The Romanian economy will stagnate this year, a 2023 in which concerns about uncertainties associated with macro-economic conditions will be at the forefront, as shown by the findings of the 5th edition of the Moneycorp Barometer on the state of the Romanian economy. The high investment potential, supported especially from the European funds area, as well as the positive expectations related to the stability of the exchange rate are seen by the executives of the Romanian companies as the main arguments for a positive economic evolution.
According to the survey, which involved 1102 companies from various sectors such as IT&C, insurance, equipments, raw materials, energy, FMGC or tourism, 2023 is the year of caution.
32% of managers surveyed in the 5th edition of the Moneycorp Barometer expect economic stagnation in 2023, while another 28% see marginal economic growth. An identical 28% see a mild recession this year, while 12% of executives are pessimistic, betting on a severe economic downturn in 2023.
48% of those surveyed expect rising operating costs (material prices, services, transport costs, interest, etc.) to be at the forefront, along with the effects of falling sales, mentioned by 40% of respondents. Managers also mentioned the increase in the financial bottleneck (8%) and the possible insolvency/bankruptcy of partners (5%).
In these circumstances, 72% of those surveyed said they would not budget for significant investment this year and only 28% would invest, mainly because of the opportunities created by the crisis period.
"2023 is a year of challenges but also of opportunities. The fact that the percentages of those who see marginal economic growth or a technical recession are close indicates the significant degree of uncertainty hanging over the economy this year. It is not excluded that we will see an oscillating economic evolution, a proof of the fragility of the economic environment in a rather difficult economic context'', says Cosmin Bucur, Managing Director Moneycorp Romania.
After 2 years of COVID and a year of record inflation, many companies are entering the new year better prepared to face the challenges. They have also adapted to the context generated by the war in Ukraine, which most (60%) believe will continue beyond 2023.Perhaps the best proof is that 68% of companies plan to hire this year.
2023, on the other hand, looks set to be a year in which business restructuring continues to come to the fore.According to the barometer results, 44% of those surveyed are facing an increased timeframe to collect invoices, while 48% believe it has remained at the same level as in 2021.
"Optimising operational costs, rethinking and adapting product and service offerings to the new economic reality will make the difference between those who will explore the opportunities that have arisen and those who will have to manage decreases in sales caused by higher production costs" added Cosmin Bucur, Managing Director Moneycorp.
Inflation and financing costs
According to the managers interviewed by Moneycorp, inflation will continue to be one of the biggest problems in the economy, which will also directly affect financing costs.
40% of those surveyed expect inflation of 10-12% by the end of 2023, while 28% see inflation above this level. Another 32% of respondents expect inflation to be between 6-10%. Most executives (40%) expect that we will only get rid of this major problem from the first half of 2024.
By then, however, most expect financing to be extremely expensive, with ROBOR expected to be in the 7-9% range by 44% of respondents. 12% of respondents expect ROBOR to be between 9-11%, and another 8% expect it to be above 11%. Only 36% of executives anticipate an ROBOR level <7% by the end of 2023.
Claudiu Ghebaru, Senior Corporate Dealer Moneycorp, says that in a rather turbulent macroeconomic context, it will be difficult for many companies to manage their businesses on predictable coordinates. Securing market share will be one of the main challenges.
"Against the backdrop of declining purchasing power and sales in general, data show that last year 60% of companies surveyed said they only partially passed on the extremely high costs of electricity, raw materials, transport, credit or exchange rates in the final price. Many of them chose to cut back on the company's profitability margin in an attempt to secure their customer base,'' he says.
Moreover, 24% say they have tried to avoid passing on additional costs to customers while only 16% have passed on all costs to consumers.
For most companies, 2022 was a year in which companies managed to take advantage of opportunities and turn it into a year of growth. 28% saw an increase in turnover of up to 10% and 28% above this level. 24% saw no significant change and 12% reported a decrease in business between 10-25%.
"Rising raw material and transport costs, strong advances in energy and gas prices and a shortage of skilled staff were the biggest challenges last year. Towards the end, rising financing costs escalated and are seen as one of the main challenges for the economy in 2023'', added Claudiu Ghebaru.
How to protect yourself against currency risk and how the Euro and the Dollar will evolve in 2023
Most (48%) of the executives surveyed by Moneycorp in the ''State of the Economy Barometer'' expect the Euro to be quoted at 4.95-5.00 lei at the end of the year. 24% see a depreciation of the Euro/Leu exchange rate in the range 5.00 lei-5.05 lei, and 16% above this level. On the other hand, another 12% of managers expect a very stable rate around 4.95 lei/Euro.
As for the US dollar, 24% see the rate at 4.80-5.00 lei and 20% see it between 4.60 and 4.80 lei. Interestingly, 32% estimate that the US currency could be worth between 4.20 and 4.60 lei this year.
Is there a chance that these forecasts will come true?
"It all depends on the global context, on how central banks manage inflation, on how they deal with the effects of the war, on how China returns to the forefront of the world economy after the prolonged lockdown.
"Central banks, especially the Fed and the ECB, will play a major role in the coming months, as monetary policy decisions aimed at curbing inflation will influence the behaviour of the economy and investors," says Sebastian Bacioiu, Head of Dealing at Moneycorp Romania.
When asked which currency they trust more, 44% indicated the European currency, 24% the US dollar and 20% the Romanian leu.
"This is because we have a euro-centric economy, where the Euro reference is much more relavant than the USD, the US currency also plays a significant role in key sectors of energy and foreign trade, especially with China. We are interested in the Euro because our main trading partners are Germany, France, Italy and Spain, where we export and import in Euro", Sebastian Bacioiu added.
Asked how they protect themselves against currency risk, 36% of respondents use forward contracts, currency options and swaps.
Focus on investments
"Overall, 2023 will be a complicated year, with many question marks but also many opportunities. Investment, especially from the NREP funds, should be the main element to support the economy, alongside the other necessary measures mentioned by executives, such as digitisation and more efficient tax collection.
If we manage to make the absorption of EU funds more efficient, we will benefit both from horizontal business development and currency stability, an element that has been one of the main arguments, pillars of economic stability since 2022", said Cosmin Bucur.
The survey conducted by Moneycorp and consultancy firm Frames was carried out on a group of more than 1102 companies from various sectors, such as IT&C, Insurance, Equipment, Commodities, Energy, FMGC or Tourism. The profile of respondents was middle and top management, with higher education, 63% male and 37% female, with an average age of 47.