Business

Sentiment
Index
Central Europe / 1st edition / September 2009

Do great minds think alike?

Views from executives
in Central Europe
 Introduction

Deloitte Business Sentiment Index

goes a long way in discovering
the current thinking of senior
executives – and what their
concerns and aspirations are for
their companies.

I am pleased to introduce the first Deloitte Business The report focuses not on the ”hard facts“ of statistics
Sentiment Index (DBSI) – a groundbreaking survey of and balance sheets, but on the equally important
the views of leading corporate executives from the and often underrated personal beliefs of senior
largest organisations across Central Europe (CE). management professionals.

The report highlights the findings from the survey
conducted during the Summer of 2009 with these
executives, who have the greatest influence on the
future direction of the Central Europe economies.
Their responses to the carefully-selected set of
questions about the current and future business
environment – ranging from employment prospects
and payment trends to new product development and
capital expenditure – have been collated into an index
which will be an invaluable and regular ”barometer“
for the prospects of the CE region, inviting comparison
across national boundaries and industrial sectors.
In addition, the report focuses firmly on the future by
asking executives for their predictions for the prospects
for the economy and companies over the long term.
As a result, I have every confidence that in time the
Deloitte Business Sentiment Index will become a good
indicator of economic and business develoment and
an essential resource for companies and professionals
across all sectors in Central Europe.

