KPMG Pulse of Economy 2015

KPMG Pulse of Economy 2015

Read opinions from business leaders on the state of national economies and the outlook for their companies from nine countries in CEE.

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Numbers tell a story

Measuring someone's pulse is often a great way to judge how healthy they are – it's one of the basic indicators of their vitality, or lack of it. Similarly, there's only one real way to know how things are going in other ways - economically in one's country, turnover-wise for one's business, etc. - and that's by measuring their “vital statistics.”

Visit www.kpmgpulsesurvey.com for the full publication.

An economic portrait of CEE

That's why, in September 2015, KPMG's regional practice in Central & Eastern Europe (CEE) set out to survey business leaders in nine CEE countries to gauge opinions on their national economies, the euro, foreign investments, tax environment and on companies' remuneration and staffing policies. Previously conducted for several years in the Baltics, this year KPMG's “Pulse of Economy” survey covered nine countries in the region: Bosnia and Herzegovina, Croatia, Czech Republic, Estonia, Latvia, Lithuania, Poland, Romania, and Slovakia. Business leaders in these countries were polled on various subjects, including the three key aspects their companies should focus on. The web-based survey collected responses from 731 executive managers and company owners in the countries included in the survey.

Preferred tax regimes

One notable result from Pulse of Economy is that 79% of those entrepreneurs and managers participating in the survey indicate that tax policies remain high on decision-makers’ agendas, and simplified tax payment and administration procedures are anticipated from governments. Moreover, strong sentiment was expressed in favor of a flat personal income tax system, clearly winning over a progressive income tax system.

How the economy will fare in CEE

Survey respondents appear to have fairly reasonable, measured expectations for the economy. On average, 51% of the respondents in the region believe that the economic situation will improve somewhat or even significantly, while 34% do not see any particular changes and only 15% expect worse times ahead.

Skilled workers important

Skilled labor is clearly key for optimal business operations, according to POE respondents, 60% of whom say that they need their skilled workers to remain competitive both in the domestic and international markets, thus it may be an aspect companies should focus on.

Stability in employee numbers

There may also be additional good news for those worried about keeping their jobs: 53% of respondents in the CEE countries do not plan any notable changes in employee numbers. New job creation, however, could be more robust. The CEE average of those companies planning to hire stands at 36% and only 12% of respondents in the region plan redundancies. For employees, the salary outlook for 2016 appears rather promising, with 58% of CEE respondents planning increases in staff remuneration, slightly lower than the 69% registered in the previous survey.

Future of euro – anyone's guess?

But what about the overall health of the business environments that enterprises in Central & Eastern Europe are operating in? One factor we deemed worthy of analysis was the euro – specifically, how business leaders see the future of the common currency. It turns out, a significant proportion of survey participants see a bumpy road ahead for it. Possibly due to the ongoing challenges in the common monetary policy, the biggest share of respondents in the region - 42% compared to last year’s 31% - indicate that by 2020 the euro will be struggling and no further countries are likely to have joined the euro area. Almost the same percentage of respondents indicate that the euro will have a stable position (41% vs. 43% in 2014), with that sentiment the strongest in Lithuania and Romania (both 57%).

Energy key to competitiveness

Finally, given the European Union's emphasis on affordable energy as a key to economic competitiveness, our researchers sought to find out what sources of power survey participants believe should be emphasized for these economies to receive the greatest economic benefit – nuclear power came away with the highest survey sentiment. KPMG's Pulse of Economy survey reports significant support for nuclear energy in the Czech Republic (77%) and Slovakia (66%), as well as in many other countries; overall, 40% of Central and Eastern European business leaders place it in the top spot.

Visit www.kpmgpulsesurvey.com for the full publication.

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