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Romania-based business executives, more pessimistic than last year, study says

Business executives in Romania are more and more pessimistic about the local workforce environment, a PwC study shows.

The main concerns are related to the availability of the key skills and the change of the workforce demography. The study reads that 38% of the business leaders in Romania consider that global economy will slow down its growth in the upcoming 12 months, and Germany will remain the most important country for the growth perspective of the companies based in Romania.

After five years when the share of the organization leaders in our country who counted on a bigger growth of the global economy has been significantly superior to those of the company managers who forecast decreases of the growth pace, the study this year brings a reversal. A higher percentage of the <pessimistic> was recorded only in 2012 and 2013, when the Romanian economy was trying to get out of a tough and long recession,” the PwC Global CEO Survey for Romania pointed out.

The percentage of 38% was almost three times higher as against the one in the past report (13%).

As for the Central and Eastern European region, business executives are adjusting downward their forecasting for 2019 due to the growing political and economic incertitude in the region. 31% of the general manager in the CEE region expect a decrease of the global economic growth. One year ago, the percentage was 6%.

In Romania, the percentage of the respondents who voiced confidence in the development capacity of their own companies in the coming 12 months have dropped to 35% from 38% (last year) and from 52% (2017).

“Confronted with the new realities (populism, protectionism, labour market and trade barriers), organisations are looking inward and mainly relying on internal resources to drive revenue growth over the next 12 months. Around three quarters of CEOs are focusing on operational efficiency, and a similar percentage on organic growth. Around three out of every five-business executives worldwide and in Central and Eastern Europe are planning the launch of new products and services. The percentage of their counterparts in Romania planning to launch such initiatives to drive revenue growth is substantially lower (43%),” the study further says.

CEOs’ dwindling optimism has an impact on expansion plans outside their home territory. Given the volatile global economy and political hindrances to globalisation, business executives seem less certain about their plans for expansion outside their domestic markets. More than a third of the Romanian executives (35%) surveyed consider that the expansion becomes uncertain. Therefore, they don’t know what territories to nominate when they are asked what are their top three countries – other than the one where they are headquartered – for the development perspectives of their own organization over the next 12 months.

For Romania, Germany, with 30% of the respondents naming it, is the most important country for the growth perspectives, and occupies this position for several years. The percentage is lower than the 43% registered last year. Germany is followed this year, at considerable distance by France (12%) and The United States of America (10%, compared to 41% in 2018’s edition). USA is head to head with Great Britain and Bulgaria.

What do CEOs in Romania fear the most?

CEOs in Romania are more concerned than their counterparts worldwide and in the region about the large number of potential threats to growth prospects. Inadequate infrastructure is the number one concern, as in 2018, with almost two-thirds (62%) of executives in Romania saying they are extremely concerned. The same percentage appears this year when it comes to uncertainty about public policy. The next two challenges, in the opinion of around half of the respondents in Romania, have to do with the workforce – the availability of people with key skills (50%) and the change in the workforce demographics (47%). Business executives in Romania are focusing their attention on ways for their companies to adjust to rising populism, which ranks last in the top five potential threats.

Of the broader societal risks, beyond the by now well-established threats on the minds of business executives in the region and in the entire world (geopolitical uncertainty and public policy uncertainty, over-regulation), CEOs in Romania have some specific concerns for 2019. They feel, to a significantly larger extent than their counterparts worldwide and in Central and Eastern Europe, threatened by inadequate infrastructure, volatile exchange rates and populism.

An insufficiently developed infrastructure causes, among other issues, costs and lead-times on orders to increase and Romania’s attractiveness to decrease in the eyes of prospective investors interested in developing new production facilities. The concern about the volatility of the exchange rate is well grounded, given the sharp rise in the euro against the Romanian currency since early this year. The business environment is very sensitive to many of the decisions that have influenced the economy over the past year. Transparency together with economic and legislative predictability are the most asked for elements during the dialogue with governmental decision makers. They are needed so that development of the Romanian companies and continuous investment plans could be done on solid bases”, says Ionuț Simion, Country Managing Partner, PwC Romania.

In terms of business-specific potential threats to companies’ growth, talent availability, technology and consumers are still the main challenges on the agenda of business executives.

PwC conducted 1,378 interviews with CEOs in 91 countries, over the last quarter of 2018. For this 9th edition of the Romania report, we conducted 60 interviews with CEOs active on the local market.

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