Bela Seres
Managing Partner
Financial Advisory
Deloitte Central Europe

2 Deloitte Business Sentiment Index - Reflecting views 3

 Contents

7  Executive summary 26  Appendix: Our approach

8  Overall highlights 28  Methodology – At a glance

9  Conclusions 29  Additional resources

10  Key Findings 30 Leadership and governance

12  Cautious optimism – But still some cause for concern

4 Deloitte Business Sentiment Index - Reflecting views 5

 Executive summary
The Deloitte Business Sentiment Index could not
have come at a more appropriate time, as Central
Europe takes a mixed view towards recovery instead
of reminiscing over the years of plenty of the past
decade.
The findings for the first index show there is
a wide gulf between the responses and outlook of
professionals by country, with Poland consistently
the most optimistic in its attitude to the future. True,
Poland is a well-established economy in the region,
and is therefore more equipped perhaps to ”weather
the storm“ than less mature economies, such as
Croatia, but the significant differences between its
upbeat answers compared to its more pessimistic
partners in the index suggest this may herald a new
era in the business dynamics of Central Europe, with
Poland pulling away for good from its neighbours.
For instance, 60.5% of Polish executives feel their
workforce will remain stable; over half (52.1%)
believed the economy will improve over the next six
months, and 76.7% believe the financial prospects for
their companies will improve. These headline figures
suggest Polish professionals have an impressive level
of confidence that fortunes are about to change for
the better for the Polish economy and its companies.
Compare these bullish outlooks, however, with other
countries’ outlooks on the same issues: only around
30% of professionals in the Czech Republic believe
workforces will stay the same; an enormous 89.7% of
Croatian executives feel the economy will deteriorate,
and in Romania, 23.1% of those surveyed believe the
financial prospects of their companies are bleak.
The index finds the responses of the countries to be in
line with the reaction to life after such a bruising year
for the global economy: a mixture of negative and
slightly positive views combining to balance out in an
overall expression of caution for the short term.
6 Deloitte Business Sentiment Index - Reflecting views 7
With the responses of Poland, however, and more
upbeat cross-country forecasts on crucial issues for
growth such as the availability of credit (for instance,
Croatia and Czech Republic, on balance, show 58.6%
and 67.7% of their professionals respectively still
believe credit is available), the index paints a broader
picture of some signs of optimism to temper this
caution.
This could mean that companies approach the
next financial period by regrouping and assessing
the damage caused by the recession. This may
trigger proactive business activity such as renewed
M&A interest - for example, companies disposing of
their non-core activities, withdrawing from countries
or cutting product lines in order to reduce their debt
levels and therefore starting to generate M&A activity
again.
Overall, the Deloitte Business Sentiment Index
amounted to 97 in this first edition (with the index
scale being 0 to 200). We will use this as a benchmark
figure for future waves of the index (with the next
edition due in December 2009) in order to build
up a bank of sentiment figures for comparison and
analysis. The value 97 has been calculated as a result
of the relative impact of the overly positive sentiment
of business leaders from Poland (with their positive
responses pulling the index upwards) balanced out by
companies from Croatia and Czech Republic (whose
predominantly negative responses pulled the index
downwards), and with the three other countries
polled in the index scoring around the mid-point.
Our findings show significant differences in outlook
between the countries surveyed, which underlines
the importance of a country-by-country approach to
recovery and a reminder that complacency has no
place in the markets of the region.
Overall highlights
The survey findings show interesting differences in
individual country outlooks.
Economy prospects
In total, over 40% of those surveyed feel that the
general prospects of the economy will deteriorate
over the next six months, with just over a quarter
(26.8%) believing that it will improve.
• T he worst expectations are in Croatia, Czech
Republic and Slovakia, whereas over half of
professionals from Poland (51.2%) believe the
economy will improve.
Company prospects
In contrast, the professionals surveyed about the
future financial prospects of their companies were
more optimistic, with a positive result of 45.8% of
respondents compared to a negative of 15.3% of
those surveyed.
• T he most positive feelings about financial prospects
are in Poland (76.7%), Slovakia (56.7%) and
Hungary (48.4%).
Credit availability
Almost two thirds of the total (57.9%) believed
credit was available to them, with the best situations
reported in Poland (72.1 % positive) and Czech
Republic (67.7% positive).
Payment terms
Despite the natural concern that companies would
take a long time to repay in times of recession, the
majority of those surveyed did not feel there to be
any danger of not being paid back by debtors. Only
Croatia, compared to the other countries, reported
significant delays in payment.
Sales revenue
Most of those surveyed were optimistic that sales
revenues would increase (41.1% of the net total) over
the next 12 months, compared to 4.2% thinking that
they would reduce significantly.
8 Deloitte Business Sentiment Index - Reflecting views 9
Launching new products
Well over half (56.8%) were optimistic of launching
new products or services in the next 12 months –
although Czech Republic reported both positive and
negative responses of 45.2% for the likelihood of
new product launches.
Changes in workforce over next 12 months
Over half of respondents (52.1%) expect their
workforce not to change in the following year, with
the most confident of stability in the workforce being
Poland (60.5% of those surveyed in the country). The
worst situation seems to be in Croatia and Czech
Republic, the best in Hungary.
Spending on capital goods
Two fifths (40.5%) of respondents expect their
spending on capital goods to stay unchanged.
Likelihood of M&A activity
In all the countries company acquisitions are very
unlikely, as 60% of responses were negative. The
most pessimistic responses came from Slovakia (70%
extremely unlikely of takeover activity), the most
optimistic ones from Poland (7.7% likelihood).
Regulatory environment
Over three fifths (61%) of respondents believe that
the regulatory environment will remain unchanged.
Special question: EU funds availability
A quarter (25.5%) of respondents believe EU grants
are fairly or easily available, but twice as many
(51.6%) felt the grants were fairly or very hard to
obtain. The worst availability of EU grants seems to be
in Romania and Slovakia.
Conclusions
Although the survey finds the majority of respondents
are at best cautious, or (as seems to be more the
case) very pessimistic about the state of the global We wait with interest to see how
and regional economy, there do seem to be the first
signs that the recession is coming to an end in the CE regains its footing – and have
Central Europe countries surveyed.
every confidence that despite the
True, the general sentiment index is negative, but
a large group of companies that view the situation for predictions of market experts
their own operations fairly optimistically. Hopefully,
they will undertake positive actions to drive their and the media it will maintain
companies forward, which will then influence the
economy accordingly and stimulate investment its status as a major player in the
demand, which will in turn speed up the growth rate
of the GDP and economic recovery overall. global financial markets.
But we’re not out of the woods yet. The effects And of course, there’s the case of Poland – with
of such an enormous crash are still being felt, and consistently positive responses to the questions
it is those economies which stretched themselves posed, Polish executives gave every indication that the
too thinly in times of plenty which are suffering country will emerge not just as the most important
accordingly as markets begin to rebalance. player in Central Europe but also as a significant force
Employment levels will have to react accordingly in the global markets.
to productivity slowdowns and job losses will be
inevitable in many of the countries surveyed. If these predictions hold true, we should be looking
toward positive integers emerging and not a sea of
On a more positive note, compared to other minus signs over the next few months (even if those
economies, including ”safer“ bets such as the UK plus signs are only followed by single digits). One
and US, CE enjoys a degree of comfort from the of the lessons learnt from this global financial crisis
presence of the EU and its purse. Yes, some of the should be that economies are more measured in their
region’s constituents, such as Croatia, are struggling, recovery plan and future strategies.
but with others such as Hungary stabilising at the
point of low or no growth there is a case for believing
that economies have no further left to fall and will
therefore have to begin the steep climb towards
recovery, no matter how slowly.
Key findings

Deloitte Business Sentiment Index - Reflecting views 11

 Cautious optimism –
but still some cause for concern
The findings which follow illustrate the range of opinions in the six countries surveyed.

Question 1: In 6 months’ time, do you expect the general prospects of your country economy to have? Question 2: Generally speaking, how do you feel about the financial prospects for your company now? Are your feelings...

