Business evolution in 2017 report: 20 pct of Romanian companies expecting negative profits

According to the survey report “Business evolution in 2017” released this Tuesday by Valoria, in the second half of the year, Romanian companies have made significant adjustments to previously projected figures for turnover, profit, employee numbers, salary levels and investments for this year. The percentage of companies expecting negative profits is now 20 percent compared to only 6 percent at the beginning of the year, while the percentage of companies which do not make investments in 2017 reaches 26 percent in the second half of the year versus 10 percent in the first half.

“Unfortunately, the comparative data indicate a change in the business sentiment, the appetite for investment being the one that eroded the most, indicating a preservation instinct already activated by tax and legislative developments in recent months,” says Constantin Magdalina, Emerging Trends and Emerging Technologies expert, co-author of the research.

In the last 6 months, there is a slight percentage increase of companies expecting a fall in turnover this year, from 13 percent to 17 percent. There are negative adjustments of 1-4 percentage points in the percentage of companies expecting their turnover to grow in 2017.

The profit forecasts for the second half of 2017 are pessimistic. Although 31 percent of companies expect their profit to grow by 1 percent -5 percent, 19 percent expect the company’s profit to be higher by 5 percent-10 percent and 10 percent forecast an increase from 20 percent to over 30 percent. Also, in September 2017, 28 percent of companies have negative expectations about their profits in 2017.

According to the survey results, 26  percent of companies (compared to 10 percent in the first part of the year) say they will not make investments in 2017. Only 15 percent of companies want to increase their investments by 10-30 percent versus 36 percent previously.

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The most important challenges for companies in the second half of 2017 are: political and legislative instability (54 percent vs. 28 percent in the first part of the year), the general state of the economy (49 percent vs. 41 percent), the problems with the labor force (35 percent vs. 17 percent), the steep increase of the salary level (27 percent vs. 13 percent) and the decrease of internal investments (21 percent vs. 23 percent).

The most important opportunities for companies in the second half of 2017 are: consumption growth (65 percent vs. 19 percent in the first part of the year), export and opening of other markets (59 percent vs. 33 percent), digitalization and opportunities online (42 percent vs. 37 percent), partnerships with other companies (31 percent vs. 27 percent) and access to European funds (30 percent vs. 17 percent).

“We will see how these trends will be reflected next year in the next blitz survey of March 2018,” concludes Elena Badea, managing partner Valoria.