the business situation the hungarian enterprises and their responses to the economic crisis

The Business Situation the Hungarian Enterprises andTheir Responses to the Economic Crisis

Ágnes Makó – Ágnes Czibik – István János Tóth

http://www.gvi.hu/

HCCI Research Institute of Economics and Enterprise

Workshop on Sentiment Indicators and the Current Crisis

Budapest, Lánchíd 19 Design Hotel

Monday 9 November 2009 9:00

http://www.gvi.hu/

23.04.20. 4:09 http://www.gvi.hu/ 2

Topics

• Crisis in Hungary – a brief review• Crisis in Hungary – results of GVI business tendency

survey• Steps of adaptation – results of two ad-hoc surveys• Conclusions

Topics Macro data GVI survey Steps of adaptation Conclusions

23.04.20. 4:09 http://www.gvi.hu/ 3

Macroeconomic data – a brief review


23.04.20. 4:09 http://www.gvi.hu/ 4

GDP growth rate: recession before the crisis


• Long recession period before the crisis: 2006.q3 -2007.q4

• World crisis: 2008.q2 –

• Dramatic deterioration

GDP growth rate in Hungary (same quarter of prev. Year = 100%, 2001.Q1 - 2009.Q2)

92

94

96

98

100

102

104

106

2005 I. II. III. IV. 2006 I. II. III. IV. 2007 I. II. III. IV. 2008 I. II. III. IV. 2009 I. II.

23.04.20. 4:09 http://www.gvi.hu/ 5

GDP growth rate: the German and Hungarian recession link up


GDP growth rate in Hungary and Germany 2005-2009 (previous quarter = 100%)

92

94

96

98

100

102

104

2005 I. II. III. IV. 2006 I. II. III. IV. 2007 I. II. III. IV. 2008 I. II. III. IV. 2009 I. II.

Hungary

Germany

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Dramatic rise of unemployment from 2008.q4


Number of Unemployees in Hungary, 2005.q1 - 2009.q2 (thousand head)

250

270

290

310

330

350

370

390

410

430

2005 I II III IV 2006 I II III IV 2007 I II III IV 2008 I II III IV 2009 I II

23.04.20. 4:09 http://www.gvi.hu/ 7

Rise in Unemployment: in developed regions


• More developed regions, higher growth rate of unemployment

• Period of significant rise: from October 2008 to March 2009

higher growth rate

lower growth rate

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The end of the crisis: When?


Progress of the Recession

-18

-16

-14

-12

-10

-8

-6

-4

-2

0

2

4

I II III

IV V VI

VII

VIII

IX X XI

XII

XIII

XIV XV

XV

Quarters from Start of Recession

GDP: Change from Peak

1930-1934 (Britain)

1979-1983 (Britain)

1990-1994 (Hungary - transformational recession)

2008- (Hungary - current recession)

2008- (Germany - current recession)

Source: NIESR, own calculation

23.04.20. 4:09 http://www.gvi.hu/ 9




-18

-16

-14

-12

-10

-8

-6

-4

-2

0

2

4

I II III

IV V VI

VII

VIII

IX X XI

XII

XIII

XIV XV

XV



1930-1934 (Britain)

1979-1983 (Britain)





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-18

-16

-14

-12

-10

-8

-6

-4

-2

0

2

4

I II III

IV V VI

VII

VIII

IX X XI

XII

XIII

XIV XV

XV



1930-1934 (Britain)

1979-1983 (Britain)





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-18

-16

-14

-12

-10

-8

-6

-4

-2

0

2

4

I II III

IV V VI

VII

VIII

IX X XI

XII

XIII

XIV XV

XV



1930-1934 (Britain)

1979-1983 (Britain)





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-18

-16

-14

-12

-10

-8

-6

-4

-2

0

2

4

I II III

IV V VI

VII

VIII

IX X XI

XII

XIII

XIV XV

XV



1930-1934 (Britain)

1979-1983 (Britain)





23.04.20. 4:09 http://www.gvi.hu/ 13




-18

-16

-14

-12

-10

-8

-6

-4

-2

0

2

4

I II III

IV V VI

VII

VIII

IX X XI

XII

XIII

XIV XV

XV



1930-1934 (Britain)

1979-1983 (Britain)





