Business sentiment worsened among companies operating in central and Eastern Europe in the three months to April, although the pace of the fall slowed due to resilience in countries like Poland and the Czech Republic. The Thomson Reuters & OeKB Central and EEBCI showed drops in business climate in every country in the region, with Ukraine, Hungary, Bulgaria and Russia suffering most.
The survey as a whole fell to minus 15 in April, from minus 10 in January. It was dragged down by a steep fall in companies' assessments of their current business situation, but the category of business expectations, while still negative, improved slightly. The survey also showed companies' economic outlook actually improved slightly, but was still at an eye-popping negative 56, from negative 59 the previous quarter.
When the index falls below zero, it shows corporate morale is negative. The business sentiment index plunged 39 points and turned negative for the first time in January, so the relatively light fall this time showed some fledgling signs for optimism.
"But this glimmer of hope cannot be interpreted as an economic turnaround in Central and Eastern Europe," said Austrian export financing bank Oesterreichische Kontrollbank (OeKB), which compiles the index. The poll was taken among 400 international firms managing 1,400 companies in emerging Europe as the financial crisis kept its hold on the region, although capital markets have clawed back after taking a thrashing at the start of the year.
The survey showed the business climate was the darkest in Hungary, a country relying on rescue aid from the International Monetary Fund, the EU and the World Bank, with a score of negative 32.
It and Bulgaria were the most pessimistic looking forward, even though Hungary's forint reached a four-month high last week after hitting an all-time low in February. Ukraine scored negative 31 in business climate, better than the previous quarter although still deep in the red. Direct investors there were also less pessimistic than in January, but their reading improved only to minus 62, from minus 77.
"This could suggest that the Ukrainian economy's tailspin is slowing," the survey said. Overall business expectations were still well below zero at minus 23, but an improvement over the previous figure of negative 32. Businesses in Ukraine and Russia were less pessimistic about the next six months than they were in January.
And in Poland, the Czech Republic, Slovakia and Slovenia, the picture was brighter. They all scored zero or positive figures for the "current business situation" category, versus negative figures for all the other countries. "Despite a reduced dynamic, business there is still going well, and (businesses) are less sceptical about the prospects for growth compared to January 2009," the OeKB said.
In industry, business climate was especially poor in the transport, manufacturing and real estate sectors, motors for the emerging boom over the last few years. Investment was still falling across the region, but also at a slower rate, the survey showed, with some of the poorest figures for Hungary, Slovakia, Romania and Ukraine.
The quarterly survey was first published in January 2007. Distributed exclusively on the Reuters System, the Thomson Reuters & OeKB Central European Business Climate Index is based on quarterly surveys of 400 international companies with regional headquarters in Austria, which manage 1,400 affiliate companies in 19 countries in central and eastern Europe.