Reaching the danger zone?
A mood of pessimism has gripped Austria's business leaders. Looking to the future, 73 percent expect the economic situation in Europe to get worse. But the climate in Central and Eastern Europe (CEE) offers a more mixed picture: while 54 percent of managers see further downturn ahead, 39 percent believe the outlook is not yet clear. These are some of the interesting findings to emerge from a market study by Roland Berger Strategy Consultants. The online survey covered 250 executives from Austria and CEE, asking them how they expect the financial crisis to pan out. Looking at their own industry, the respondents generally foresee zero growth, if not slight shrinkage, in Western Europe but only slower growth in Central Europe. The expectations for Russia range from reduced growth to sales drops of ten percent or more.
After the US, the crisis seems to be hitting Western Europe the hardest. A majority of Austrian managers (60%) rate the immediate damage in the West as relatively minor but expect (72%) a significant downturn in 2009. This picture contrasts with the view in the CEE economies. While respondents there (55%) tend to have a more negative view of the current situation in the West, they are less gloomy about future prospects. "The Eastern Europeans are far more optimistic about the duration of the crisis. As many as 30 percent of these managers believe the financial crisis will no longer affect Western Europe in 2010," says Rupert Petry, Managing Partner at the Roland Berger office in Vienna. Looking at their own industry's prospects in Western Europe, 27 percent of all respondents predict a slight drop in sales and 25 percent a stagnation.
Little impact on Central Europe
For the present, the impact of the crisis on Central European economies has been slight. However, the managers surveyed by this study see things getting far worse next year. "But the crisis will not be felt as sharply in the Central European countries as in the West. Czech mangers, in particular, appear optimistic on this front," Petry notes. Only the Hungarian managers expressed strong fears for next year (84%). But this darker mood, the consultant remarks, "is explained not so much by the present global financial meltdown as by the fact that Hungary has already been facing a lengthy economic crisis."Looking at the prospects for their own region in 2009, the respondents generally expect reduced growth (33%) or a small downturn in sales (24%).
No clear opinion trend for Russia
The survey did not come up with any clear picture for the mood in Russia. Although 50 percent of Austrian and 47 percent of Russian and Ukrainian company bosses report a significant negative impact on present business, almost 50 percent of the Russians believe the crisis will cease to play a role in 2010. Rupert Petry sums it up like this: "The mood in Russia breaks down three ways. A third believe the trough has already been reached; a third think the outlook remains uncertain; and the other third expect worse things to come." The same mixed picture emerges about the consequences they anticipate for their own industry. Here, the expectations range from reduced growth (24%) to drops in sales of more than ten percent (23%).
Significant decline in orders expected for 2009
Just how real the crisis has already become is indicated by the fact that 53 percent of the Austrian and 42 percent of the Russian and Ukrainian businesses covered by the survey complain about problems in raising finance. As for their order books, 42 percent of the Eastern European and 28 percent of the Central European companies are already reporting drops. 26 percent of the Austrian businesses are in the same predicament. With a view to 2009, 68 percent of Austrian, 25 percent of Central European and 37 percent of Eastern European managers reckon with fewer orders. "So the optimism among the Central Europeans is quite striking. Only about a quarter of those managers expect the crisis to directly impact their own company," Petry concludes.
A stronger focus on costs
Despite the relatively positive outlook expressed by a number of managers, almost all the respondents are preparing for tougher times ahead. Austrian managers are increasingly focusing on cost-cutting programs (69%) and budget tightening for 2009 (69%), followed by freezes on recruitment (54%). In Central Europe, the priorities are tighter budgets (63%), cost savings (60%) and stricter cash management (53%). In Russia and Ukraine, cost-cutting programs (68%) are also on the agenda, ahead of hiring freezes (63%), tighter budgets and stricter cash management (58% each). Although many of the Russian and Ukrainian companies questioned are considering cutting back on production (53%) or even closing production sites (32%), this response is less common elsewhere. "Only 27 percent of the Austrian and 13 percent of the Central European managers are thinking about scaling down production. Plant closures are being discussed by 12 percent of Austrian and 8 percent of Central European companies," says Petry.
After the US, the crisis seems to be hitting Western Europe the hardest. A majority of Austrian managers (60%) rate the immediate damage in the West as relatively minor but expect (72%) a significant downturn in 2009. This picture contrasts with the view in the CEE economies. While respondents there (55%) tend to have a more negative view of the current situation in the West, they are less gloomy about future prospects. "The Eastern Europeans are far more optimistic about the duration of the crisis. As many as 30 percent of these managers believe the financial crisis will no longer affect Western Europe in 2010," says Rupert Petry, Managing Partner at the Roland Berger office in Vienna. Looking at their own industry's prospects in Western Europe, 27 percent of all respondents predict a slight drop in sales and 25 percent a stagnation.
Little impact on Central Europe
For the present, the impact of the crisis on Central European economies has been slight. However, the managers surveyed by this study see things getting far worse next year. "But the crisis will not be felt as sharply in the Central European countries as in the West. Czech mangers, in particular, appear optimistic on this front," Petry notes. Only the Hungarian managers expressed strong fears for next year (84%). But this darker mood, the consultant remarks, "is explained not so much by the present global financial meltdown as by the fact that Hungary has already been facing a lengthy economic crisis."Looking at the prospects for their own region in 2009, the respondents generally expect reduced growth (33%) or a small downturn in sales (24%).
No clear opinion trend for Russia
The survey did not come up with any clear picture for the mood in Russia. Although 50 percent of Austrian and 47 percent of Russian and Ukrainian company bosses report a significant negative impact on present business, almost 50 percent of the Russians believe the crisis will cease to play a role in 2010. Rupert Petry sums it up like this: "The mood in Russia breaks down three ways. A third believe the trough has already been reached; a third think the outlook remains uncertain; and the other third expect worse things to come." The same mixed picture emerges about the consequences they anticipate for their own industry. Here, the expectations range from reduced growth (24%) to drops in sales of more than ten percent (23%).
Significant decline in orders expected for 2009
Just how real the crisis has already become is indicated by the fact that 53 percent of the Austrian and 42 percent of the Russian and Ukrainian businesses covered by the survey complain about problems in raising finance. As for their order books, 42 percent of the Eastern European and 28 percent of the Central European companies are already reporting drops. 26 percent of the Austrian businesses are in the same predicament. With a view to 2009, 68 percent of Austrian, 25 percent of Central European and 37 percent of Eastern European managers reckon with fewer orders. "So the optimism among the Central Europeans is quite striking. Only about a quarter of those managers expect the crisis to directly impact their own company," Petry concludes.
A stronger focus on costs
Despite the relatively positive outlook expressed by a number of managers, almost all the respondents are preparing for tougher times ahead. Austrian managers are increasingly focusing on cost-cutting programs (69%) and budget tightening for 2009 (69%), followed by freezes on recruitment (54%). In Central Europe, the priorities are tighter budgets (63%), cost savings (60%) and stricter cash management (53%). In Russia and Ukraine, cost-cutting programs (68%) are also on the agenda, ahead of hiring freezes (63%), tighter budgets and stricter cash management (58% each). Although many of the Russian and Ukrainian companies questioned are considering cutting back on production (53%) or even closing production sites (32%), this response is less common elsewhere. "Only 27 percent of the Austrian and 13 percent of the Central European managers are thinking about scaling down production. Plant closures are being discussed by 12 percent of Austrian and 8 percent of Central European companies," says Petry.
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