Transcript Corporate responses to the economic crisis: The Hungarian

HCCI
Institute for Economic and Enterprise Research
Corporate responses to the economic crisis:
The Hungarian case
Ágnes Czibik (GVI) – Ágnes Makó (GVI) –
István János Tóth (MTA KTI)
30th CIRET Conference – Economic Tendency Surveys and the
Services Sector
New York City, Westin New York at Times Square
14 October 2010
http://www.gvi.hu/
Topics  Hungary in a nutshell  Business situation and adaptation: survey results  Conclusions
Topics
• Motivation of the research
• Hungary in a nutshell - main problems of the
economy
• Business situation and adaptation results of three ad-hoc surveys
• Conclusions
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Topics  Hungary in a nutshell  Business situation and adaptation: survey results  Conclusions
Motivation
• A special crisis beyond the business cycle:
structural changes – what happens to
companies?
• Ad-hoc survey on business climate and on the
reactions of firms – do they react as usual or is
it special?
• Loan market crisis – examining companies
with loan
Topics  Hungary in a nutshell  Business situation and adaptation: survey results  Conclusions
Hungary
• CentralEastern
Europe
• Area: 93 030
km2
• Population:
10 001 000
(July 2010)
Main problems of the Hungarian
economy
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Topics  Hungary in a nutshell  Business situation and adaptation: survey results  Conclusions
Crisis before the crisis
• " Crisis before
the crisis ": long
period of
recession
2006.Q3 2007.Q4
• Governmental
measures
• EU-markets
• Beginning of the
recovery - world
crisis : 2008.Q2 –
dramatic
deterioration
GDP growth rate in Hungary and in the EU, 1996Q1-2010Q2
(100%=corresponding period of the previous year)
8
6
4
2
0
-2
-4
-6
European Union (27 countries)
Hungary
-8
Source: Eurostat
Topics  Hungary in a nutshell  Business situation and adaptation: survey results  Conclusions
Lost position
• Falling behind
the Central
European region
• Per capita GDP:
63% of the
EU-27 (2009)
GDP per capita in Purchasing Power Standards (PPS) in CentralEastern Europe (EU-27 = 100), 1995-2009
90
85
Hungary
Slovakia
Poland
80
Czech Republic
75
70
65
60
55
50
45
40
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Source: Eurostat
Topics  Hungary in a nutshell  Business situation and adaptation: survey results  Conclusions
Lost position
• Falling behind
the Central
European region
• Per capita GDP:
63% of the
EU-27 (2009)
• Slovakia:
overtook in 2006
GDP per capita in Purchasing Power Standards (PPS) in CentralEastern Europe (EU-27 = 100), 1995-2009
90
85
Hungary
Slovakia
Poland
80
Czech Republic
75
70
65
60
55
50
45
40
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Source: Eurostat
Topics  Hungary in a nutshell  Business situation and adaptation: survey results  Conclusions
Lost position
• Falling behind
the Central
European region
• Per capita GDP:
63% of the
EU-27 (2009)
• Slovakia:
overtook in 2006
• Poland: catching
up
GDP per capita in Purchasing Power Standards (PPS) in CentralEastern Europe (EU-27 = 100), 1995-2009
90
85
Hungary
Slovakia
Poland
80
Czech Republic
75
70
65
60
55
50
45
40
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Source: Eurostat
Topics  Hungary in a nutshell  Business situation and adaptation: survey results  Conclusions
Lost position
• Falling behind
the Central
European region
• Per capita GDP:
63% of the
EU-27 (2009)
• Slovakia:
overtook in 2006
• Poland: catching
up
• Czech Republic:
keeping good
position
GDP per capita in Purchasing Power Standards (PPS) in CentralEastern Europe (EU-27 = 100), 1995-2009
90
85
Hungary
Slovakia
Poland
80
Czech Republic
75
70
65
60
55
50
45
40
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Source: Eurostat
Topics  Hungary in a nutshell  Business situation and adaptation: survey results  Conclusions
Extremely high deficit
• One of the
countries with
the highest
deficit in the
EU
• Governmental
measures in
2006
• Decrease of
government
deficit
General government deficit in Hungary and in the EU,
percentage of GDP, 2000-2009
EU (27 countries)
2
Hungary
0
-2
-4
-6
-8
-10
2000
Source: Eurostat
2001
2002
2003
2004
2005
2006
2007
2008
2009
Topics  Hungary in a nutshell  Business situation and adaptation: survey results  Conclusions
Low employment
• One of the
countries with the
lowest employment
rate in the EU
• Reasons:
transformation
shock, tax burden,
black work
• Crisis – between
2008.Q4 and
2010.Q1: the
number of
employed
decreased by
200 000
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Employment rate in Hungary and in the EU (15 to 64 years),
1997-2009
68
European Union (27 countries)
66
Hungary
64
62
60
58
56
54
52
50
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
Source: Eurostat
http://www.gvi.hu/
12
2009
Topics  Hungary in a nutshell  Business situation and adaptation: survey results  Conclusions
A "province" of Germany?
