Business Sentiment Index: Hopes down

Executives in Central Europe are pessimistic about the prospects for their economies in 2012, the latest Business Sentiment Index published by Deloitte shows, with Hungary no exemption.

The composite index in Hungary is now down six points from June 2011 to 102, just two points above the level of the first Index in September 2009.

It seems that Hungary is on the cusp of a second wave of the economic crisis. The results of the first two quarters of 2011 were disappointing, even before signs of a potential double dip began to emerge over the summer. Consumer expenditure, industrial output and foreign direct investment have all slowed considerably in the past six months. This comes on top of the weak GDP growth over the past four years. As a result, executives have had to postpone any hopes of solid business results and a sustainable economic recovery.

Despite the more negative outlook for the country, 49% of the Hungarian executives in this survey expressed a balanced view about the financial prospects for their company, up from 33% in June 2011. Slightly fewer executives expect a positive outlook for their companies (37% compared to 40% in June 2011) and fewer expect a negative outlook (14% versus 27% in June).

For the first time, a majority (57%) of Hungarian executives feel that revenues from sales will remain unchanged over the next 12 months. Only 29% remain optimistic that revenues will increase, while 14% of those surveyed expect revenues to reduce.

Exports and imports have started to slow in Hungary, with imports falling faster than exports. Although Hungarian executives expect new opportunities to develop in Asia, with more companies turning to Chinese suppliers and technology, it is clear that falls in export levels will pose a very severe threat to any economic recovery in 2012. Executives will be watching the export situation closely as the internal market is not large enough to support growth by itself, the survey notes. PF