Company Managers Are a Bit More Optimistic

Company Managers Are a Bit More Optimistic

The SMEs’ Economic Activity Index Survey, made by  IBS – International Business School – and  Policy Agenda, shows a growth by 3.9 percentage points compared to the previous quarter. Figures confirm that the expectations of SME managers have reached the level registered 3 years ago. This fact may raise hopes that the situation of small- and medium enterprises will start improving in the coming months, resulting eventually in sustainable growth.

Company Managers are More Optimistic

The declining trend of the SME index seemed to have changed from the 4th quarter of 2012. Over the last year, the values reached again those observed at the beginning of 2011. For a sustainable improvement it is required that the figures for the coming quarters of 2014 remain as good as the currently registered ones – (50.3%) -, and the index should remain permanently above 50 percent. Looking at the forecasts by SME managers, it is apparent that those companies which survived the deep recession may eventually leave behind the worst of it.

28% of enterprise managers opine that the state of the Hungarian economy will worsen during the next half  year. This figure is slightly lower than 3 months ago (33%), but it is a real low as compared to pessimism that prevailed 18 months ago  (56%).

In the previous survey period, only 27% of SME managers expected short-term recovery and growth in the Hungarian economy. This was a jump relative to the 10% figure that prevailed through the past 12 months, confirming the growth forecasts of the the analysts. In the current survey period, however, the percentage of those expecting growth became even more pronounced: the majority (53%) of SME managers see short-term recovery coming.

In previous survey, managers assessed, as a rule, the situation of their own enterprise more optimistically than that of the country.  According the the current survey, this is now more balanced as 49% of  managers expect improvement in own business for the first half of 2014 whereas 53% expect growth in the Hungarian economy.

Real Optimism or Success Propaganda?

The Hungarian economy produced nearly 2% growth in the 3d quarter of 2013, considerably surpassing analysts’ expectations. This fuelled an intense success propaganda on the part of the government. Nevertheless, a detailed analysis of the data shows that it was, for the most part, a single factor, i.e., agriculture behind the astonishing performance.

Partly for this reason, it was particularly interesting to see whetherSME managers sensed any upsurge of growth in their particular industries. In fact, 54% of respondents gave account of recovery in their industries, whereas 24% continued to report declining economic performance.

On a 5-grade scale, the average of the respective answers was 3.4, clearly suggesting that the majority of managers sensed growth in their respective sectors. Should this optimistic view prove more than the effect of government propaganda,  we are supposed to see improving statistical figures in the national economy in thecoming months.

Improving Liquidity

The liquidity position of SMEs is continuously monitored by the IBS Policy Agenda as a part of their SME Economy Activity Index survey. The current data show  massive improvement:we have not registered as high a percentage of respondents expecting improvement in their respective liquidity status. Compared to the 8% low in September 2012, currently more than one thirdof respondents see a strenthening liquidity position in their companies.

However, it is a warning signal that the ratio of those who await a worsening in their respective liquidity also increased (by 3 percentage points) relative to the previous survey period. Should these trends prove to be lasting, one could easily experience a sharp split in the SME sector into an optimist wing and a pessimist one. This could foreshadow the demise of numerous companies while others may tread on the path of steady development. This may as well be considered as a healthy process from the viewpoint of national economy asa certain self-purification. However, the short-term effects of such a process must be managed and whether the economic policy and mechanisms of the goovernment are up to the task remains yet to be seen.

This was a representative survey, based on the responses received from 500 company managers involved, to provide an overview regarding the economic activity of small and medium sized enterprises. The survey was performed in the period between 13 December and 19 December 2013 on an on-line company panel, and through telephone interviews. The IBS-Policy Agenda SME Economic Activity Index is formulated based on the business survey index-calculation. Read more about the methods applied.