in the 2017 survey
*capital expenditures
7Balancing optimism with risk aversion | Central Europe CFO Survey 2018
Methodology The findings discussed
in this report represent
the opinions of
About the data
600 CFOs
The findings presented and discussed in this The Deloitte Central Europe CFO Confidence based in
report represent the opinions of nearly Index consists of three sub-indices that
six hundred CFOs based in twelve Central reflect CFOs’ optimism (or lack of it) about 12 Central European countries:
European countries: Bulgaria, Croatia, three key issues:
the Czech Republic, Hungary, Latvia, Bulgaria (BG), Croatia (HR),
• Economic processes (the Economy
Lithuania, Poland, Romania, Serbia, Slovakia,
Confidence Index): this is based
the Czech Republic (CZ),
Slovenia and the Ukraine. Hungary (HU), Latvia (LV),
on questions about economic growth,
The survey was conducted between
unemployment and the Consumer Price Lithuania (LT), Poland (PL),
Index (CPI);
September and November 2017. Romania (RO), Serbia (RS),
• The business environment (the Business
Slovakia (SK), Slovenia (SI)
When ‘Eurozone’ is used in the charts Environment Confidence Index): this
and infographics in this report, it refers is based on questions concerning and the Ukraine (UA).
to the Central European countries uncertainty, risk, operational expenses,
in the survey that have adopted the attractiveness of different sources
the European currency. ‘Non-Eurozone’ of funding and opinions about
refers to the other CE countries covered the M&A market;
by the survey. When we use ‘EU’,
• Prospects for the development
this refers to those surveyed Central
of the CFOs’ companies (the Company
European countries that are full members
Perspective Index): this is based
of the European Union.
on questions concerning the company's
future, its financial position (revenue,
Some of the charts in the report show
debt-servicing capabilities, capital
results as an index value (net balance). We
expenditure and margins), its predicted
calculate this by subtracting the percentage
level of gearing and employee numbers.
of respondents giving a negative
response from the percentage giving
The sub-indices are a mean of the net
a positive response. We deem responses
balance index for selected questions.
that are neither positive nor negative
The main index is a mean of the sub-indices
to be neutral. Due to rounding, responses
and assumes values between - 100 and 100:
to the questions covered in this report may
- 100 means that a given CFO provided only
not aggregate to 100.
pessimistic answers, while 100 means only
optimistic answers were given.
Some findings include a comparison
with those presented in the previous
edition of this survey, based on a sample
of the eleven countries that appear in both
editions. Please note that due to the limited
number of answers from Slovakia
and the Public Sector in the current survey,
data concerning those two elements needs
to be interpreted cautiously.
8Balancing optimism with risk aversion | Central Europe CFO Survey 2018
BG Bulgaria PL Poland
HR Croatia RO Romania
CZ Czech Republic RS Serbia
HU Hungary SK Slovakia
LV Latvia SI Slovenia
LT Lithuania UA Ukraine
LV
LT
PL
UA
CZ
SK
HU
RO
SI
HR RS
BG
9Balancing optimism with risk aversion | Central Europe CFO Survey 2018 10
Balancing optimism with risk aversion | Central Europe CFO Survey 2018
CFO Confidence Index is up
Overall, the participating CFOs display performance of the European economy At 32%, the value of the Company
more confidence than in previous editions in 2017, leading to a highly optimistic outlook Perspective Confidence Index is little
of the survey. The CFO Confidence for 2018. changed from that in last year’s report
Index has risen by 10 pp, from 13% last (29%). This may reflect the fact that CFOs
time to 23%. This rise is mainly driven At the same time, the value of the Business expect their companies to develop
by increased optimism among finance Environment Confidence Index has shown steadily in the year ahead, with a positive
function leaders regarding future a steep decline (from -2 to -22%). This may economic performance balancing
macro-economic conditions. be linked to the fact that CFOs are predicting out any cost pressures.
almost all cost categories to increase
There is a significant increase in 2018. Cost-related issues have a high
in the Economy Confidence Index, rising impact on the value of this index.
by 49 pp to 60%. This may reflect the robust
CFO Confidence Index by sub-indices
2017 2018
60
32
29 23
13
11
0%
scale (-100; +100)
-2 where -100 means all answers
are negative and +100
all answers are positive
-22
Economy Business Company CFO Economy Business Company CFO
Confidence Environment Perspective Confidence Confidence Environment Perspective Confidence
Index Confidence Confidence Index Index Confidence Confidence Index
Index Index Index Index
11Balancing optimism with risk aversion | Central Europe CFO Survey 2018 12
Balancing optimism with risk aversion | Central Europe CFO Survey 2018
Economic outlook
GDP growth during 2017 was better than For the second successive time, the proportion
participating CFOs anticipated in the last report: of CFOs expecting a fall in unemployment has
five of the twelve countries in our sample risen, this time reaching 47%. Only in the Czech
achieved 3.5% growth or higher in the third Republic did we see a negative net balance
quarter, with Romania leading the way. Such of answers, meaning that when it comes
strong GDP growth rates may have influenced to the employment outlook for 2018 more Czech
CFOs’ predictions this time – when it comes CFOs are pessimistic than optimistic.
to growth rates in 2018, there has been
a significant rise in optimism. An overwhelming net balance of 85% of CFOs
also believes that consumer prices will increase
The average prediction for GDP growth for each in 2018. This belief is particularly strong
of the countries in our sample is positive, in the Czech Republic and Lithuania, with more
equalling 1.8% or above. The average prediction than 90% of respondents expecting a positive
for all countries is 2.4%, a rise of 0.5 pp since inflation rate in 2018.
the previous survey.
In addition, it is likely that rapid growth has
contributed to the fact that the majority of CFOs
expect interest rates to increase or remain
the same in 2018; CFOs from Eurozone countries
are more likely to expect interest-rate stability
than their non-Eurozone counterparts.
13Balancing optimism with risk aversion | Central Europe CFO Survey 2018
CFOs are again more optimistic
on GDP growth
The proportion of CFOs expecting high CFOs in Slovenia and Bulgaria expressed This is mainly due to the difficult political
or very high GDP growth in the next the highest optimism about GDP growth situation and war in the eastern part
year has nearly doubled since the last in 2018, 55% and 54% of respondents of the country, which continue to prevent
survey (from 21% to 41%). Similarly, respectively expecting growth of at least the economy from performing normally.
the mean of CFOs’ predictions for GDP 2.6%. The most conservative CFOs
growth has risen from 1.9% to 2.4%. are those from the Ukraine, where less
(The scale in question was from -5% than one in five respondents expect such
to 5%.) The optimistic predictions for GDP a fast growth rate and the net balance
are understandable: following the financial of answers stands at -27%.
crisis and slow down, accelerating
economic performance is currently giving
a boost to all sectors.