23.04.20. 4:09 http://www.gvi.hu/ 14

Crisis in Hungary – results of GVI business tendency survey


23.04.20. 4:09 http://www.gvi.hu/ 15

Definition of GVI BCI


GVI BCI =

0,1*UHJ (present business situation) +

0,2*UHV (expected business situation in next 6 months ) +

0,1*VJJ (present financial situation) +

0,2*VJV (expected financial situation in next 6 months) +

0,2*MSV (level of total order books)

0,1*BGV (investments to machines, equipments in next 6 months)

0,1*BEV (investment to real estates in next 6 months)

23.04.20. 4:09 http://www.gvi.hu/ 16

Survey parameters


• Period: 1998-

• Survey method: mail survey and CATI

• Sample: Hungarian enterprises

• Case numbers: 1300-1900 companies

• Regularity: twice a year (April and October)

• Weighting: by company size (by contribution to the GDP) and regional

• Test of homogeneity: identical sample distribution by company size and region

• Good predictor for GDP growth rate change

• Lead time: cca. 90 days

23.04.20. 4:09 http://www.gvi.hu/ 17

The performance of theGVI Business Tendency Survey

- an illustrative analysis


23.04.20. 4:09 http://www.gvi.hu/ 18

1st step: Scatterplot of GDP growth rate and GVI BCI (t=24)


0,400,300,200,100,00-0,10-0,20

bci

5,00

2,50

0,00

-2,50

-5,00

-7,50

gd

p

R Sq Linear = 0,793

• R = 0,891p > 0,000t = 24

• Due to the unit root (cointegration) problem, we have to detrend the time series

• Simple method: differencesdT = Ti+1 - Ti

23.04.20. 4:09 http://www.gvi.hu/ 19

2nd step: GDP growth rate and GVI BCI (detrended by difference, t=23)


GDP growth rate and GVI BCI (differencies, t=23)

-6

-5

-4

-3

-2

-1

0

1

2

3

-0,25

-0,2

-0,15

-0,1

-0,05

0

0,05

0,1

0,15

dgdp

dbci

R = 0,583p > 0,003t = 23

• R = 0,583p > 0,003

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Scatterplot of GDP growth rate and GVI BCI (detrended data, t=23)


0,150,100,050,00-0,05-0,10-0,15-0,20

dbci

2,50

0,00

-2,50

-5,00

dg

dp

R Sq Linear = 0,34

• R2 = 0,34p > 0,000t = 23

• Strong positive relationship

• The GVI BCI’s changeis good predictor of the change of GDP growth rate

23.04.20. 4:09 http://www.gvi.hu/ 21

Toward the turning point?


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GDP growth rate and GVI BCI 1998-2009

-8,0

-6,0

-4,0

-2,0

0,0

2,0

4,0

6,0

8,0

-0,3

-0,2

-0,1

0,0

0,1

0,2

0,3

0,4

GDP

GVI BCI


23.04.20. 4:09 http://www.gvi.hu/ 23



-8,0

-6,0

-4,0

-2,0

0,0

2,0

4,0

6,0

8,0

-0,3

-0,2

-0,1

0,0

0,1

0,2

0,3

0,4

GDP

GVI BCI

23.04.20. 4:09 http://www.gvi.hu/ 24



-8,0

-6,0

-4,0

-2,0

0,0

2,0

4,0

6,0

8,0

-0,3

-0,2

-0,1

0,0

0,1

0,2

0,3

0,4

GDP

GVI BCI

23.04.20. 4:09 http://www.gvi.hu/ 25



-8,0

-6,0

-4,0

-2,0

0,0

2,0

4,0

6,0

8,0

-0,3

-0,2

-0,1

0,0

0,1

0,2

0,3

0,4

GDP

GVI BCI

23.04.20. 4:09 http://www.gvi.hu/ 26



-8,0

-6,0

-4,0

-2,0

0,0

2,0

4,0

6,0

8,0

-0,3

-0,2

-0,1

0,0

0,1

0,2

0,3

0,4

GDP

GVI BCI

23.04.20. 4:09 http://www.gvi.hu/ 27



-8,0

-6,0

-4,0

-2,0

0,0

2,0

4,0

6,0

8,0

-0,3

-0,2

-0,1

0,0

0,1

0,2

0,3

0,4

GDP

GVI BCI

23.04.20. 4:09 http://www.gvi.hu/ 28



-8,0

-6,0

-4,0

-2,0

0,0

2,0

4,0

6,0

8,0

-0,3

-0,2

-0,1

0,0

0,1

0,2

0,3

0,4

GDP

GVI BCI

23.04.20. 4:09 http://www.gvi.hu/ 29



-8,0

-6,0

-4,0

-2,0

0,0

2,0

4,0

6,0

8,0

-0,3

-0,2

-0,1

0,0

0,1

0,2

0,3

0,4

GDP

GVI BCI

turning point in the crisis in Hungary ?