Figure 1: Percentage of opinions

Titulek chybí
Figure 2: P
 redictions on the economy by country Figure 3: Percentage of opinions Figure 4: Current financial prospects for company
Titulek chybí
(next 6 months)
100% 4.2% 0.5% 100%
0.5% 4.2% 0.5%
0.5%
12.6% 76.7%
15.8% 100% 80% 11.1% 12.6% 80%
15.8% 11.1%
56.7%
26.8% 80% 60% 51.2% 100% 60% 48.4%
45.8%
26.8% 38.5%
34.5% 76.7%
60% 40%
26.8% 25.8% 51.2% 80% 40% 25.8%
23.3%
38.5% 12.9% 38.5% 56.7% 15.4%
40% 20% 60% 20% 48.4%
0% 25.8% 45.8%
23.3%
20% 0% 40% 0% 34.5%
12.9% 25.8%
0% -6.9%
-11.6%
0%
-20% -16.3% 20% -20% -15.3% -16.1% -16.1% -20%
15.4%
-25.8% -23.1%

-20%
-40% -38.5% 0% -40%
25.8% -41.6% -16.3%
-43.3% 38.4%
25.8% -48.4%
-25.8% 38.4% -6.9%
-40%
-60% -20% -60%
-15.3% -16.1% -16.1%
-11.6%
-38.5% -20% -23.1%
-41.6% -43.3%
-60%
-80% -48.4% -40% -80%
33.2%

ia
kia
e

tia

d
c

y
Re ech
rag

bli

ar

lan
33.2%

an
-89.7%

oa

va
-60%

ng
pu

m
e

Cz

Po
-80%

Slo
Cr
Av

Hu

Ro
ia
kia
e

tia

d
c

y
Re ech
rag

bli

lan
ar

an
-80%
oa

va
-89.7% ng
pu

m
e

Republic Cz

Po
Slo
Cr
Av

Ro
Hu

31.1% Positive

ia
kia
e

tia

d
c

y
Re ech
Romania

rag

bli
Hungary

ar

lan
31.1%

an
Slovakia

oa
Average

va
Croatia

ng
Poland

pu

m
e

Cz
Czech

Po
Slo
Cr
Positive Negative

Av

Hu

Ro
Negative
Improved somewhat Positive Definitely positive Positive
Improved somewhat Definitely positive
Stayed the same Negative Fairly positive Negative
Stayed the same Fairly positive
Deteriorated somewhat Balanced mixed
Deteriorated somewhat Balanced mixed
Deteriorated significantly Fairly negative
Deteriorated significantly Fairly negative
Don’t know
Don’t know Definitely negative
Definitely negative
Don’t know
Don’t know

Question 1 Highlights Question 2 Highlights

• T he worst expectations are in Croatia, where
89.7% of the responses were negative.
• Czech Republic and Slovakia also have very
pessimistic expectations.
• Responses from Poland, on the other hand,
were very optimistic, with 51.2% expecting
improvement.
• T he overall expectations are that the country
economies are going to either deteriorate or stay
the same.
• Of additional interest is that no country believed
their economy would ”improve significantly“.
Many market experts and commentators believe the • T he most positive feelings about financial prospects
region is in serious trouble following the global crash, are in Poland (76.7%), Slovakia (56.7%) and
so it’s therefore no surprise that the business leaders Hungary (48.4%).
surveyed are rather negative about the state of the • A s for the industries, the best results are in Energy
economy at the moment. and Resources with 61.3% of positive answers.
The Polish economy looks to be in the best position The majority of professionals surveyed were optimistic
compared to the other countries surveyed and this is about the financial prospects of their company,
supported by the results of the survey, which found with the most bullish those in Poland and the most
Poland’s top managers the most optimistic about the pessimistic those in Romania. Such a disparity may be
general economic environment. due to continued strong consumer demand in Poland,
which has helped to sustain the positive growth rate
despite the global recession. However, in Romania,
consumer expenditure fell by over 12%, one of the
largest declines in the EU.
It is quite common for companies to be much more
optimistic about their own operations than about the
general economic environment. Despite the outwardly
cheerful outlook of many of the top managers about
their company’s prospects, many industrial companies
in CE actually saw year-on-year sales down 25-40%
by the end of Q1 2009. The collapse has moderated
but now many companies are reporting flat sales at
this bottom level.

12 Deloitte Business Sentiment Index - Reflecting views 13

Question 3: How do you rate the present availability of credit for your company? Bank credit availability is highlighted in three groups according to company financial prospects

Figure 5: Percentage of opinions Figure 6: Current availability of credit Figure 7: Bank credit availability

100%
12.1%
12.1%
80% 67.7%
72.1% 80%
100% 60% 57.9% 58.6% 53.8% 70%
53.3% 70%
19.5%
19.5%
80% 40% 67.7% 35.5% 72.1%
58.6%
60%
57.9% 53.8% 52%
12.1% 60% 20% 53.3%
12.1% 50%
40% 35.5%
0%
38%
40%
20% -20%
-25.8% -23.3% 30%
0% -40% -30%
-34.5% -32.3% -30%
-36.7%
-20% -60% 20%
-25.8% -23.3%
-30% -32.3% -30%
-40% -80% -34.5% -36.7% 10%
17.9%
17.9% -60% Company financial prospects
0%

ia
kia
e

tia

d
c

y
Re ech
rag

bli

lan
ar
(according to Question 2)

an
oa

va
ng
pu

m
e

Cz

Po
Slo
Cr
Av

-80%

)
Ro
Hu

d
)

irly
ely e
irly

ce

nit ativ
ely e

/fa
lan
/fa
nit tiv
38.4%

g
ia
kia

efi Posi
e

tia

d
c

ba
Re ech

38.4% Positive

Ne
rag

bli

lan
ar

an
oa

va

d/
ng
pu

m
e

Cz

Po

ixe
Slo
Cr
Av

efi
Ro
Hu

Negative

(d
M
(d
Easily available Positive
Easily available
Somewhat available Negative
Somewhat available
Somewhat hard to get
Somewhat hard to get
Very hard to get
Very hard to get
Don’t know
Don’t know