What is your expectation for your country’s economic GDP growth for the year 2018?
1% 4% 3%
8% 9% 7% 8%
11% 13% 13% 14% 13%
14% 18% 19%
21% 22% 20%
18%
13%
31% 42%
30%
32% 44%
35% 38% 19% 47%
29% 40% 30%
33% 47%
41%
53%
55%
26%
36%
34% 46% 33%
32% 30% 36% 27% 22%
40% 30%
24% 19% 50%
15% 33%
4%
14% 15% 14%
12% 9% 11% 10% 14%
9%
15% 10% 17% 15%
10% 13%
8% 8% 9% 6% 4% 7% 7% 6% 9% 8% 7%
CE 2016 2017 2018 EU Eurozone BG HR CZ HU LV LT PL RO RS SK SI UA
50%
32% 39% 33% 34% 33%
24% 26% 31% 25%
20%
7%
balance
Net
-3%
-16% -13%
-35% -27%
Very low (≤0.5%) Low (0.6% - 1.5%) Medium (1.6% - 2.5%) High (2.6% - 3.5%) Very high (≥3.5%) Net balance
14Balancing optimism with risk aversion | Central Europe CFO Survey 2018
Positive expectations for factors like GDP,
unemployment, inflation and interest
rates abound across most markets.
In particular, GDP growth is regarded
positively, with predictions ranging from
1.8% in the Ukraine to 2.9% in Slovakia.
Similarly to last year, CFOs most often
underestimated the GDP growth potential
among CE countries. In none of the twelve
countries surveyed was the GDP growth
rate less than 2% during the third
quarter of 2017. Romania stands out
with an excellent GDP growth rate of 8.8%.
Such strong current GDP growth rates
may be the reason behind the second
successive increase in CFO optimism about
the pace of growth during the next year.
Predictions of GDP growth in 2017 versus real GDP growth in Q3 20171,2
Expected 2017 GDP
GDP Growth Very low Low Medium High Very high
Country Q3. 2017 (≤0.5%) (0.6%-1.5%) (1.6%-2.5%) (2.6%-3.5%) (>3.5%)
Bulgaria 3.90% 19% 23% 36% 13% 10%
Croatia 3.30% 15% 26% 54% 3% 3%
Czech Republic 5% 15% 24% 55% 5% 3%
Hungary 3.90% 21% 35% 45% 0% 0%
Lithuania 3.10% 21% 14% 50% 7% 7%
Poland 4.90% 10% 12% 36% 30% 12%
Romania 8.80% 11% 19% 23% 17% 30%
Serbia 2.10% 18% 24% 40% 16% 2%
Slovakia 3.40% 29% 42% 29% 0% 0%
Slovenia 4.50% 10% 35% 47% 6% 2%
Ukraine 2.10% 10% 34% 33% 15% 9%
1 Data obtained from: https://pl.tradingeconomics.com/country-list/gdp-annual-growth-rate?continent=europe
2 Latvia didn’t participate in the previous edition of the survey.
15Balancing optimism with risk aversion | Central Europe CFO Survey 2018
Very strong GDP growth rates may
have influenced CFOs’ predictions
this time – when it comes to growth
rates in 2018, there has been
a significant rise in optimism.
The GDP growth predictions for 2018
are broadly consistent across industries.
Public Sector CFOs are particularly
optimistic (57% of them expect GDP
growth of at least 2.6%). The most negative
views are held in the Life Sciences industry,
where 36% of CFOs anticipate growth
to be no higher than 1.5% during 2018.
What is your expectation for your country’s economic GDP growth for the year 2018?
9% 7% 7% 9% 8%
13% 13%
17% 18%
29% 28%
32% 35% 30%
30% 30% 57%
32% 27%
29%
30% 37%
31%
41% 39% 50%
34% 39%
29%
15%
36% 15% 15%
5% 4%
15% 13%
18%
13% 14%
11% 11% 10% 10%
3% 4%
Business Construction Consumer Energy, Financial Life Manufacturing Other Public Sector Technology,
& Professional & Real Estate Business Utilities, Services Sciences Media,
Services Mining Telecommunications
43%
32%
24% 29% 22%
23% 17%
13% 13%
balance
0%
Net
Very low (≤0.5%) Low (0.6% - 1.5%) Medium (1.6% - 2.5%) High (2.6% - 3.5%) Very high (≥3.5%) Net balance
16Balancing optimism with risk aversion | Central Europe CFO Survey 2018
CFOs are positive
about unemployment
There is a consensus among CFOs that The net balance of answers is nearly twice
unemployment rates in Central Europe as optimistic as in 2016, rising from 18%
countries will fall during 2018. The Czech to 34%. The fall in the unemployment rate
Republic was the only country to deliver is a factor in CFOs’ optimism about overall
a negative net balance of answers. market conditions.
Interestingly, the sentiment is quite
the opposite in neighbouring Slovakia,
where 100% of respondents expect
unemployment to fall.
How do you expect unemployment levels in your country to change over the next twelve months?
6%
13% 12% 15% 15%
18% 20% 19% 17%
23% 24% 21% 24% 27%
21%
42%
46%
27%
40% 42% 36%
38% 40% 18%
36%
48%
100%
66%
81%
76% 73% 76%
58% 57%
54% 55%
47% 46% 49%
45% 45%
41%
33%
13%
CE 2016 2017 2018 EU Eurozone BG HR CZ HU LV LT PL RO RS SK SI UA
100%
76% 76% 81%
67%
54% 58%
34% 34% 30% 34% 40%
18% 27% 27%
13%
balance
Net
-8%
Decrease No change Increase Net balance
17Balancing optimism with risk aversion | Central Europe CFO Survey 2018
The proportion of CFOs expecting a fall
in unemployment has risen, this time reaching 47%.
The Czech Republic was the only country to deliver
a negative net balance of answers. Interestingly,
the sentiment is quite the opposite in neighbouring
Slovakia, where 100% of respondents expect
unemployment to fall.
CFOs from the Consumer Business, of respondents expect unemployment
Manufacturing and Construction & Real to increase. This may be due to significant
Estate sectors are the most optimistic changes in the sales channels affecting
about prospective unemployment levels, the sector and therefore the business
with half or more respondents expecting models these companies operate.
unemployment to fall in 2018.
The most pessimistic CFOs represent
the Technology, Media, Telecommunications
(TMT) and Business & Professional
Services sectors, where more than 25%
How do you expect levels of unemployment to change in your country over the next twelve months?
