CFOs in Bosnia and Herzegovina predict the economy to stagnate in 2014
CFO Survey in Bosnia and Herzegovina
Sarajevo, 6 March 2014 – According to Deloitte's CFO Survey in Bosnia and Herzegovina1 , as many as 71 percent of CFOs from Bosnian-Herzegovinian companies envisage the economy to stagnate in 2014. In addition, more than half of the respondents describe the overall financial and economic uncertainty faced by their companies as high. Despite that, there are reasons to be optimistic, as 57.4 percent of the respondents assess the outlooks of their companies to be better than half a year ago.
This year Bosnian-Herzegovinian CFOs will focus first on reducing the direct and indirect costs and then on increasing their revenue on the existing and new markets. ‘This year, new investments will be the lowest priority of CFOs from companies based in our country. This is not surprising given that three-fourths of the respondents feel that this is not the time to take additional risks onto companies’ balance sheets’, says Sabina Softić, Deloitte Partner, elaborating further that it is interesting to note that, in this respect, Bosnia and Herzegovina belongs to the group of Central European countries with a higher risk appetite, with only Romania, Czech Republic, Poland and Lithuania demonstrating a more positive sentiment of the 14 countries covered by the survey.
The survey has shown the unemployment rate is expected to increase slightly in the next period. Thus, 42 percent of the respondents do not expect any changes, while 38 percent expect the number of unemployed to rise moderately, and 4 percent anticipate a considerable increase in unemployment. On the other hand, lack of qualified staff, especially at middle and top management levels, is to be felt strongly.
As regards sources of funding, almost half of CFOs (49%) do not expect the gearing ratios of their companies to change this year. On the other hand, 28 percent have set their minds to reduce the ratio and 23 percent aim at increasing it. Twenty-seven percent of the surveyed CFOs consider loans to become harder to obtain. Still, a vast majority is confident that loans will be available as usual, whereas only 9 percent consider loans to be readily available. ‘The findings correspond with macroeconomic data showing a trend of increasing domestic savings and deposits,’ explains Softić and continues: ‘The growing share of bad debt forces banks to increase their provisions and define less favourable financing terms and conditions in response to the expected financing cost increase, although only 6 percent believe the increase will be significant.’
CFOs in Bosnia and Herzegovina also expect the next 12 months to reveal focus on restructuring or reorganisation (71%), which is in line with the cost-reduction strategy and the focus on a better utilisation of available resources. In Bosnia and Herzegovina, 53 percent of CFOs believe that the number of mergers and acquisitions will increase in the upcoming 12 months, which is somewhat in line with the latest trends in Europe. At the same time, 37 percent do not expect any significant change in this segment, and 10 percent anticipate the M&A intensity to decrease. ‘Borrowing from banks is still more attractive than raising capital,’ says Softić.
The CFO confidence index in Central Europe indicates that there is some optimism emerging. Yet, despite the indications, the majority of Central Europe's CFOs still feel now is not the time to take on higher balance-sheet risks. Due to the expected increase in the financing costs many have plans to reduce gearing levels. The majority of CFOs in Central Europe share the view that the top priority for the next year is simply to grow revenue.
1 The survey, conducted in October and November 2013, covered almost 600 CFOs from 14 Central European countries (Albania & Kosovo, Bosnia and Herzegovina, Bulgaria, Czech Republic, Estonia, Croatia, Hungary, Lithuania, Latvia, Poland, Romania, Serbia, Slovakia and Slovenia).