Question 3 Highlights
• Overall, credit is quite easily available in all
countries and industries, as 57.9% of responses are
positive.
• T he best situation is in Poland (72.1% positive)
and Czech Republic (67.7% positive).
Many companies state that credit is available or they
are able to finance investment from their own profits
which they have built up in past years. This is an
important point – many companies worldwide faced
this crisis with a good cash/profit position so they had
layers of fat to eat into. Of course, there is a limit to
how long that ”fat“ will last.
The results of the survey bear out this mainly upbeat
outlook: companies are, on the whole, pleased with
the present availability of credit. Although in Hungary
there is a little uncertainty about credit, in Poland it
remains easily available.
To explore these findings further, we looked at the
responses based on joint consideration/correlation of
many variables. On one such analysis, we found credit
availability is generally higher among companies with
positive financial prospects (70% of them declare
credit is ”easily“ or ”somewhat“ available).
Most probably these good financial prospects result
in a better position regarding banks’ expectations
related to credit. However, from the banks’ point
of view, they always have to give credit as this is
their main source of business, even during the crisis
(safe treasury bonds would not cover total possible
demand from banks), and credit to large companies
in good shape is among the safest lending (relative to
credit to small companies, and non-mortgage covered
loans to consumers).
This correlation between credit availability and financial
prospects is most evident in Poland, Slovakia and
Croatia, which may suggest bank credit policies in
these countries are slightly more related to companies’
actual financial prospects.

14 Deloitte Business Sentiment Index - Reflecting views 15

Question 4: L
 ooking in general at your company’s debtors and outstanding dues – how would you evaluate Question 5: In 12 months’ time do you expect your revenue from sales to have…
the time they are currently taking to pay? Is the average number of days of payment…

Figure 8: Percentage of opinions Figure 9: Accounts receivable: Payment by debtors Figure 10: Percentage of opinions Figure 11: Revenue from sales (12 month outlook)

100% 100%
3.2% 4.2% 0.5% 4.2%
3.2%
13.2%
79.1% 4.2% 0.5% 4.2%
8.9% 13.2% 80% 80% 74.4%
8.9% 65.4% 16.8%
100% 59% 60% 16.8% 100%
60% 51.7% 51.6% 79.1% 60% 53.3%
80% 80% 45.3% 45.2% 74.4%
37.9% 65.4% 38.5%
40%
59% 60% 40% 31%
60% 51.7% 51.6% 60% 53.3%
41.1% 45.3% 45.2%
16.1%
20% 37.9%
41.1% 20% 38.5%
40% 40% 31%
0% 0% 16.1%
20% 20%
-20% -20% -9.7% -9.3%
0% -20.9% 0% -21.1% -20% -23.1%
-40% -30.8% -40% -31%
-20% -38.8% -40% -20% -38.7%
-9.7% -9.3%
-44.8% -45.2% -20%
-60% -20.9% -21.1%
-60% -23.1%
-40% -58.6% -30.8% -40% -31%
-38.8% -40% -38.7%
-80% -44.8% -45.2% -80%
-60% -60%
29.5% -58.6% 33.2%

ia
kia
ia
kia

tia

d
c
e

tia

d
c

y
y

Re ech
Re ech
29.5%

rag
33.2%

bli
rag

bli

lan
ar
lan
ar

an
an

oa
oa

va
va

ng
-80% -80%
ng

pu
pu

m
e
m
e

z
z

Po
Po

Slo
Slo

Cr
Cr

Av
Av

c C
c C

Ro
Hu
Ro
45.3% Hu
45.3%

ia

ia
kia

kia
e

e
tia

tia

d
y

y
Re ech

Re ech
rag

rag
bli

bli
lan
ar

lan
ar
an

an
oa

oa
va

va
ng

ng
pu

pu
m
e

m
e
Cz

Cz
Po

Po
Slo

Slo
Cr

Cr
Av

Av
Ro
Hu

Ro
Hu
Positive Positive
Negative Negative
Definitely safe Positive Increased significantly Positive
Definitely safe Increased significantly
Fairly safe Negative Increased somewhat Negative
Fairly safe Increased somewhat
Somewhat excessive Stayed broadly unchanged
Somewhat excessive Stayed broadly unchanged
Significantly excessive Reduced somewhat
Significantly excessive Reduced somewhat
Don’t know Reduced significantly
Don’t know Reduced significantly
Don’t know
Don’t know

