Romanian companies are concerned about the slowdown in economic growth, the expected increase in unemployment and high inflation, according to the Deloitte 2023 Romania CFO Survey, conducted at the end of last year among over 120 chief financial officers (CFOs) based in our country.
The survey reveals a sharp drop in the Romanian CFOs’ economic growth expectations, as only 17% of the respondents believe the economy will grow by more than 2.5% in 2023, compared with 57% of last year’s participants. The majority of the surveyed CFOs (57%) expect an economic growth of maximum 1.5%, which shows more optimism than across the Central European region, where nearly three-quarters (73%) of the participants see economic growth of less than 1.5% for their country this year.
More than half (55%) of the Romanian CFOs believe the economic conditions will deteriorate and lead to higher unemployment this year, compared with just a third (33%) last year, but, in this case too, the change is less dramatic than in the CE region, where the percentage of CFOs expecting higher unemployment more than doubled from 33% to 68%, with particularly negative prospects in Poland, Hungary and the Czech Republic (over 85% of respondents).
Almost two-thirds (63%) of Romanian CFOs expect inflation level to further increase in 2023, amid supply chain disruptions which pushed up the prices of raw materials, commodities, energy and transport, which have ultimately led to higher consumer prices.
The local expectations are in line with the CE results (70% of respondents), but the percentages are lower than last year, when over 90% of the CFOs based in Romania and Central Europe expected increases. The inflation expectations for Romania almost doubled compared to last year’s survey, from 5.7% to 11.2% in 2023.
"This year’s survey shows several changes in local and regional CFOs’ sentiment, as the optimism visible in the 2022 study was affected by the geopolitical situation which impacted significantly the European economies through new supply chain challenges and increased inflation. It is important to highlight, though, that the survey captures CFOs’ expectations at the end of 2022, when IMF and World Bank economic forecasts were more pessimistic than now, and that the respondents in Romania have shown more optimism than their Central Europe peers, fueled most likely by the macro-economic forecasts for the region, which indicate Romania will remain among the performers amid a regional economic slowdown,” said Zeno Caprariu, Audit Partner, Deloitte Romania, and coordinator of the CFO Program in Romania.
Companies in Romania expect further cost increases across all categories, especially workforce costs (94%), due to higher salary demands from employees struggling with the effects of high inflation, production and service delivery costs (90%), transportation costs and cost of debt (88% each). The only stable costs, according to local CFOs’ estimations, are VAT and corporate tax, indicating a sense of fiscal stability.
More than half (55%) of companies based in Romania feel a high level of uncertainty, in line with the trend across the region, which makes CFOs more risk averse. A large majority of them (86%) believe that now is not a good time to take greater risk onto their balance sheets, which is valid for companies across all sectors, except for those in energy, utilities and mining and consumer business.
Unlike their CE peers, Romanian CFOs’ biggest risk remains the shortage of skilled professionals (63%), followed by increasing regulations (32%), reduction in domestic demand (31%), economic growth outlook (25%), geopolitical risks (23%) and currency fluctuations (20%). At the regional level, the geopolitical risks have climbed to the top of the CFOs’ concerns (45%).
While most CFOs in Romania remain optimistic about the evolution of their companies’ revenues (69% expect them to increase), over 40% estimate a decrease in operating margins.
The interest rates increase has cut companies’ appetite for bank loans, according to the survey. Only 24% of the local respondents still think that bank borrowing is an attractive option to fund their company (down from 42% in 2022), while 40% believe the opposite, a change that has also been visible across the region. Internal financing remains Romanian CFOs’ preferred source of funding (54%).
The Romanian CFOs’ top three priorities remain cost reduction (27%), organic growth (23%) and digitalization (11%), followed by expansion into new markets (10%). At the opposite end, expansion by acquisitions represents a priority for only 1% of the respondents. Meanwhile, for CFOs in the region, cost reduction is no longer the top priority (9%, down from 20% in 2022), and their focus is now on growing their businesses, either through organic growth (21%) or growth in existing markets (11%). Digitalization is also a top priority for 9% of CFOs in CE.
The Deloitte 2023 Romania CFO Survey was conducted between late October and mid-December 2022. Local answers are compared to the aggregated data gathered from more than 620 CFOs based in 15 countries - Albania, Bulgaria, Bosnia and Herzegovina, Croatia, the Czech Republic, Estonia, Hungary, Kosovo, Latvia, Lithuania, Poland, Romania, Serbia, Slovakia and Slovenia.