5%
9% 9% 10%
14% 15% 14%
18%
27% 26%
38%
41% 40%
49%
38% 43%
44%
27% 50%
32%
57%
50% 50%
45% 43% 45% 43% 42%
40%
36%
Business Construction Consumer Energy, Financial Life Manufacturing Other Public Sector Technology,
& Professional & Real Estate Business Utilities, Services Sciences Media,
Services Mining Telecommunications
41% 53% 40%
34% 29%
27% 21% 25%
18% 16%
balance
Net
Decrease No change Increase Net balance
18Balancing optimism with risk aversion | Central Europe CFO Survey 2018
Most CFOs expect
inflation to rise
CFOs’ conviction that the next year will The overall net balance for all surveyed
bring consumer price increases has risen countries is 81%, significantly higher than
since the previous survey (by 12 pp to 85%). in the last survey. After several years of very
This belief is most common in the Czech low inflation, or even deflation in some
Republic and Lithuania, where more than countries, price rises are anticipated
90% of respondents anticipate an inflation whenever there is significant boost to GDP.
rate of higher than zero in 2018.
How do you expect CPI (Consumer Price Index) levels to change in your country over the next twelve months?
48%
73% 75%
79% 81% 80%
85% 88% 88% 87% 87%
90% 92% 91% 90%
95%
36%
22%
20%
18%
10% 8% 19% 20%
9% 12% 4% 11% 4% 5% 15%
10% 10%
6% 4% 3% 1% 3% 5% 1% 2% 4% 5% 5%
CE 2017 2018 EU Eurozone BG HR CZ HU LV LT PL RO RS SK SI UA
95% 90% 90%
85% 87% 85% 88% 83% 86% 81%
81% 76%
67% 70%
60%
33%
balance
Net
Decrease No change Increase Net balance
19Balancing optimism with risk aversion | Central Europe CFO Survey 2018
CFOs across Central Europe
are looking forward to 2018
with optimism. At the same time,
they are well aware of the possible
obstacles and will restrict the risks
they take.
CFOs from all industries expect to see
a rise in the Consumer Price Index (CPI)
in 2018. Those from the Public Sector
are the most conservative in this respect,
with only 57% selecting this response.
By way of contrast, more than 90%
of respondents from three industries
(Business and Professional Services, Life
Sciences and Construction & Real Estate)
expect consumer prices to rise.
How do you expect CPI (Consumer Price Index) levels to change in your country over the next twelve months?
57%
83% 85% 82% 82%
86% 86%
95% 93% 93%
14%
9% 29%
14% 8% 10% 18%
4% 15%
5% 2% 3% 9% 7% 6% 5%
Business Construction Consumer Energy, Financial Life Manufacturing Other Public Sector Technology,
& Professional & Real Estate Business Utilities, Services Sciences Media,
Services Mining Telecommunications
95% 91% 93%
85%
79% 80% 81% 82%
73%
29%
balance
Net
Decrease No change Increase Net balance
20Balancing optimism with risk aversion | Central Europe CFO Survey 2018
CFOs expect interest rates
to rise or stay the same
CFO opinions on the future direction This may explain why in those countries
of interest rate are mixed, with notable 51% of CFOs do not expect interest
differences between countries. The two rates to change, compared to just 39%
most common answers are that rates in the sample as a whole.
will remain unchanged or increase.
It is important to note that countries
in the Eurozone have their interest rates
set by the ECB (European Central Bank).
What do you expect to happen to interest rates in your country over the next twelve months?
12%
21% 23% 25%
31%
42% 40%
47% 45%
55%
59% 60% 61%
61%
94% 93%
55%
64%
33%
71%
63%
52% 58%
39% 51%
38%
40% 39%
27% 27%
23%
15%
6% 4% 2% 6% 6% 2% 4% 7%
CE 2018 EU Eurozone BG HR CZ HU LV LT PL RO RS SK SI UA
They will go down They will stay the same They will go up
21Balancing optimism with risk aversion | Central Europe CFO Survey 2018
It came as no surprise that CFOs expect
rates to remain stable or to rise: rates
are already very low, and it would
be unusual for central banks to reduce
them in a positive environment
for inflation and GDP growth.
CFOs from the Business & Professional No more than 15% of respondents from
Services sector are most positive that any sector expect interest rates to fall
interest rates will rise in 2018 – 82% during the next twelve months. This
of them selected this answer. While is understandable at a time when interest
a majority of CFOs from other industries rates in most countries are at their lowest
share this view, a significant proportion level for several years or even decades.
of respondents expect interest rates
to remain unchanged.
What do you expect to happen to interest rates in your country over the next twelve months?
29%
46% 43%
49% 48%
54%
62% 61% 60%
82%
57%
43%
43% 39%
41%
42%
37% 36%
36%
9%
11% 13% 14% 14%
9% 9% 2% 3% 3% 4%
Business Construction Consumer Energy, Financial Life Manufacturing Other Public Sector Technology,
& Professional & Real Estate Business Utilities, Services Sciences Media,
Services Mining Telecommunications
They will go down They will stay the same They will go up
22Balancing optimism with risk aversion | Central Europe CFO Survey 2018
23Brochure / report title goes here |
Section title goes here
24Balancing optimism with risk aversion | Central Europe CFO Survey 2018
Business environment
outlook
CFOs expect costs in the majority of categories This year, we asked about the possible impact
to increase during 2018, making it challenging of interest rate rises on company strategies.
for them to keep costs down to reasonable CFOs generally believe that interest rates have
levels. Nearly all respondents believe that only a limited role to play in the operation
the costs of hiring skilled professionals will of their companies. They mostly therefore have
increase in the year to come. no plans to adjust strategy in the event of a rise.
Many CFOs still perceive country-level economic
uncertainty as high, which may explain why
a majority are reluctant to take more risk onto
their balance sheets. Given such circumstances,
it is understandable that CFOs find the idea
of internal financing attractive.
25Balancing optimism with risk aversion | Central Europe CFO Survey 2018
2018 will bring higher costs
for companies
CFOs expect most costs to increase It is worth emphasising that those
in 2018. The main exceptions categories that depend on manpower
are tax-related costs and provisions are the ones mostly felt to be at risk of cost
for bad debt, which are predicted increases in the year ahead. This is due
to remain stable. A stand-out observation to the very low unemployment rate across
is that 91% of respondents think workforce the region, which is forecast to decrease
costs will be higher in 2018 than now. further and so increase the pressure
In addition, more than three-quarters to reward employees more highly.
of CFOs expect overall production/delivery
and transportation costs to increase
next year.