Question 4 Highlights Question 5 Highlights

• Countries where there don’t seem to be significant
delays in paying include Poland with 79.1% of
positive answers and Romania with 65.4% of
positive answers.
• T he country with most significant delays in
payments is Croatia.
• T he industry sector with the fewest problems is
Energy and Resources.
Deloitte found that in Poland it takes usually more
than three months to recover liabilities from debtors
– in the case of larger companies the period is a bit
shorter but generally not shorter than two months.
Fortunately this doesn’t seem to be causing problems,
as almost 80% of companies in Poland indicated that
retrieving liabilities is good.
The worst situation concerning liabilities is in Croatia,
where consumer expenditure fell very significantly
in the last year, demand for exports is expected to
continue to fall, and foreign investments are expected
to be significantly reduced.
• Only 21% of respondents expect their revenues
to reduce.
• T he only pessimistic country is Czech Republic,
where only 16.1% of responses were positive.
• Poland is the most optimistic country, as 74.4%
expect their revenues to increase and only 9.3%
to decrease.
Companies around the world are waiting for the end
of summer to gauge what happens to their sales in
September and the fourth quarter of 2009. Happily,
the survey found that revenue from sales is generally
expected to return to growth in the next 12 months
in Central Europe. Poland and Slovakia have especially
good expectations. In the former, this is probably due
to the good general economic prospects, while in
Slovakia, it is most likely due to the expected reverse
of the downward trend in exports, which is the
engine of its economy.

16 Deloitte Business Sentiment Index - Reflecting views 17

Question 6: H
 ow do you feel about prospects for launching new products or services Q5 vs. Q6 comparative: Do prospects for launching new products and services drive prospects for sales increase?
by your company over the next 12 months? What are the variables that correlate with sales prospects?

Figure 12: Percentage of opinions Figure 13: P

 rospect for launching new products/services Figure 14: Correlation coefficient between sales expectations and other variables
(next 12 months)
100%
11.6%
11.6% 12.6% 80%
12.6% 0.4
100% 58.6% 62.8% 61.5%
56.8% 58.1%
60% 53.3%
80% 45.2% 0.321
6.3% 0.298
6.3% 40% 62.8% 61.5%
56.8% 58.6% 58.1%
53.3% 0.3
0.287
60% 0.267
45.2%
20% 0.235
40%
0%
20% 0.2
-20% 0.156
-15.4%
0% -20,7%
-40% -31.6% -30.2%
-38.7% -36.7%
-20% -45.2% -15.4%
-20,7% 0.1
-60%
-40% -31.6% -30.2%
-38.7% -36.7%
-80% -45.2%
-60%
25.3% 0.0

ia
kia
e

tia

d
c

y
25.3%
Re ech
rag

bli

lan
ar

an
oa

va
-80%
ng
pu

m
e

Po
Slo
Cr
Av

c C

Ro
44.2% Hu

an s

tal

ts
nt

y + cts

r
mp ct
44.2%

the

uc
ia
kia
e

tia

me

6M
y

M capi
co ospe
Re ech

om spe
rag

bli

lan
ar

an

2M od
an no
oa

va

oy
ng
pu

on ro
m
e

Cz

+1 pr
Po

mp e a
s + on
r
Slo
Cr
Av

l
yo ial p

2M mp

ec l p
Ro
Hu

Positive

es new
co quir
od ng

of nera
12
+1 tal e
for anc
ur

go endi

Ac

ser ing
Negative

Ge
Fin

To

Sp

or unch
vic
Definitely optimistic Positive
Definitely optimistic

La
Fairly optimistic Negative
Fairly optimistic
Rather less optimistic
Rather less optimistic
Definitely less optimistic
Definitely less optimistic
Don’t know
Don’t know

Question 6 Highlights
• In all industries and countries respondents are fairly
optimistic about the prospects for launching new
products.
• T he only exception is Czech Republic, where both
positive and negative responses are at 45.2%.
The climate for introducing new products should be
a leading indicator of renewed economic activity.
According to the results, the majority of respondents
viewed the climate for introducing new products fairly
optimistically. The best opinions were in Romania
and Croatia. These two countries, however, have
the largest ”product gap“ in the EU. In Romania it
is due to the relatively low level of GDP, while in
Croatia there is still a need for new products as it has
a relatively young market economy.
Optimism about launching new products and services
proved to be related to expectations about sales.
This last variable was, however, correlated to an
even higher extent with other variables (in fact, this
variable is correlated with most of the other variables,
which is understandable, as the revenue from sales is
the ultimate goal of business activity).
The two top variables, company financial prospects
and total employment are not directly stimulating
sales in 2010.
It is possible also to look for more than one variable
that are jointly related to target variables (in this
case: revenue from sales. Using this approach, it
was found that in the largest share of companies,
increased sentiment for sales (over 12 months) is
among businesses that BOTH feel good about current
financial prospect AND are optimistic about new
product/services launch. In this group, as many as
three quarters of companies feel optimistic about
sales (compared to only 45% of the total sample).

18 Deloitte Business Sentiment Index - Reflecting views 19

Question 7: How do you expect your firm’s total workforce to change in size over the next 12 months? Will it... Question 8: C
 ompared with the last 12 months, how do you expect your firm’s spending on capital goods
(equipment, IT systems, new buildings) to change during the next 12 months? Will it...