2009:
• Small open
economy:
export/GDP=
64%
2008:
• 24% of FDI
from
Germany
2009:
• 25,6% of
export
• 24,8% of
import
GDP growth rate in Hungary and Germany, 2005Q1-2010Q2
(100%=corresponding period of the previous year)
110
108
106
104
102
100
98
96
94
Germany
Hungary
92
90
Source: Eurostat
Topics  Hungary in a nutshell  Business situation and adaptation: survey results  Conclusions
Business situation and adaptation results of three ad-hoc surveys
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Topics  Hungary in a nutshell  Business situation and adaptation: survey results  Conclusions
Survey parameters
•
•
•
•
•
Period: March and June 2009, March 2010
Survey method: CATI
Sample: Hungarian enterprises, quota sampling by bank loans
Sectors: manufacturing, construction, trade and other services
Case numbers: 314 companies in March, 302 companies in June, 300
companies in March 2010. Panel database: N=184
• Test of homogeneity: identical sample distribution by company size
and sectors
• The research was supported by the National Office for Research and
Technology, Jedlik Ányos Programme. (Project number:
NKFP_07_A2-TEXTREND, Contract number: OM-00002/2008)
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Topics  Hungary in a nutshell  Business situation and adaptation: survey results  Conclusions
Special Crisis Climate Index
CCI = (a1 + a2 + a3 + a4 + a5) / 5
Name
a1
a2
a3
Definition
Categories
Changes in the volume of domestic sales
down, unchanged, up
Expected changes in the volume of domestic sales
(-1, 0, 1)
down, unchanged, up
Expected change in the volume of investment
(-1, 0, 1)
no investment,
down,unchanged, up
a4
a5
Expected changes in the number of employees
Average gross changes in employees’ wages in the given year
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(-1, -0,33, 0,33, 1)
down, unchanged, up
(-1, 0, 1)
decrease, remain stable,
increase (-1, 0, 1)
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Topics  Hungary in a nutshell  Business situation and adaptation: survey results  Conclusions
Results
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Topics  Hungary in a nutshell  Business situation and adaptation: survey results  Conclusions
Companies with credit: barely different CCI
• Companies with
credit were in
worse situation
only in March
2009
Crisis Climate Index by credit,
March 2009 - March 2010
0,00
-0,04 -0,03
no credit
-0,05
credit
-0,10
-0,15
• The difference
disappeared
-0,20
-0,24
-0,25
-0,26 -0,27
-0,29
-0,30
-0,35
March 2009
Source: IEER
June 2009
March 2010
Topics  Hungary in a nutshell  Business situation and adaptation: survey results  Conclusions
Exporting firms: steep falling - faster recovery
Crisis Climate Index by the rate of export in total sales
March 2009 - March 2010
0,10
• Crisis: driven by
narrowing of
export markets
0,05
0,07
no export
<51%
50%<
0,00
-0,03
-0,07
-0,05
-0,10
-0,15
• Exporting firms’
CCI were positive
in March 2010
-0,20
-0,22
-0,26
-0,25
-0,30
-0,24
-0,29
-0,27
-0,34
-0,35
-0,40
March 2009
June 2009
March 2010
Source: IEER
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Topics  Hungary in a nutshell  Business situation and adaptation: survey results  Conclusions
Clustering method
• Does the developed/less developed dichotomy appear in the
data?
• Two clusters for „developed” and „less developed”
companies
• Clustering by export, foreign ownership, net sales revenue,
number of employees
Foreign ownership
Net sales revenue
Export
Number of employees
ANOVA
Cluster
Error
Mean Square df Mean Square
8,60
1
0,17
864,36
1
0,48
6,80
1
0,55
857,70
1
0,68
F
df
877
877
877
877
50,74
1792,32
12,44
1256,45
Sig.
0,00
0,00
0,00
0,00
Topics  Hungary in a nutshell  Business situation and adaptation: survey results  Conclusions
CCI by two different type of firms
• Developed
firms were in
better situation
in all three
surveys
Crisis Climate Index in the two types of companies
(March 2009 - March 2010)
0,05
0,00
developed (cluster 2)
-0,05
-0,11
-0,10
-0,15
-0,18
?
-0,20
• Absence of Dec
2008 survey
0,02
less developed (cluster 1)
-0,24
-0,25
-0,31
-0,30
-0,37
-0,35
-0,40
Dec 2008
March 2009
June 2009
March 2010
Source: IEER
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Topics  Hungary in a nutshell  Business situation and adaptation: survey results  Conclusions
Regional impacts of the crisis
• Crisis reached
first the
developed
regions (West
and Central
Hungary)
• Index of
registered
unemployment
rose first here
Sept 2008
Dec 2008
March 2009
June 2009
March 2010
Topics  Hungary in a nutshell  Business situation and adaptation: survey results  Conclusions
Corporate responses
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Topics  Hungary in a nutshell  Business situation and adaptation: survey results  Conclusions
Main questions
• Ordinal or special reactions?
• Consciousness in corporate strategies
or trial and error?
• Which measures were effective?