23.04.20. 4:09 http://www.gvi.hu/ 30



-8,0

-6,0

-4,0

-2,0

0,0

2,0

4,0

6,0

8,0

-0,3

-0,2

-0,1

0,0

0,1

0,2

0,3

0,4

GDP

GVI BCI

23.04.20. 4:09 http://www.gvi.hu/ 31

Steps of adaptation – results of two ad-hoc surveys


23.04.20. 4:09 http://www.gvi.hu/ 3232

Survey parameters

• Period: March and June 2009• Survey method: CATI• Sample: Hungarian enterprises, quota sampling by

bank loans• Case numbers: 314 companies in March, 302

companies in June. Panel database: N=258• Test of homogeneity: identical sample

distribution by company size and sectors


23.04.20. 4:09 http://www.gvi.hu/ 33

Results


23.04.20. 4:09 http://www.gvi.hu/ 3423.04.20. 4:09 34

Drop in domestic sales

• Decrease of sales in construction and in the processing industry

• Governmental spending-cut measures, fall of governmental investments

-0,8

-0,7

-0,6

-0,5

-0,4

-0,3

-0,2

-0,1

0

0,1

March 2009 June 2009

Change in the volume of domestic sales in the past 6 months by sectors, average points

processing industry

construction

trade

services

Source: RIEE


23.04.20. 4:09 http://www.gvi.hu/ 3523.04.20. 4:09 35

Improving expectations of large companies

-0,6

-0,5

-0,4

-0,3

-0,2

-0,1

0

0,1

0,2

0,3

March 2009 June 2009

Expected change in the volume of export sales in the following6 months by company size (headcount), average points

x-20

20-49

50-99

100-249

250-x

Source: RIEE

• Progressing expectations of the largest companies

• Dual economy in Hungary: efficiency – large company size, foreign ownership, production for export markets


23.04.20. 4:09 http://www.gvi.hu/ 3623.04.20. 4:09 36

Improving business climate in Germany

• Ifo: improving business climate for 4 months

• Expanding export opportunities

• Hungarian export headed to Germany: 28.4% (2007); 26.6% (2008)

75

80

85

90

95

100

105

110

115

120

J Jl J Jl J Jl J Jl J Jl J Jl J Jl J Jl J Jl J Jl J Jl J Jl J Jl J Jl J Jl J Jl J Jl J Jl J Jl O

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 20082009

Business climate in Germany in the industry and trade, according to the Ifo business climate survey, 2000=100%,

January 1991 - October 2009.

Business climate

Current business situation

Business expectations

Source: www.cesifo.de


23.04.20. 4:09 http://www.gvi.hu/ 3723.04.20. 4:09 37

Panel data – classification of change

March June Change

stagnating worsening worsening

improving stagnating worsening

improving worsening worsening

worsening worsening stagnation

stagnating stagnating stagnation

improving improving stagnation

worsening stagnating improvement

worsening improving improvement

stagnating improving improvement


23.04.20. 4:09 http://www.gvi.hu/ 38

Companies with loans vs. without loans


23.04.20. 4:09 http://www.gvi.hu/ 3923.04.20. 4:09 39

Progressing expectations of companies with loans

21,8

46,2

32,134,5

44,8

20,7

0

5

10

15

20

25

30

35

40

45

50

worsened stagnated improved

Per cent

Change in expectations concerning the volume of export sales between March 2009 and June 2009, by raising a loan, per cent

with loans

without loans

Source: RIEE

• Raising loans –improving expectations

• Restoration of the loan market situation – recovery of the real economy


23.04.20. 4:09 http://www.gvi.hu/ 4023.04.20. 4:09 40

Applied crisis management measures


23.04.20. 4:09 http://www.gvi.hu/ 4123.04.20. 4:09 41

Applied crisis management measures I.