Figure 15: Percentage of opinions Figure 16: Views on workforce size Figure 17: Percentage of opinions Figure 18: Firms spending on capital goods
(12 month outlook)
100% 100%
4.2% 1.6% 2.7% 4.2%
4.2% 1.6% 10.5% 2.7% 4.2%
10.5% 80% 80%
100% 14.2% 100%
60% 14.2% 60%
80% 16.3% 80%
16.3%
40% 40% 30.2%
25.8% 25.8%
60% 60% 18.4% 19.2%
20% 12.1% 10.3% 10.0% 14.0% 20% 10.3% 9.7% 10.0%
7.7%
40% 3.2% 40% 30.2%
25.8% 25.8%
0% 0%
18.4% 19.2%
20% 12.1% 10.3% 10.0% 14.0% 20% 9.7%
7.7% 10.3% 10.0%
-20% 3.2% -20%
-16.1%
0% -25.6%
0% -23.3%
-40% -35.8%
-40% -32.3% -34.6%
-36.7% -38.4%
-20% -16.1%
-45.2% -42.3% -20% -43.3%
-60% -44.8%
-60% -55.2% -25.6% -23.3%
31.6% -40% 22.1% -40% -58.1%
-32.3% -34.6%
31.6% -35.8% -36.7% 22.1% -38.4%
-80% -45.2% -42.3% -80% -43.3%
-60% -60% -44.8%
-55.2%
-58.1%

ia
kia
e

tia

d
c

y
ia
kia
40.5%
e

tia

d
c

Re ech
y

rag

bli
Re ech

lan
ar

an
rag

bli

lan
ar

an
40.5%

oa

va
oa

va

ng
pu
-80% -80%
ng

m
e
pu

Cz

Po
m
e

Slo
Po

Cr
Av
Slo
Cr
Av

c C

Ro
Hu
Ro
52.1% Hu
52.1%

ia
kia
ia
kia

tia

d
c
e

tia

y
y

Re ech
Re ech

rag

bli
rag

bli

lan
ar
lan

an
ar

an

oa
oa

va
va

ng
ng

pu
pu

m
e
m
e

Cz
Cz

Po
Po

Slo
Cr
Slo

Av
Cr
Av

Positive

Ro
Hu
Ro
Hu

Positive
Negative Negative
Increase significantly Positive Increase significantly Positive
Increase significantly Increase significantly
Increase somewhat Negative Increase somewhat Negative
Increase somewhat Increase somewhat
Stay broadly unchanged Stay broadly unchanged
Stay broadly unchanged Stay broadly unchanged
Reduce somewhat Reduce somewhat
Reduce somewhat Reduce somewhat
Reduce significantly Reduce significantly
Reduce significantly Reduce significantly
Don’t know Don’t know
Don’t know Don’t know

Question 7 Highlights Question 8 Highlights

• 52.1% of respondents don’t expect their workforce
to change in the following year.
• However, over one third (35.8%) expect their
workforce to reduce over the next 12 months.
• 12.1% expect to hire new employees.
• T he worst outlook seems to be in Croatia and
Czech Republic, the best in Hungary.
Every company is looking at their headcount as they
try to cut costs. So far, headcount reduction has not
been excessive among companies in CE, with up to
half of those surveyed not making cuts or at least
deep ones. The survey found that employment in
large companies is expected to stay unchanged or
decline.
The most significant drop in employment is
expected among the largest companies in Croatia,
Czech Republic and Slovakia. In these countries,
unemployment was relatively low in reaction to the
crisis, but the negative responses reflect the fact
that their employment levels will have to adapt to
the present volume of production – which is now
much lower. Hungary, where over 10% of the labour
force is currently unemployed, is the only country
among those surveyed where further lay-offs are not
expected.
• Reductions are mostly expected in Czech Republic
(60%), Slovakia (43.3%) and Croatia (44.8%).
• Poland is the only country where there is more
respondents expecting an increase of spending
compared with those expecting a decrease.
Investment demand is a very important indicator of
economic sentiments, but only in Poland are senior
managers optimistic about investment perspectives
for the forthcoming year. Poland, however, is an
exception, as it is buoyed by strong consumer
demand, which is a driving force of the economy.
In other countries, companies are in a much more
difficult position, because they cannot rely on strong
demand from the consumer sector. Slovak and
Czech business leaders report the worst situation.
These economies rely strongly on exports and at the
moment (taking into account the current very weak
external demand) they seem to have over-invested.