Topics  Hungary in a nutshell  Business situation and adaptation: survey results  Conclusions
Measures examined
• First survey: 18 measures
• Afterwards: the 13 most common measures
Strategic measures
• Seeking new markets
• Launching new products
• New strategic plan
Cost cutting measures
• Postponing investments
• Cutback of noncore services
Measures related to employment
• Layoffs
• Freezing or cutting wages
• Shorter working hours
Other measures
• Reducing receivables
• Reducing dependence on suppliers
•Reducing short-term debts
•Government and EU benefits
Topics  Hungary in a nutshell  Business situation and adaptation: survey results  Conclusions
More variability in the first period
• Average number
of applied
measures:
90
2009 March: 5,5
2009 June: 5,6
Corporate responses to the economic crisis from March 2009 to March
2010 (%, N: between 279 and 314)
Seeking new markets
Reducing receivables
80
Reducing dependence on
suppliers
Reducing short-term debts
70
Postponing investments
60
New strategic plan
50
2010 March: 5,8
•„All potential
measures for
surviving”
Cutback of non-core services
40
Launching new products
30
Freezing or cutting wages
Layoffs
20
Shorter working hours
10
Government and EU benefits
0
March 2009
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June 2009
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March 2010
26
Topics  Hungary in a nutshell  Business situation and adaptation: survey results  Conclusions
CCI by the the number of applied
measures
•Worse
situation –
more
measures
•Different
measures?
IEER Crisis Climate Index by the number of the applied measures by firms
(March 2009 – March 2010)
0,0
-0,01
-0,05
-0,1
-0,2
-0,3
-0,15
-0,18
-0,29
under 5
measures
-0,30
5-9
measures
-0,4
-0,43
-0,5
-0,06
-0,49
above 9
measures
-0,6
March 2009
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June 2009
March 2010
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Topics  Hungary in a nutshell  Business situation and adaptation: survey results  Conclusions
Corporate responses: employment and
strategic measures
90
80
70
60
50
Corporate responses to the crisis 1.
Proactive measures
Seeking new
markets
•Significance of seeking new markets
New strategic
plan
40
30
20
10
0
Launching
new products
March
2009
June 2009
Corporate responses to the crisis 2.
Employment
March
2010
•Less layoffs in 2010
•Shorter working hours
rarely applied
Freezing or
cutting wages
90
80
70
60
50
40
30
20
10
0
Layoffs
Shorter
working hours
March
2009
June 2009
March
2010
Topics  Hungary in a nutshell  Business situation and adaptation: survey results  Conclusions
Corporate responses: cost cutting and other
measures
Corporate responses to the crisis 3.
Other costcutting measures
90
80
70
60
50
40
30
20
10
0
Postponing
investments
• Postponing investments
and cutback of non-core
services are also prevalent
Cutback of
non-core
services
March 2009
June 2009
March 2010
• Significance of
government benefits is
growing
90
80
70
60
50
40
30
20
10
0
Corporate responses to the crisis 4.
Other measures
Reducing
receivables
March 2009 June 2009 March 2010
Reducing
dependence
on suppliers
Reducing
short-term
debts
Government
and EU
benefits
Topics  Hungary in a nutshell  Business situation and adaptation: survey results  Conclusions
The most effective measures
• Seeking
new markets
• Freezing
wages
The most effective corporate responses to the crisis
March 2010
22,5
Seeking new markets
Freezing or cutting wages
Reducing receivables
Out-sourcing non-core services
Postponing investments
Launching new products
14,5
13,2
9,0
7,7
7,4
5,3
4,6
4,0
3,9
Reducing short-term debts
Reducing dependence on suppliers
New strategic plan
Layoffs
Government and EU benefits
Shorter working hours
2,6
1,9
0
5
10
15
20
%
25
Topics  Hungary in a nutshell  Business situation and adaptation: survey results  Conclusion
Companies’ most effective measures and the
CCI
•Firms with
higher CCI:
government
benefits, new
products, new
strategic plan
•Lower CCI:
cost cutting
•Low case
numbers
IEER Crisis Climate Index by the most effective response to the crisis
according to the firm (March 2010)
Government and EU benefits
Launching new products
New strategic plan
Reducing receivables
Postponing investments
Seeking new markets
Layoffs
Reducing short-term debts
Out-sourcing non-core services
Reducing dependence on suppliers
Freezing or cutting wages
Shorter working hours
-0,4 -0,3 -0,2 -0,1
0
0,1
0,2
0,3
0,4
0,5
0,6
Topics  Hungary in a nutshell  Business situation and adaptation: survey results  Conclusion
Conclusion
• In an open economy like Hungary the crisis was driven mainly
by narrowing of export markets. Credit crisis was secondary.
• Exporting firms’ business situation worsened earlier but they
also seem to recover earlier
• Companies tried to apply many measures to minimize the
unfavourable impacts of the crisis. Worse CCI – more measures.
• Connection between CCI and type of most effective measure
• Firms with worse situtation: cost cutting
• Firms with better situation: strategic measures
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Topics  Hungary in a nutshell  Business situation and adaptation: survey results  Conclusions
Further research
• Further surveys – more data – higher case
numbers
• More complex analysis, methods
• Following Hungarian firms’ situation and activity
throughout the crisis
Thank you for your attention!
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