• Rapid reaction to the crisis

• Several different measures

• Shorter working hours at 19%

• Workforce cut at 42% of the companies

45,9

44,5

41,6

22,0

21,2

20,8

20,3

19,1

8,3

4,2

0 5 10 15 20 25 30 35 40 45 50

New long-term plans

New products

Workforce cut

Other measures

Improving short-term financial security

Reducing prices, new pricing policy

Governmental and European Union supports

Shorter working hours

Selling assets

Converting foreign currency loan

Applied crisis management measures I. (%, more responses can be given) N: between 303 and 358

Source: RIEE

23.04.20. 4:09 http://www.gvi.hu/ 4223.04.20. 4:09 42

Applied crisis management measures II.


86,3

82,0

72,7

67,6

65,0

52,9

52,5

50,3

0 10 20 30 40 50 60 70 80 90 100

Reducing other expenses

Searching for new markets

Reducing, freezing wages

Reducing receivables

Cutting down on temporarily dispensable services

Reducing dependence on suppliers

Reducing short-term debts

Cancelling planned investments

Applied crisis management measures II. (%, more responses can be given) N: between 303 and 358

Source: RIEE

• Reducing costs is prevailing

• Searching for new markets: 82%

• Postpone the shrinking of the company

23.04.20. 4:09 http://www.gvi.hu/ 4323.04.20. 4:09 43

Searching for new markets

23,57

7,27

5,77

76,43

92,73

94,23

0% 20% 40% 60% 80% 100%

no export

x-50%

51-x%

Applied crisis management measures: searching for new markets by rate of export in total sales (%) N=302

not applied

applied

Source: RIEE

• Active and "expansionist" reaction at companies with export sales

• Appearance of the dual economy


23.04.20. 4:09 http://www.gvi.hu/ 4444

Part-time working hours by exports

84,89

76,36

73,08

15,11

23,64

26,92

0% 20% 40% 60% 80% 100%

no export

x-50%

51-x%

Applied crisis management measures: part-time working hours, shorter working hours by rate of export in total sales (%) N=301

not applied

applied

Source: RIEE

• Part-time working hours at companies with export sales

• Non-typical form of employment in Hungary


23.04.20. 4:09 http://www.gvi.hu/ 4523.04.20. 4:09 45

Part-time working hours by company size

89,86

81,01

76,62

78,26

63,33

10,14

18,99

23,38

21,74

36,67

0% 20% 40% 60% 80% 100%

<20 employees

20-49 employees

50-99 employees

100-249 employees

249< employees

Applied crisis management measures: part-time working hours, shorter working hours by company size (%) N=301

not applied

applied

Source: RIEE

• Diminishing labor force demand

• Rising unemployment


23.04.20. 4:09 http://www.gvi.hu/ 4623.04.20. 4:09 46

Dismissal and part-time work

• Workforce cut and part-time work – complementary crisis management measures

• Enterprises in unfavorable business situation apply several methods


28,38

12,08

71,62

87,92

0% 20% 40% 60% 80% 100%

Applying dismissal

Not applying dismissal

Dismissal and part-time work (%) N=355

Applying part-time work Not applying part-time workSource: RIEE

23.04.20. 4:09 http://www.gvi.hu/ 4723.04.20. 4:09 47

New long-term plans by foreign ownership

54,55

41,18

45,45

58,82

0% 20% 40% 60% 80% 100%

without foreign

ownership

with foreign ownership

Applied crisis management measures: New long-term plans by the rate of foreign ownership (%) N=299

not applied

applied

Source: RIEE

• Long-term planning at companies with foreign ownership

• A different business mentality?


23.04.20. 4:09 http://www.gvi.hu/ 4823.04.20. 4:09 48

Conclusions

• Rapid reaction with diverse measures

• Unfavorable situation – parallel application of several measures

• More efficient companies are more efficient in self-protection

• Recovery of loan markets supports real economy

• Slight improvement in expectations - toward the turning point?

• The end of the crisis is cannot be seen yet


23.04.20. 4:09 http://www.gvi.hu/ 49

Thank you for your attention!

You can download this presentation from the GVI website from November 12 2009

http://www.gvi.hu/


http://www.gvi.hu/

the business situation the hungarian enterprises and their responses to the economic crisis

Documents

mail survey

survey method

q4world crisis

uhj present business

brief reviewcrisis

significant rise

regional test of homogeneity

current crisisbudapest