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Romanian CFOs: In the Mood for Growth in 2016

Date: 02/17/2016
Source: Deloitte

After a year marked by healthy macroeconomic indicators, Romanian CFOs are optimistic regarding the country’s growth in 2016 and are increasingly looking to either enter new markets or expand in size, according to the 7th edition of the Deloitte Central Europe CFO Survey which includes Romania.

The survey shows that nearly a quarter of the interviewed CFOs estimate a GDP growth up to 3.5%, which is in line with the World Bank’s forecast of 3.9%. Meanwhile over half of those interviewed (52%) are starting to see new markets as a source of revenue, compared to 33% last year. In addition, 57% of the CFOs expect the number of employees to increase.

“If three or four years ago companies were faced with budget cuts following the economic slowdown, companies are today looking again at expansion, as they are considering new markets more than before or are looking to expand their teams,” said Ahmed Hassan, Partner Deloitte Romania and CFO program leader. “On the other hand, the survey reveals talent shortage at middle, top and senior levels which will be an important issue for companies to consider over the next year.”

Despite Romanian CFOs showing a high degree of optimism regarding the future of the CEE region, the majority is still cautious when taking risks: 78% of the CFOs believe it is not a good time to take larger risks and 76% are looking at internal financing as a source of funding rather than bank borrowing.

Added Hassan: “Recent changes such as the new Fiscal Code are also well regarded by CFOs as 69% believe these will have a positive impact on their business. In the short term the level of optimism and business sentiment will be influenced by economic and political stability.”

According to Mircea Varga, CFO Tiriac Holdings, Romania could become one of the most attractive economies in Europe depending on its ability to manage a favourable moment.
”Despite a discouraging year-beginning marked by global turbulences with main indexes reaching historic lows for the last five years, dramatic de-capitalization of important European banks in the context of discrete adoption of the "bail-in" measure for the European banking system and serious questions concerning the US economy’s entry into a new recession, I remain optimistic regarding Romania’s economic growth in 2016. I believe a 3.5% to 3.8% increase of its GDP is still sustainable,” Varga said.

“In this respect I believe that the tax relaxation started in 2015, together with the strengthening of the financial and fiscal discipline along with the tightening of the tax collection measures, are necessary ingredients for the sustainable development of a healthy economy. Romania’s economy could become one of the most attractive economies in the region and- why not- in Europe but that depends on us how well we will succeed to manage this favourable moment,” Varga added.

In his turn, Bogdan Popa, Vice President & CFO Raiffeisen Bank Romania said that 2016 will bring more competition among banks in their efforts to bring new investment opportunities particularly for SMEs.
”In 2016 the economic growth will continue, at micro level we will see bigger differences between the players, an accelerated adoption of new technologies and adaptation or renewal of the business models. The focus will stay on the conservation of resources, even though the decrease of costs is no longer a purpose in itself, the increase of productivity will remain a concern. Banks will search for lending opportunities especially at SME level, trying to bring on the market advantageous credit lines for investments in innovation, technological renewals and workforce development,” Popa said.

Key Findings of the Deloitte CFO Survey in Romania
• Almost 70% of the CFOs believe that the current tax changes will have a positive effect
• 40% consider shared service centers (SSCs) as beneficial for the company
• 45% of the CFOs believe that lack of the required skills is one of the main reason their company has difficulties in finding qualified personnel
• 33% of the CFOs predicts that CAPEX will focus on IT hardware and software and plant & equipment
• 30% of the CFOs expect that investment in hardware and software will be one of the top 3 IT challenges

Economic Outlook
• 24% of the CFOs see a GDP growth between 2.6 and 3.5%
• 53% of the CFOs are optimistic regarding economic growth
• 78% of the CFOs believe that this is not a good time to be taking greater risk onto their balance sheet down by 7% from previous year
• 52% of the local CFOs are starting to see new markets as o source of revenue compared to 33% last year
• 59% of the local CFOs are seeing growth opportunities in the local markets compared to 62% last year
• 67% of the Romanian CFOs believe that the Greek crisis has seriously affected the stability of the Eurozone
• 63% of the CFOs are considering the current economy as having a normal level of uncertainty as compared to 37% the year before

Costs

• Direct cost reduction is no longer a priority for 59% of the CFOs
• Indirect cost reduction is somewhat important for 67% of the CFOs
Financing
• 30% of the CFOs are seeing bank borrowing as unattractive as compared to 15% last year
• 33% of the CFOs believe that the cost is likely to increase in the next 12 months
• 41% of the CFOs have rated corporate debt as attractive while 33% consider equity as an attractive source of funding
Talent
• 51% of the CFOs believe that there will be a decrease in unemployment
• 62% of the CFOs do not expect talent shortages in the finance area over the next year
• 73% of the CFOs expect talent shortage in the middle to top level
• 57% of the CFOs expect the number of employees to increase

Company’s growth outlook
• 76% of the CFOs are looking at internal financing as a source of funding for the company
• 71% of the CFOs are considering business remodelling or restructuring to be a priority for their business
• 50% of the CFOs are considering operating margins to increase
• 78% of the CFOs expect an increase in revenues

The 7th edition of the report represents the views of almost 500 CFOs based in 11 Central European countries: Bosnia and Herzegovina, Bulgaria, Croatia, the Czech Republic, Hungary, Lithuania, Poland, Romania, Serbia, Slovakia and Slovenia. The survey was conducted between August and October 2015. The survey tracks the latest thinking and actions of CFOs representing largest and most influential companies in the Central European region. It explores top-tier CFO issues across four areas: business environment, company priorities and expectations, finance priorities, personal priorities.
For more information, see: http://www2.deloitte.com/global/en/pages/about-deloitte/articles/2016-Deloitte-CE-CFO-Survey.html.


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