20 Deloitte Business Sentiment Index - Reflecting views 21

Question 9: W
 ould you say that a decision by your company to acquire another company Question 10: Do you generally expect the regulatory environment for your company in your country
over the next 12 months is…? in 12 months’ time to be…

Figure 19: Percentage of views Figure 20: Asset Acquisition (12 month outlook) Figure 21: Percentage of views Figure 22: Regulatory environment (12 month outlook)

2.1% 4.2% 100% 100%

2.1% 4.2% 1.1%
1.1% 1.6%
1.6%
6.8%
6.8% 7.9%
80% 7.9% 80%
11.1% 100% 100%
11.1%
60% 60%
80% 80%
40% 30.2% 40%
60% 60%
15.3% 17.2% 21.6%
21.6%
17.2%
20% 9.7% 10.0% 11.5% 20% 9.5% 6.5% 6.7% 9.3% 11.5%
40% 6.5% 40% 6.5%
30.2%
0% 17.2% 0% 17.2%
35.8% 20% 15.3% 9.7% 10.0% 11.5% 20% 9.5% 6.5% 6.7% 9.3% 11.5%
35.8% 22.6% 6.5% 61.1% 6.5%
22.6% -20% 61.1% -20% -16.1%
0% 0% -20.9%
-40% -40% -28.4% -30.0%
-34.5% -34.6%
-20% -41.9% -20% -38.7%
-16.1%
-60% -60% -20.9%
-40% -60.0% -57.7% -40% -28.4% -30.0%
-62.1% -34.5% -34.6%
-67.7% -67.7% -41.9%
-70.0% -38.7%
-80% -80%
-60% -60%
-57.7%

ia
kia
e

tia

d
c

y
-60.0%

Re ech
rag

bli
ia
kia
-62.1%

lan
e

ar
tia

d
c

an
y
Re ech
rag

bli

oa

va
lan
ar

an
-67.7% -67.7%

ng
pu
oa

-70.0%

m
e
va

z
-80% -80%

Po
ng
pu

Slo
Cr
Av

c C
m
e

Cz

Po

Ro
Hu
Slo
Cr
Av

Ro
Hu

ia
kia
e

tia

d
y
Re ech
rag

bli
ia
kia

lan
e

ar
tia

d
c

an
y
Re ech
rag

bli

oa

va
lan
ar

an

ng
pu
oa

m
e
va

Cz

Po
ng
pu

Slo
Cr
Av
m
e

Cz

Po

Ro
Hu
Slo
Cr
Av

Ro
Hu

24.2% Positive Positive

24.2%
Negative Negative
Extremely likely Positive Significantlyless
Significantly lessrestrictive
restrictive Positive
Extremely likely
Somewhat likely Negative Somewhat less restrictive
Somewhat less restrictive Negative
Somewhat likely
Neither likely nor unlikely Broadlyunchanged
Broadly unchanged
Neither likely nor unlikely
Somewhat unlikely Somewhat
Somewhat moremorerestrictive
restrictive
Somewhat unlikely
Extremely unlikely Significantlymore
Significantly morerestrictive
restrictive
Extremely unlikely
Don’t know Don’t know
Don’t know
Don’t know

Question 9 Highlights Question 10 Highlights

• In all the countries company acquisitions are very
unlikely, as 60% of responses were negative.
• T he most pessimistic responses came from
Slovakia, the most optimistic ones from Poland.
Although a crisis gives a very good opportunity to
acquire new companies, respondents report that it
is rather unlikely that they will make any takeovers
in the next 12 months. The only country indicating
the possibility of company takeovers is Poland, which
of all the countries surveyed, is in the strongest
economic position. In all of the other countries,
which have suffered significantly from the crisis and
where the companies are struggling for survival, the
probability of any takeovers in the immediate future
is very small.
• 28.4% believe regulation will become more Almost 90% of those surveyed are pessimistic about
restrictive in the next 12 months. any regulatory changes or easing of regulatory
• 61.1% of respondents believe that the regulatory practices.
environment will stay unchanged.
• T he country with the most negative outlook for any
changes in regulation is in Hungary, where 38.7%
of respondents expect the regulatory environment
to become more restrictive.

22 Deloitte Business Sentiment Index - Reflecting views 23

Following the series of 10 questions, we asked participants from the Eurozone one final question. For future surveys this ”additional question“ will be on an
issue of particular topical interest.

Additional Question: How do you evaluate the present availability of new EU grants for your company? Are they...

Figure 23: Percentage of views Figure 24: Availibility of EU grants

100% 100%
6% 1.2%
6% 1.2%
80% 80%
24.2% 100%
24.2%
16.8% 60% 60%
16.8% 80% 41.9% 41.9%
40% 40% 29% 29%
60% 25.5% 25.5% 22.6% 22.6%
20% 20% 13.3% 13.3%
41.9% 11.5% 11.5%
40% 29%
25.5% 22.6%
0% 0%
20% 13.3% 11.5%
-20% -20%
0%
-40% -40%
-20% -44.2% -44.2%
-60% -60% -48.4% -48.4%
-51.6% -51.6% -48.4% -48.4% -53.3% -53.3%
-40%
21.1% -80% -80% -69.2% -69.2%
-44.2%
21.1% -60% -51.6% -48.4% -48.4%
-53.3%

ia

ia
iya

nkida
e

annd
c

lic
ubary
Re ech

epng h
rag

rag

bli

aakr

an
HRu zec

ovla

mla
onvg
pu

-69.2%

m
e

Cz

-80%

RoPo
SPlo
Av

Av

Ro
30.4% HSul

ia
kia
e

d
c

30.4%
Re ech
rag

bli

lan
ar

an
va
ng
pu

m
e

Cz

Po
Slo
Av

Ro
Hu

Positive Positive
NegativeNegative
Easily available Positive
Easily available
Fairly available Negative
Fairly available
Fairly hard to get
Fairly hard to get
Very hard to get
Very hard to get
Not interested in EU grants
Not interested in EU grants
Don’t know
Don’t know