In your view, how are costs for companies in your country likely to change over the next twelve months?
9%
18%
31%
47%
55%
63%
68%
77% 76%
91%
88%
75%
55%
46%
35%
27% 34%
21% 24%
7% 14%
10% 7% 7%
2% 5% 4% 3% 2% 1%
Cost Cost Cost Provision Real estate Corporate VAT Cost Overall Transportation
of debt of equity of workforce for bad debts costs tax of business-related production/ costs
services delivery
costs
balance
Net
-11% -5%
-18%
-40%
-46% -60%
-63% -74% -75%
-88%
Decrease No change Increase Net balance
26Balancing optimism with risk aversion | Central Europe CFO Survey 2018
Regardless of industry, CFOs expect CFOs in the Business and Professional CFOs in most industries anticipate stability
increases across most cost categories Services industry predicted increases when it comes to tax (VAT and CIT).
in 2018. CFOs from two industries in six of the ten cost categories they However, there is a light inclination
stand out in anticipating higher costs: examined. In Manufacturing, cost rises towards pessimism (represented by a low
the Business and Professional Services relating to workforce, transportation and negative net balance of answers
industry, in the area of workforce costs; and overall production were mentioned in most industries). Interestingly, Financial
and the Life Sciences industry, relating most frequently – by at least four Services CFOs are the most optimistic
to overall production costs. out of five CFOs. in this respect; theirs is the only industry
in which more respondents expect tax
cuts than anticipate tax increases.
In your view, how are costs for companies in your country likely to change over the next twelve months?
Business & Energy, Technology,
Construction Consumer Financial Life Public
Professional Utilities, Manufacturing Other Media,
& Real Estate Business Services Sciences Sector
Services Mining Telecommunications
No change 9% 37% 32% 32% 38% 36% 39% 36% 29% 32%
Cost
of debt
Net balance -73% -37% -40% -55% -30% -50% -49% -47% -43% -44%
No change 27% 59% 46% 51% 46% 64% 46% 41% 29% 48%
Cost
of equity
Net balance -73% -28% -43% -36% -36% -36% -42% -41% -71% -32%
No change 0% 4% 6% 6% 16% 7% 4% 6% 29% 12%
Cost
of workforce
Net balance -100% -87% -92% -81% -77% -79% -95% -87% -71% -88%
No change 50% 57% 55% 60% 34% 57% 62% 60% 0% 52%
Provision
for bad debts
Net balance -32% -22% -17% -23% -9% -29% -12% -13% -14% -36%
No change 36% 20% 29% 32% 27% 7% 30% 24% 14% 28%
Real estate
costs
Net balance -55% -67% -64% -60% -66% -64% -62% -64% -57% -60%
No change 91% 70% 75% 79% 73% 71% 75% 73% 86% 76%
Corporate
tax
Net balance -9% -22% -21% -4% 2% -14% -10% -10% -14% -12%
No change 91% 80% 91% 87% 95% 93% 85% 87% 86% 90%
VAT
Net balance -9% -11% -5% -9% 2% -7% -7% -2% 14% -6%
Cost No change 27% 35% 33% 26% 32% 7% 37% 35% 57% 42%
of business-
related
Net balance -73% -61% -60% -57% -64% -93% -59% -62% -43% -42%
services
Overall No change 14% 17% 24% 23% 38% 0% 15% 19% 29% 30%
production/
delivery costs Net balance -86% -74% -71% -68% -55% -100% -83% -79% -43% -66%
No change 23% 17% 23% 36% 43% 21% 17% 13% 71% 32%
Transportation
costs
Net balance -77% -83% -75% -64% -54% -79% -81% -85% -29% -64%
27Balancing optimism with risk aversion | Central Europe CFO Survey 2018
CFOs expect at least the same
level of M&A activity in 2018
The vast majority of CFOs, There are some notable differences from
regardless of country, think the level country to country. The most optimistic
of M&A transactions in 2018 will be similar CFOs are from Slovakia, where 70%
to or higher than that of 2017. Overall, of respondents expect M&A transaction
CFOs’ expectations regarding M&A in 2018 levels to increase. The net balance is lowest
are nearly the same as their predictions in Poland, the Czech Republic and Romania,
were for 2016. not exceeding 40% in any of these countries.
How do you expect M&A levels to change in your country over the next twelve months?
45% 44%
52% 51% 51% 49% 52%
56% 52% 54% 53%
59% 57% 61% 60% 61%
70%
50% 48% 41%
43% 43% 43% 45% 40%
41% 48% 42%
37% 40% 36% 35% 33%
30%
8% 10%
5% 4% 6% 6% 3% 3% 5% 5% 4% 4% 3% 6% 7%
CE 2016 2017 2018 EU Eurozone BG HR CZ HU LV LT PL RO RS SK SI UA
70%
54% 54% 58% 55% 56%
47% 46% 45% 52% 52% 50%
39% 48% 47%
36% 38%
balance
Net
Decrease No change Increase Net balance
28Balancing optimism with risk aversion | Central Europe CFO Survey 2018
On the one hand, the majority of CFOs
anticipate favourable macro-economic
conditions in 2018. On the other, some
economies have already achieved their
historically low rates of unemployment.
They are therefore reliant on inbound
workers to keep their economies growing.
The most optimistic opinions on the level
of M&A transactions in 2018 are held
by CFOs from the Financial Services
industry, with 68% expecting an increase
in activity. CFOs in the Life Science
and Construction & Real Estate industries
express the most conservative views,
with more than 10% expecting M&A levels
to fall in 2018.
Over the next twelve months, how do you expect M&A levels to change in your country?
43% 45%
50% 48% 51% 48%
52%
56% 57%
68%
43%
39%
41% 51% 44%
43%
46% 38%
43%
30%
13% 14%
9% 2% 6% 2% 4% 7% 8%
Business Construction Consumer Energy, Financial Life Manufacturing Other Public Sector Technology,
& Professional & Real Estate Business Utilities, Services Sciences Media,
Services Mining Telecommunications
66% 57%
49% 49%
41% 45% 41% 40%
35%
29%
balance
Net
Decrease No change Increase Net balance
29Balancing optimism with risk aversion | Central Europe CFO Survey 2018
CFOs expect normal or higher
country-level uncertainty
CFOs’ expectations for future levels The most negative views are held
of external financial uncertainty differ by CFOs from the Ukraine and Romania.
substantially between countries, In the Ukraine’s case, this is probably
but there is a negative net balance linked to poor political stability
in nearly all countries. Most CFOs see and the country’s conflict with Russia.
the uncertainty level as normal or high,
but expectations of low uncertainty
were most common among those from
the Czech Republic, Hungary and Lithuania
(ranging from 17% to 25%).
