Central European companies have accustomed themselves to operating in challenging economic conditions, according to Chief Financial Officers (CFOs) from Central European countries. Although over half of the respondents still anticipate inflation growth, an increasing number of companies are also planning to boost investment spending, as exposed in the “2024 Central Europe CFO Survey” report prepared by advisory firm Deloitte. Among the surveyed, a decline in perceived uncertainty was noted, but this sentiment still accompanies over half of the respondents.
The 16th edition of the 2024 Central Europe CFO Survey participated 544 CFOs from 15 Central European countries. They took part in the survey between October and December 2023, and the results provided an assessment of the mood among the representatives of the management board of finance departments of companies in the region. The respondents also shared their forecasts for the next 12 months.
A reflection of the compiled responses is the CE CFO Confidence Index, which consists of three sub-indices. Each mirrors the financial directors’ views on business environment (Business Environment Confidence Index), economic processes (Economy Confidence Index), and the perspectives of the companies represented by the respondents (Company Perspective Confidence Index).
Growing CFO Optimism
The latest reading of the main index points to a significant improvement in mood among the surveyed CFOs. The Confidence Index for 2024 amounted to 17 points. This is not only almost twice as high as the previous year, but also the highest level of the indicator since before the COVID-19 pandemic.
“The results of the latest edition of the survey are proof that business is adapting to new, tougher conditions. Despite still dealing with instability – the war in Ukraine continues, tensions in the global economy have only slightly decreased, but this is an improvement compared to the situation a year ago. Global supply chains are operating more smoothly, commodity prices are also normalizing. CFOs, taught by their experience in recent years, see this improvement in their environment and despite many challenges, they look optimistically at growth prospects,” says Julia Patorska, a partner, and leader of the economic analysis team, Deloitte.
Economic Realism
Despite this year’s Economy Index result being the lowest of all sub-indices, compared to the previous year, respondents express more optimism about economic factors. The most frequently indicated response to the question regarding the anticipated GDP growth of Central European countries in 2024 was 1.1%. A year earlier, most responses indicated a three times lower growth rate. By 30 percentage points to a level of 38%, the proportion of CFOs predicting higher unemployment during the next few months fell. Fewer and fewer managers also anticipate inflation rate growth: 57% vs 70% a year ago. The respondents also shared their opinion on the predicted inflation rate in their countries and across the Euro zone. The average expected inflation in the first category was 6.1%, while for the Euro zone it was 4.1%. The most significant differences are visible in predictions concerning, e.g., Poland – 7.5 vs. 4.3%.
“In the results of the current survey, I notice a considerable caution of CFOs. Respondents see an improvement in the business environment and are also more optimistic about their company’s prospects. At the same time, however, they do not believe that the situation is improving more broadly, in the entire economy. This is well visible, for example, regarding Poland – 57% of respondents think that GDP growth will not exceed 1.5% this year, and only 8% expect growth above 2.6%. Meanwhile, half of the economists surveyed by the National Bank of Poland expect that GDP growth will be 3% or more. So there’s room for a positive surprise,” says Dr. Aleksander Łaszek, a senior manager in the economic analysis team, Deloitte.
Increasing Investments
Survey participants view the development prospects of the companies they represent more positively. This is evidenced by the latest reading of the Company Perspective Confidence Index sub-index, which was 11 points higher than 12 months ago. The proportion of CFOs declaring greater optimism in this area has also increased to 36%, although this is still less than in 2021 or 2022.
This change of approach is related to changing expectations regarding forecasted company revenues. So, 61% of respondents expect higher incomes in 2024, which means an increase of 3 percentage points compared to the previous year. Noteworthy also is the change in the mood regarding operating margins – 35% of respondents expect their growth, 10 percentage points more than a year earlier. More and more entities also plan to increase investment outlays (39% vs 36% a year earlier) and anticipate employment growth (32%, or 2 percentage points more than at the end of 2022).
“The approach of CFOs to the prospect of the region’s economic recovery is characterized by realism. Although a significant portion of respondents foresee the possibility of a positive scenario unfolding, the answer distribution indicates that most are cautious about this. On the other hand, it seems that companies have learned to operate in highly unstable conditions. Greater certainty, in turn, leads them to undertake pro-development actions, evidenced by the declared increase in investment outlays,” says Robert Nowak, CFO Programme Lead, partner in the Tax Advisory department, Deloitte.
