Money Buzz! Europa

Category: Economy

  • Overall confidence in the Czech Republic economy decreased in April

    Overall confidence in the Czech Republic economy decreased in April

    • Overall confidence in the economy remarkably decreased in April, show the latest survey published by the Czech Statistical Office.
    • The composite confidence indicator decreased by 19.6% to 74.8%, m-o-m.
    • Business confidence fell by 19.3% to 73.8% compared to March.
    • Consumer confidence indicator decreased by 20.4% to 80.1%, m-o-m.
    • The composite confidence indicator (economic sentiment indicator) that is stated by basic indices and the individual composite indicators have the sharpest decrease from the beginning of the survey.

    In industry, in April, confidence indicator decreased by 16.6 points to 72.0, the sharpest decrease from the beginning of the survey. Expectations of the employment decreased, too. Stocks of finished goods increased compared to March. Expectations of total economic situation development for the next three as well as six months are worse. The most significant barrier of production is insufficient demand; it was stated by 45% of respondents approximately. Approximately 22% of respondents choose barrier: other. According to the businessmen in the industry sector, the situation around coronavirus and government measure impact their business activities. Overall, confidence in the industry is significantly lower, y-o-y.

    Manufacturing industry

    The production capacity utilization in manufacturing industry decreased to 69.4%, q-o-q. It is the lowest value in the regular quarterly survey in the manufacturing industry from the beginning of the survey.

    Respondents estimate they have work secured by contracts for 10.4 months, which is less than in the previous quarter.

    Investment

    From the investment survey (the survey was realized from March. Some companies did not reflect the situation around the coronavirus), companies expect a decrease in the investment activity in 2020.

    This decrease is around 15 %, y-o-y. They invest in the renewal of the current production equipment and extension of the capacity utilization. The investment to the new technologies is the lower.

    Construction sector

    Confidence in construction decreased by 11.7 points to 107.3, m-o-m. The assessment of total demand for construction work decreased compared to March. Expectation about employment decreased significantly. Expectations of total economic situation development are worse.

    The most significant barrier of production is still lack of staff; it was stated by 37 % of respondents approximately. The second significant barrier of production is insufficient demand; it was reported by 22 % of respondents almost. Finally, confidence in construction is lower, m-o-m.

    Trade

    In trade, in April, confidence indicator decreased by 14.4 points to 85.4 (the sharpest decrease from the beginning of the survey). The assessment of the overall economic situation of the respondents decreased, m-o-m. The stocks increased slowly. Expectations of total economic situation development for the next three decreased significantly. Finally, confidence in trade is lower, y-o-y.

    Services

    In selected services (incl. banking sector), confidence decreased by 23.7 points to 70.5 (the sharpest decrease from the beginning of the survey). The assessment of the current economic situation of the respondents decreased compared to March. Assessment of demand decreased. 

    Expectations of total demand for the next three months fell. Expectations of overall economic situation development for the next three as well as six months decreased significantly.

    A third of the respondents choose the ”other” barrier, which includes the government measures connecting the coronavirus. Overall, confidence in selected services is significantly lower, y-o-y (the sharpest y-o-y decrease from the beginning of the survey).

  • Record number of foreign travellers in Latvia in 2019

    Record number of foreign travellers in Latvia in 2019

    • In 2019 foreign travellers crossed the border of Latvia 8.3 million times, which is 7.3 % more than the year before. 
    • The latest data of the Central Statistical Bureau (CSB) show that traveller expenditure rose by 7.2 % and reached EUR 806.3 million.

    In 2019, the number of same-day travellers or number of border crossings increased by 9.9 %, reaching 6.4 million, expenditure – by 14 %, reaching EUR 268.1 million.

    The largest rise was observed in the number of same-day travellers from Ukraine – by 93.4 % (175.7 thousand), Russia – by 36.2 % (626.3 thousand) and Belarus – by 32.4 % (246.3 thousand). Average expenditure in same-day trips also increased by 3.7% – EUR 41.8.

    Even though 48.5% of the same-day travellers stayed in Latvia in transit, their expenditure in expenditure structure comprised 17.1%. Out of total same-day traveller expenditure the largest share (52.3%) was comprised by expenditure of those travellers, who arrived for shopping.

    Overnight travellers

    In 2019, Latvia was visited by 1.9 million foreign overnight travellers (0.6 % less than in 2018), spending 4.2 % or EUR 538.2 million more. Compared to the year before, the total number of nights spent rose by 5.1 %, reaching 8.3 million nights.

    Visitors stayed in Latvia on average for 4.3 days – 0.3 days more than in 2018. 

    1.2 million or 63.3 % of all overnight travellers arrived to Latvia from Lithuania, Estonia, Germany, Russia, Sweden, Norway and Finland. 18.9 % (0.4 million) travellers were from Belarus, United Kingdom, Poland, Belgium, France and Netherlands.

    Significant increase was observed in the number of overnight travellers from three largest priority markets – from Lithuania of 12.2 %, from Russia – of 22.1 % and from Estonia – of 19.5 %.

    How much travellers spent

    On average travellers from Russia spent EUR 301 per trip, which has not changed, as compared to the previous year.

    Travellers from Lithuania on average spent EUR 136.3 per trip last year (increase of 27.5 %), but travellers from Estonia – EUR 123.9 (increase of 22.1 %).