How would you rate the overall level of external financial and economic uncertainty in your country?
4%
18% 21% 20%
22% 22%
29% 27%
38% 36%
43% 44%
70%
71% 77% 77%
70% 61% 63%
70%
69%
52% 63% 67%
51%
44%
57%
25%
25% 21% 20%
17% 17%
11% 12% 12% 12% 10%
7% 5% 2% 6% 8% 3%
CE 2018 EU Eurozone BG HR CZ HU LV LT PL RO RS SK SI UA
22%
balance
Net
-6% -6% -4%
-10% -14%
-24% -22% -21%
-26% -33%
-43%
-65% -74% -73%
Low level of uncertainty Normal level of uncertainty High level of uncertainty Net balance
30Balancing optimism with risk aversion | Central Europe CFO Survey 2018
Despite the groundswell of confidence
in most of the countries, economic
and financial uncertainty still
appears to be a significant factor
in how participating CFOs see
the immediate future.
CFOs’ views on external financial uncertainty This contrasts with the Public Sector,
in 2018 are quite similar across all industries, where 57% of respondents anticipate high
with most expecting normal or high levels levels of external financial and economic
of uncertainty. uncertainty in their countries.
CFOs from the Life Sciences industry appear
to be the most relaxed, with 21% expecting
low external uncertainty.
How would you rate the overall level of external financial and economic uncertainty in your country?
32% 32%
36% 37% 36% 36%
46% 43% 43%
57%
43%
50% 47% 59% 56%
54%
47% 48%
46%
43%
21%
14% 16%
9% 11% 9% 12% 9% 10%
Business Construction Consumer Energy, Financial Life Manufacturing Other Public Sector Technology,
& Professional & Real Estate Business Utilities, Services Sciences Media,
Services Mining Telecommunications
balance
Net
-14%
-21% -23% -20%
-23% -26%
-37% -32% -35%
-57%
Low level of uncertainty Normal level of uncertainty High level of uncertainty Net balance
31Balancing optimism with risk aversion | Central Europe CFO Survey 2018
Interest rate increases
will not impact strategies
In most countries, CFOs have no plans Serbia, where CFOs also often
to change their strategies in the event mentioned other strategies, is something
of interest rate rises. The two reasons of an exception to this rule.
given were the low impact of interest
rates on their business and their belief
that the rates will remain the same.
Among the strategies for change that
CFOs did mention, the one chosen most
often was debt reduction; this appears
to be a conservative move.
If interest rates were to rise in the next twelve months, which one of the following strategies do you think would be most appropriate for your business?
Strategy
Adapt Shift marketing Strategy remains
remains
production Reduce Revaluate approach (e.g. less unchanged – a rise
Increase Reduce Refinance unchanged – we
plans to cope Other leverage investment emphasis on in interest rate will
debt debt debt do not believe
with changes ratio plans pricing and more have little impact on
interest rates
in demand on other apsects) my business
will rise
2018 4% 1% 2% 12% 5% 7% 8% 3% 44% 13%
EU 4% 1% 2% 12% 5% 7% 8% 3% 46% 12%
Eurozone 4% 0% 4% 13% 4% 5% 4% 4% 46% 16%
BG 6% 3% 0% 9% 6% 6% 12% 3% 27% 27%
HR 0% 0% 3% 20% 8% 15% 13% 0% 30% 13%
CZ 5% 2% 1% 8% 6% 5% 4% 0% 66% 3%
HU 2% 0% 2% 2% 2% 4% 7% 2% 52% 28%
LV 7% 0% 5% 7% 2% 12% 10% 0% 52% 5%
LT 4% 0% 0% 17% 0% 4% 4% 13% 42% 17%
PL 2% 1% 5% 15% 2% 2% 8% 3% 45% 15%
RO 8% 1% 1% 15% 8% 13% 17% 6% 30% 0%
SR 12% 3% 0% 9% 9% 15% 12% 0% 18% 21%
SK 0% 0% 0% 10% 10% 0% 0% 0% 50% 30%
SI 3% 0% 6% 17% 8% 0% 0% 3% 39% 25%
UA 0% 0% 0% 23% 0% 3% 3% 3% 50% 17%
32Balancing optimism with risk aversion | Central Europe CFO Survey 2018
Whether or not rates go up, CFOs
are not anticipating much change
in company strategies.
CFOs in almost all sectors do not think In the Business & Professional Services
that a rise in interest rates would have industry, however, 23% of CFOs would
a significant impact on their businesses, choose to re-evaluate their investment
meaning they would not change strategy. plans. This is notably more than
This approach is most common in the Life in other industries.
Sciences industry, where 64% express
such a view. Attitudes in the Public Sector are mixed –
the options of reducing debt, refinancing
debt and keeping the current strategy
were each chosen by 29% of CFOs.
If interest rates were to rise in the next twelve months, which one of the following strategies do you think would be most appropriate for your business?
Strategy
Strategy remains
Adapt Shift marketing remains
unchanged –
production Reduce Revaluate approach (e.g. less unchanged –
Increase Reduce Refinance a rise in interest
plans to cope Other leverage investment emphasis on we do not
debt debt debt rate will have
with changes ratio plans pricing and more believe
little impact on
in demand on other apsects) interest rates
my business
will rise
Business
& Professional 5% 0% 0% 5% 5% 5% 23% 14% 36% 9%
Services
Construction
2% 0% 0% 17% 7% 7% 11% 4% 33% 20%
& Real Estate
Consumer Business 0% 0% 1% 17% 7% 6% 5% 0% 51% 14%
Energy, Utilities,
0% 2% 6% 11% 9% 4% 6% 0% 51% 11%
Mining
Financial Services 11% 2% 5% 9% 0% 5% 14% 5% 32% 16%
Life Sciences 7% 0% 0% 0% 0% 7% 0% 7% 64% 14%
Manufacturing 6% 1% 2% 13% 5% 7% 7% 1% 44% 13%
Other 6% 1% 2% 9% 6% 10% 8% 4% 44% 12%
Public Sector 0% 0% 0% 29% 0% 29% 0% 0% 29% 14%
Technology, Media,
4% 2% 0% 12% 4% 6% 10% 2% 54% 6%
Telecommunications
33Balancing optimism with risk aversion | Central Europe CFO Survey 2018
CFOs will not take
more risk in 2018
The majority of CFOs do not think 2018 regarding macro-economic conditions over
will be a good time for companies to take the next year – for example, none of them
on more risk; this was the view of 69% expects unemployment to rise.
of respondents (up by 4 pp from last year).