Additional Question Highlights

• 25.6% of respondents feel EU grants are either
fairly or easily available, but twice as many (51.9%)
believe they are fairly or very hard to obtain.
• T he worst availability of EU grants seems to be in
Romania and Slovakia.
• T his question does not apply to Croatia as it is not
yet a member of the EU.
Multilateral funds and credits to CE will rise
substantially in 2009-10 and EU funding will
continue to play an important role in contributing
to infrastructure development and expansion in
the region’s municipal authorities. EU funding is an
important positive distinction for CE, as many other
regions do not have a similar funding body (e.g. Asia,
Latin America, etc.).

Around half (51.9%) of those surveyed felt EU funds

are hard to attain – with 16.9% not interested at all
in EU grants. Almost a quarter (24.4%) felt they were
relatively easy to obtain.

24 Deloitte Business Sentiment Index - Reflecting views 25

Appendix:
Our approach

Deloitte Business Sentiment Index - Reflecting views 27

Methodology – At a glance
• A series of telephone interviews were conducted.
• We interviewed either CEOs and/or CFOs
professionals.
• Sample size: N=190.
• Fieldwork administration: July 23rd - August 10th,
2009.
• Data collection method: Telephone interviews (95%
of the sample).
• Languages of data collection: local/English.
The results are based on a quantitative survey of the
Directors (CXO level) of 190 companies from Poland,
Hungary, Croatia, Czech Republic, Romania and
Slovakia. We invited the sample drawn among
the 200 largest companies in each country.
28
Additional resources
Deloitte CE Top 500 report
The Deloitte Central Europe (CE) Top 500 report ranks the 500 largest companies in
Get a broader view
Central Europe
Top 500 the region and draws on the knowledge and insights of Deloitte’s professionals along
with renowned economists and academics to provide a valuable regional commentary
on current business and industry trends. The report makes a special focus on seven
industry sectors and provides analysis of the dramatically differing corporate results
seen between Q1 2008 and Q1 2009. Overall, it provides an in-depth and wide-
ranging insight of the latest Central European developments and is an essential tool for
understanding the wider dynamics at play across the region.
Main Report 2009
For more information go to www.deloitte.com/cetop500
CE Top 500 Country-by-Country report
This report, covers 18 states across Central Europe is a vital component of the
Get a broader view
CE Top 500
Deloitte CE Top 500 programme. The report gives the reader a rapid executive
overview of the main political, social and economic forces at play in each country
and also gives a commentary on the current performance and future prospects of
the region as a whole.
For more information go to www.deloitte.com/cetop500
Country Reviews
Global Global Economic Outlook 3rd Quarter 2009
Economic In past months, pundits worried about when the economy would bottom out,
Outlook
A Deloitte Research publication | 3rd Quarter 2009
what policies would cause such an event to transpire, and whether government
Light at the end
of the tunnel? policymakers were up to the task. Today, the zeitgeist has shifted toward
What to expect
from the recovery a discussion about the shape of the recovery.
The research tool consisted of 10 single choice The nature of
the recovery
Lessons from the past
The outlook for
commodities
questions about the current situation or their
Don’t wait for the bounce
The United States
Now for the hard part
Eurozone
Uneven prospects and
expectations about the future. The sample represents
a slow journey
a good balance of region’s largest companies with
respect to industry, source of capital (44% local vs
56% foreign capital), turnover and the job role of the
respondent (37% CEOs, 44% CFOs and 19% other
members of the board). Regarding the legal status,
Global powers of the consumer products industry 2009
65% are stock companies (of which fewer than 20%
Following on from last year’s highly successful inaugural report, Global Consumer
are listed on the local stock exchange).
Business, Deloitte has produced a study ranking the world’s 250 largest consumer
Evolve, survive and thrive
products companies. Similar to last year, this report includes regional and product
Respondents were drawn from the following sectors: Global powers of the consumer
products industry 2009
category break-downs, as well as an expanded Q-ratio section. However, this
• Automotive
second edition of the report also includes a section on strategies for the changed
• Banking
economy that speaks to Deloitte’s value proposition for the industry.
• Technology
• Media and Telecommunications
Consumer Business
• Consumer Business
• Insurance
• Construction
• Energy and Resources. More information on our recent publications can be found at www.deloitte.com
Deloitte Business Sentiment Index - Reflecting views 29
Leadership
and governance

Client service responsibilities are a key

element of our partners’ roles. Their
commitment to quality and integrity in
leading teams helps deliver excellence to our
clients.

Office Managing Regional Function Regional Industry Project Sponsors Central Europe
Partners Leaders Leaders Clients and Markets

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30
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