Deloitte: CFOs forecast average CEE GDP growth of 0.33% this year

by   CIJ News iDesk III
2023-02-07   11:57

Increased economic uncertainty in the Central and Eastern European region, caused among other things by the ongoing war in Ukraine, has surveyed finance department managers expecting an economic slowdown in the coming months, according to the "2023 Central Europe CFO Survey" report by consulting firm Deloitte. They forecast GDP growth in the region this year at 0.33%.

Compared to previous editions of the survey, the sentiment among CFOs coming from Central and Eastern European countries has deteriorated significantly. The value of the Confidence Index for 2023 fell to - 15% - 25 percentage points lower than a year earlier. This is the result of a deterioration in sentiment regarding each of the index's components. Last year's Economy Index value was - 6%, while in 2021 it was 44%. The diametrical change is due, among other things, to the decline in economic growth predicted by respondents. In the latest edition of the survey, the predicted value of the region's GDP was 0.33% - slightly higher than two years ago, while compared to 2022 the difference is already 2 percentage points, according to the announcement from the report..

As in the case of economic factors, issues related to the business environment also worry representatives of financial departments of companies operating in the Central European market. This is evidenced by the value of the Business Environment Confidence Index, which stood at -46% in the latest edition of Deloitte's survey, down 6 percentage points year-on-year. One of the reasons for this trend is high business uncertainty, as indicated by 61% of respondents - a year ago, one in two surveyed CFOs held a similar view. This is the highest result since 2015, it was indicated.

More than 90% of respondents anticipate increases in the areas of employment, production or supply costs in the next 12 months, while one in four respondents expect higher expenses for transportation or those related to raising debt capital. When asked what they see as their main concerns, CFOs pointed to a decline in domestic demand (45%), geopolitical risks (45%) and a shortage of skilled labor (42%). While the last issue has ceased to be the most frequently cited risk factor compared to previous years (due to, among other things, a 22 percentage point drop in responses), geopolitical risks and shortages in domestic demand have gained in importance, according to the report.

Concern among finance department representatives also relates to the condition of the companies themselves. The percentage of respondents predicting revenue growth declined by 10 percentage points year-on-year to 58%. What's more, rising operating costs are having a negative impact on companies' margins, which 42% of respondents expect to decrease.

The fifteenth edition of the "2023 Central Europe CFO Survey", conducted in October and November 2022, involved more than 600 CFOs from 15 Central and Eastern European countries.

Source: Deloitte and ISBnews