CFOs in Romania and Slovenia are the most
Lithuania is the only country surveyed risk-averse, with over 80% thinking that 2018
where the majority of CFOs believe will not be a good time to take more risk.
the conditions will be favourable for taking
riskier financial decisions in 2018. This may
be linked to Lithuanian CFOs’ optimism
Is this a good time to be taking greater risk onto your company’s balance sheets?
46%
61% 60%
65% 64% 66% 67%
71% 69% 70% 70% 71% 70%
85% 83%
54%
39% 40%
36% 36% 34%
31% 30% 30% 30% 33%
29% 29%
15% 17%
CE 2016 2017 2018 BG HR CZ HU LV LT PL RO RS SK SI UA
8%
balance
Net
-22% -20%
-29% -27%
-38% -39% -40% -33% -39% -33%
-42% -43%
-70% -67%
Yes No Net balance
34Balancing optimism with risk aversion | Central Europe CFO Survey 2018
Similarly to last year, a majority of CFOs
are not willing to take more risk
onto the balance sheet as they fear
external uncertainty at both a country
and a company level.
There is a broad consensus across The most risk-averse industry is Business
all industries that conditions in 2018 will and Professional Services, in which over
not be favourable for taking more risk 80% of CFOs gave a negative answer.
in financial decisions.
The most positive respondents were
those representing the Financial Services,
Life Sciences and Technology, Media
and Telecommunications industries,
with positive-response levels ranging
between 36% and 38%.
Is this a good time to be taking greater risk onto your company’s balance sheets?
63% 64% 66% 64%
67%
71% 73% 71%
82% 79%
38% 36% 34% 36%
33%
29% 27% 29%
18% 21%
Business Construction Consumer Energy, Financial Life Manufacturing Other Public Sector Technology,
& Professional & Real Estate Business Utilities, Services Sciences Media,
Services Mining Telecommunications
balance
Net
-25% -29% -31%
-35% -28%
-43% -43%
-57% -46%
-64%
Yes No Net balance
35Balancing optimism with risk aversion | Central Europe CFO Survey 2018
A majority of CFOs expect
business-level uncertainty
to be normal
A majority (57%) of all surveyed CFOs Romanian CFOs are most pessimistic,
expect their companies to face a normal with two out of three anticipating that
level of uncertainty in 2018 – 9 pp more uncertainty will be high.
than in the 2017 survey. However, the net
balance of answers is negative for most
countries.
Polish CFOs have the most optimistic
attitudes, with 27% of respondents
expecting low uncertainty during 2018.
How would you rate the overall level of external financial and economic uncertainty facing your business?
14%
20% 20% 20%
27% 26% 29% 28%
31% 31% 30% 33% 37%
42% 43%
48%
67%
69% 53%
70%
70%
57% 55%
57% 68% 67% 63% 55% 50%
72%
52% 48%
50%
28%
27%
15% 17%
12% 12% 12% 13%
7% 9% 5% 3% 9% 7% 8% 5% 10%
CE 2016 2017 2018 EU Eurozone BG HR CZ HU LV LT PL RO RS SK SI UA
4% 7%
balance
Net
-19% -19% -21% -15% -11% -10%
-19% -21% -21% -23%
-35% -34% -28%
-45%
-63%
Low level of uncertainty Normal level of uncertainty High level of uncertainty Net balance
36Balancing optimism with risk aversion | Central Europe CFO Survey 2018
There is still a general risk-aversion, which has
now dominated the CFO survey results ever
since the global financial crisis that is now close
to a decade ago. Without some preparedness
to take greater risk, companies are not going
to achieve their full growth potential.
The pattern detected for cross-country CFOs from Financial Services and Public
analysis holds for cross-industrial view, Sector organisations are the most
as in nearly all industries the majority of CFOs negative about the economic uncertainty
expect normal level of uncertainty for their relating to their businesses, with at least
businesses, with as much 66% of such 50% expecting high levels of economic
answers in the Manufacturing sector. and financial uncertainty.
How would you rate the overall level of external financial and economic uncertainty facing your business?
23% 23%
29% 29% 32%
33% 34% 34%
50%
57%
43%
59%
55% 66% 48%
55% 57%
59%
45%
43%
29%
18% 16% 18%
9% 11% 11% 12%
5%
Business Construction Consumer Energy, Financial Life Manufacturing Other Public Sector Technology,
& Professional & Real Estate Business Utilities, Services Sciences Media,
Services Mining Telecommunications
balance
0%
Net
-5% -13%
-13% -16%
-20%
-24% -23%
-45%
-57%
Low level of uncertainty Normal level of uncertainty High level of uncertainty Net balance
37Balancing optimism with risk aversion | Central Europe CFO Survey 2018
CFOs are concerned about
a shortage of skilled workers
A shortage of qualified workers appears Three other factors (market pressure
to be the greatest concern of CFOs to reduce pricing, unstable law
over the next twelve months, closely and exchange rate risk) were each
followed by cost increases. These factors indicated by at least 20% of respondents.
are perceived as significant risks by 53%
and 48% of respondents respectively. The least risk-laden issues according
The shortage of skilled professionals may to our respondents are capital shortage,
be linked to the rapidly increasing volumes interest rate, disruptive technologies
of collected data (Big Data), which require and ‘other’ risks.
programming skills for efficient analysis.
Which of the following factors are likely to pose a significant risk to your business over the next twelve months?
Shortage of qualified workers 53%
Increasing costs of running a business
48%
(rising cost of materials, workforce, services)
34%
Market pressure to reduce the price of goods/services
24%
Unstable economic and tax law
20%
Exchange rate risk
17%
Increasing regulation
Growing competition 15%
Reduction in demand (domestic) 14%
Reduction in demand (foreign) 14%
Geopolitical risks 11%
Insolvency and payment bottlenecks in the economy 7%
Interest rate risk 5%
Disruptive technologies 5%
Shortage of capital 4%
Other 2%
38Balancing optimism with risk aversion | Central Europe CFO Survey 2018
A cross-industry comparison shows high For some industries, including Business & Sector. In the Energy, Utilities and Mining
similarities between CFOs’ perceptions Professional Services, Financial Services sector, this is probably linked to the lack
of the main challenges over the year and Construction & Real Estate, unstable of political stability in resource-rich
to come: concerns about qualified workers law relating to business will also be a serious Middle Eastern countries such as Syria.
and overall costs come first, followed issue. CFOs from Financial Services The impact of changing political attitudes
by market pressure to cut prices. and Public Sector organisations are worried to resources management in China are also
about increasing regulation, a factor chosen influencing European markets, and this can
Exchange rate risk is also high on the agenda by more than 40% of respondents from be observed in the responses in our survey.
of many CFOs, with the proportion those industries.
of those selecting it ranging from just 11% This cross-industrial viewpoint also reveals
of respondents in Financial Services to 36% Geopolitical risk was selected relatively that capital shortage and disruptive
in Life Sciences. frequently (by 30% and 29% respectively) technologies are among the least
by CFOs from the Energy, Utilities significant risks.
and Mining industry and the Public
Which of the following factors are likely to pose a significant risk to your business over the next twelve months?
Consumer Business
Technology, Media,
55% Telecommunications
Financial Services Shortage of qualified workforce
53% 56%
Increasing costs of running a business Shortage of qualified workforce
46%
Increasing regulations (rising cost of materials, workforce,
services) 52%
34% Increasing costs of running a business
Unstable economic and tax law 32%
(rising cost of materials, workforce,
Market pressure for price decrease
services)
32% of offered goods/services
Market pressure for price decrease 40%
of offered goods/services Market pressure for price decrease
of offered goods/services
Business & Professional
Services Manufacturing
Energy, Utilities, Mining
59%
Increasing costs of running a business 63%
(rising cost of materials, workforce, Shortage of qualified workforce
43%
Increasing costs of running a business services)
57%
(rising cost of materials, workforce, 36% Increasing costs of running a business
services) Shortage of qualified workforce (rising cost of materials, workforce,
36% services)
Shortage of qualified workforce 32%
Unstable economic and tax law
35%
30% Market pressure for price decrease
Unstable economic and tax law of offered goods/services
Construction
& Real Estate
Life Sciences Public Sector
50%
Shortage of qualified workforce
57% 46% 57%
Shortage of qualified workforce Shortage of qualified workforce
Increasing costs of running a business
43% (rising cost of materials, workforce,
43%
Market pressure for price decrease services)
Increasing costs of running a business
of offered goods/services (rising cost of materials, workforce,
33%
43% Unstable economic and tax law services)
Increasing costs of running a business
(rising cost of materials, workforce, 43%
Increasing regulations
services)
39Balancing optimism with risk aversion | Central Europe CFO Survey 2018
CFOs prefer internal
and bank financing
CFOs currently see internal financing Corporate debt and equity are moderately
and bank borrowing as the most attractive attractive as sources of funding, with over
sources of funding for their companies, half of CFOs assessing them as ‘neither
selected by 52% and 49% respectively. attractive nor unattractive’.
EU funds appear to be least attractive
to CFOs, with 27% of respondents rating
these negatively. One possible explanation
for this is that EU funding often imposes
limitations on the way companies operate,
making them less flexible.
How do you currently rate the attractiveness of different sources of funding for your company?
27% 29%
35%
49% 52%
52% 51% 38%
31%
36%
27%
20% 21% 20%
12%
Bank borrowing Corporate debt Equity Internal financing EU funds
40%
29%
6% 9% 8%
balance
Net
Unattractive Neither attractive nor unattractive Attractive Net balance
40Balancing optimism with risk aversion | Central Europe CFO Survey 2018
Bank borrowing appears to be most By contrast, this funding source is least The attractiveness of equity financing
attractive source of funding for CFOs attractive to the CFOs of Construction is moderate: net balances range between
from the Energy, Utilities and Mining & Real Estate companies, where the net 0% in four industries and 20% in Financial
industry (with a net balance of 51%). balance was a modest 15%. Services. Corporate debt is the least
It is least attractive for those from attractive source of funding among
Business & Professional Services EU funding is rated most highly by CFOs all those listed. It has the lowest net
companies (-14%). Corporate debt from the Public Sector and the Energy, balance among Business and Professional
financing shows a similar pattern. Utilities and Mining industry, with net Services CFOs (-18%) and those from
balances respectively of 29% and 28%. the Public Sector (-14%). CFOs from
CFOs in most industries like In contrast, CFOs from Consumer the Energy, Utilities, Mining industry value
internal financing as a source Businesses find it less attractive, showing it most highly, with a net balance of 21%.
of capital. In the Technology, Media a net balance of -13%. This is to be expected, as this is the sector
and Telecommunications sector, this that most commonly uses this kind
achieves a net balance as high as 58%. of funding.
How do you currently rate the attractiveness of different sources of funding for your company?
Technology, Energy, Business &
Financial Consumer Life Construction Public
Media, Utilities, Manufacturing Professional Other
Services Business Sciences & Real Estate Sector
Telecommunications Mining Services
Net balance 21% 31% 14% 24% 51% 32% 39% -14% 43% 28%
Bank
Neither
borrowing
attractive nor 54% 30% 29% 32% 19% 28% 26% 41% 57% 28%
unattractive
Net balance -4% 10% 0% 4% 21% 7% 11% -18% -14% 6%
Corporate
Neither
debt
attractive nor 54% 51% 57% 60% 49% 54% 50% 45% 86% 48%
unattractive
Net balance 20% 11% 0% 8% 9% 13% 0% 0% 0% 1%
Equity Neither
attractive nor 41% 52% 43% 52% 53% 55% 57% 45% 71% 49%
unattractive
Net balance 29% 47% 50% 58% 30% 50% 15% 50% 29% 31%
Internal
Neither
financing
attractive nor 50% 32% 7% 22% 40% 34% 41% 41% 43% 40%
unattractive
Net balance 2% -13% 21% 12% 28% 15% -7% 5% 29% 13%
EU funds Neither
attractive nor 52% 41% 36% 36% 30% 32% 46% 23% 14% 42%
unattractive
41Balancing optimism with risk aversion | Central Europe CFO Survey 2018 42
Balancing optimism with risk aversion | Central Europe CFO Survey 2018
Company
growth outlook
CFOs expect their companies to achieve higher The level of optimism about company prospects
revenues in 2018, and have set increasing is lower than last year. It remains satisfactory,
revenues high among their priorities for the year. however, with the most positive answers coming
However, it is worth noting that there are only from Bulgaria, where 79% of CFOs expect
small differences in how they rate various a better outlook for their companies than
priorities – we listed ten possible priorities, they did six months ago. Maybe CFOs feel that
and on a 1-10 scale the difference between the economy cannot perform at such a high
the most and the least important of these level for much longer and that a cyclical
was just 0.7. slowdown is approaching.
43Balancing optimism with risk aversion | Central Europe CFO Survey 2018
Slightly less positive,
but financial prospects
for companies remain good
When it comes to their companies’ for their companies, in neighbouring
financial prospects, CFOs are slightly more Romania 40% of CFOs are less optimistic
pessimistic compared with six months about the future than they were six months
ago than they were in the previous survey. ago. It is also worth noting that in Croatia
The net balance of answers fell by 6 pp, and Slovenia, just 5% and 6% of CFOs
from 33% to 27%. respectively are negative about their
companies' financial prospects.
There are considerable differences
between countries. While 79% of CFOs
in Bulgaria expect things to get better
Compared with six months ago, how do you feel about the financial prospects for your company?
31% 29%
40% 37%
43% 43% 42% 40% 43%
49% 46% 46%
51% 53%
58% 56%
79%
31%
56% 43%
40% 41% 48% 40%
35% 46% 42% 50%
36% 44%
27%
43% 39%
40%
18%
17% 20%
14% 16% 16% 16% 13% 15%
10% 12% 12% 13% 10%
3% 5% 6%
CE 2016 2017 2018 EU Eurozone BG HR CZ HU LV LT PL RO RS SK SI UA
76%
48% 42% 50%
37% 37%
33% 30% 29% 33% 30%
27% 27% 19% 26%
17%
balance
Net
-10%
Less optimistic Broadly unchanged More optimistic Net balance
44Balancing optimism with risk aversion | Central Europe CFO Survey 2018
CFOs are confident their companies’
financial prospects for the next
twelve months are good, with a high
likelihood of revenues increasing.
Similarly, CFOs from different industries The outlook is most pessimistic in the Life
have differing assessments of their Sciences industry, where 36% of answers
companies’ financial prospects. The most were negative.
optimistic are respondents from
the Consumer Business and Construction
& Real Estate industries, where more than
a half are more positive than they were
six months ago about their companies’
financial prospects.
Compared with six months ago, how do you feel about the financial prospects for your company?
29% 29%
39% 38%
46% 44% 45%
53% 52%
36%
57%
43% 47% 32%
38% 42%
34% 37%
36%
23%
18% 16% 15% 15%
13% 11% 14%
Financial Consumer Life Technology, Energy, Manufacturing Construction Business Public
Services Business Sciences Media, Utilities, & Real Estate & Professional Sector
Telecommunications Mining Services
40% 41%
30% 23% 29% 23%
21%
14%
balance
Net
-7%
Less optimistic Broadly unchanged More optimistic Net balance
45Balancing optimism with risk aversion | Central Europe CFO Survey 2018
CFOs anticipate
higher revenues
For the second consecutive year, CFOs’ The most pessimistic are Financial Services
optimism about revenues has risen. CFOs. Even here, however, only 21%
The 63% net balance of answers of respondents anticipate lower revenue
is up by 12 pp over their expectations figures for their companies in 2018.
for 2016. The majority of CFOs
in all industries expect revenues to rise.
The most optimistic are Consumer Business
CFOs, with 91% expecting increases
in revenue. This again proves consumer
spending is often the factor that does most
to boost economic performance.
In your view, how are revenues for your company likely to change over the next twelve months?
53%
59%
66% 64%
71% 73% 70% 71% 71% 72%
74% 75%
91%
32%
19% 33% 9%
16% 27% 14%
17% 14% 18%
18%
29%
21%
15% 14% 5% 15% 14%
10% 9% 9% 8% 11% 10%
5%
CE 2016 2017 2018 Business Construction Consumer Energy, Financial Life Manufacturing Other Public Sector Technology,
& Professional & Real Estate Business Utilities, Services Sciences Media,
Services Mining Telecommunications
86% 71%
63% 66% 64% 62%
51% 57% 55% 57%
50% 48%
38%
balance
Net
Decrease No change Increase Net balance
46Balancing optimism with risk aversion | Central Europe CFO Survey 2018
Operating margins may
go up in 2018
CFOs from different industries have these are low, margins stay low as well. In the Consumer Business
mixed views about how their operating In the Energy, Utilities and Mining sector, and the Technology, Media
margins will change in the next twelve many other external conditions influence and Telecommunications industries,
months. Optimistic attitudes are more margins: even the most optimistic more than half of CFOs expect operating
common than pessimistic, as the net economic forecasts across the region may margins to increase.
balance of answers is negative only in two not be sufficient to increase margins.
industries: Financial Services and Energy, Nearly 40% of CFOs in the Financial
Utilities and Mining. The most diversified views are those Services and Energy, Utilities, Mining
of CFOs from the Public Sector – 57% industries have negative expectations
In Financial Services, margins are related expect higher margins in 2018, while 43% for their companies’ operating
to the level of interest rates – while anticipate lower margins. margins in 2018.
In your view, how are revenues for your company likely to change over the next twelve months?
27% 28%
34% 36% 36%
40% 38% 39%
42% 44%
55% 52%
57%
28% 25%
50%
37% 59% 35%
41% 36% 50% 35%
32% 38%
43%
38% 39%
25% 23% 23% 26%
18% 21%
13% 13% 14%
10%
CE 2016 2017 2018 Business Construction Consumer Energy, Financial Life Manufacturing Other Public Sector Technology,
& Professional & Real Estate Business Utilities, Services Sciences Media,
Services Mining Telecommunications
43% 42%
22% 21% 23%
19% 15% 13% 14%
13%
5%
balance
Net
-4% -4%
Decrease No change Increase Net balance
47Balancing optimism with risk aversion | Central Europe CFO Survey 2018
CAPEX is set to be at least
the same as last year
The proportion of CFOs expecting their industries, where between 50% and 55%
companies to increase their capital expect capital expenditure to rise.
expenditure in the next year has decreased
by 5 pp, from 49% to 44%. Again, only The most negative views are expressed
a small fraction of respondents (13%) by CFOs from Business & Professional
expects CAPEX to fall in 2018. Services companies, where 27%
of respondents expect their companies’
Attitudes are most optimistic among CFOs CAPEX to decrease in the next year.
from the Financial Services, Consumer
Business and Energy, Utilities, Mining
In your view, how are capital expenditures (CAPEX) for your company likely to change over the next twelve months?
18%
29%
35%
41% 38%
44% 45% 46%
49% 51% 50%
55% 57%
55%
46% 57%
46% 50%
43% 42%
39% 38% 44%
40% 34%
43%
27%
20%
14% 13% 13% 13% 14% 13% 12%
9% 11% 10%
CE 2016 2017 2018 Business Construction Consumer Energy, Financial Life Manufacturing Other Public Sector Technology,
& Professional & Real Estate Business Utilities, Services Sciences Media,
Services Mining Telecommunications
57%
41% 45%
38% 36%
36% 32% 32%
27% 27%
15% 14%
balance
Net
-9%
Decrease No change Increase Net balance
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