    Even though the number of travellers from Norway and Sweden fell by 19.1 % and 55.6 %, total expenditure of travellers from these countries rose. Last year tourists from Sweden stayed in Latvia for a longer period of time – 4.5 days, (3.5 days in 2018), but average expenditure of travellers from Norway per day grew by 12.5 % and reached EUR 97.4.

  • The number of visitors in Slovakia rose, year-on-year, by 10,3 %

    The number of visitors in Slovakia rose, year-on-year, by 10,3 %

    The number of visitors in Slovakia accommodation establishments continued to increase, though the growth rate was the slowest during the last eleven months.

    In February 2020, the number of visitors in accommodation establishments reached 482 189 persons and the number of overnight stays was 1 383 672.

    The number of visitors rose, year-on-year, by 10,3 % and the number of overnight stays by 10,6 %. However, the growth rate was in both indicators was the slowest during the last eleven months.

    Services of tourist accommodation establishments were used by 316,8 thous. domestic visitors. Their number increased year-on-year, by 12,8 %, representing more than two thirds (65,7 %) of the total number of visitors accommodated.

    The number of foreign visitors also increased, reaching a year-on-year increase of 5,9 % to 165,4 thousand.

    The visitors spent, on average, 2,9 nights in the accommodation establishments, of which domestic visitors 2,9 and foreign visitors 2,8 nights.

    The most attractive tourist sites in Slovakia

    More than a quarter of visitors (26,6 %) visited Žilinský kraj. The total number of accommodated persons in this region was 128 thous. They were predominantly domestic visitors, representing 64,1 %.

    The most attractive tourist sites included also Bratislavský and Prešovský kraj, with more than 90 thous. overnight stays in each of them.

    The total number of visitors increased year-on-year in all regions, in four of them it was higher by more than 10 %, most notably in Prešovský kraj, with a growth by 17,8 %. The number of domestic visitors grew in all regions, among foreign visitors it decreased in Nitriansky, Trenčiansky and Košický kraj.

    The number of accommodation establishments increased by 348 persons (by 8,5 %) year-on-year, based on the updated Statistical register of accommodation establishments by municipalities.

    At the end of February 2020, their number reached 4 464, there were 70,4 thous. rooms and 184,8 thous. of beds available. The number of rooms increased by 2,4 thous (by 3,6 %) and the number of beds by 8,1 thous. (by 4,6 %).

  • 1.2 billion fewer international air travellers by September 2020

    1.2 billion fewer international air travellers by September 2020

    Compared to “business-as-usual”, by September 2020 international air passenger totals could drop by as many as 1.2 billion travellers according to the latest projections from the International Civil Aviation Organization (ICAO). 

    Its estimates also show that international capacity could drop by as much as two-thirds from what had been forecast for the first three quarters this year, leading airline revenues to drop by as much 160 to 253 billion dollars for the January to September period. 

    Europe and the Asia-Pacific will be hardest hit by the capacity and revenue impacts, followed by North America. Similarly, the most substantial reduction in passenger numbers is expected to be in Europe, especially during its peak summer travel season, followed by the Asia-Pacific. 

    “As overall severity and duration of the pandemic are still uncertain, ICAO has developed six different recovery paths under two indicative scenarios to explore the potential short-term economic implication of the COVID-19 pandemic,” advised ICAO Secretary General Dr. Fang Liu in a message to Representatives of ICAO’s Member States. 

  • Coface forecasts a growth rate of 4% for the Chinese economy in 2020

    Coface forecasts a growth rate of 4% for the Chinese economy in 2020

    Due to the current coronavirus (COVID-19) pandemic and its impact on the global economy, it is unlikely that China will be able to achieve its 2020 growth target. Coface forecasts a growth rate of 4% for the Chinese economy in 2020.

    Economic activity in China could decelerate faster than expected this year and miss the Communist Party of China’s (CPC) growth target of 5.6%. In recent months, the Chinese economy has faced multiple headwinds, such as the consequences of the trade war with the United States, as well as structural factors, like the country’s demographic situation (15% of the Chinese population is over 65 years old). In this context, the COVID-19 pandemic is an additional shock that will add significantly to existing challenges.

    The aforementioned 5.6% growth target is a key threshold for China and the CPC, with the party considering this a “moderately prosperous” level of society. China defines this goal as a doubling of 2010 nominal per capita income figures. Despite the current circumstances, the CPC is hoping to achieve this objective before its 100th anniversary in July 2021.

    At this stage, the government appears to remain confident in meeting the requirements for 2020. However, it is more likely that this milestone will have to be postponed until 2021. The spread of COVID-19 across the world, notably to key markets for China such as Europe and North America (30% of its exports), will drag on Chinese economic activity this year.

    A surge in corporate insolvencies is expected, despite authorities’ strong measures to limit the shock

    Chinese authorities have taken action to compensate the pandemic’s impact on the economy. For example, the People’s Bank of China (PBOC) has, so far, focused on rather prudent and targeted measures such as interest rate cuts. Notwithstanding the added flexibility enabled by these decisions, China will have to resort to aggressive monetary, as well as fiscal easing if it wants to manage the stabilization of its economy.

    Unlike 2009, there is less room for maneuver. In particular, foreign exchange reserves are not sufficient to cover outflows, putting downward pressures on the yuan.

    On the fiscal front, additional infrastructure investments aimed at offsetting the shock will add to indebtedness at local level, resulting in pressures on the already-stretched banking sector and highly indebted corporations. In this context, an increase in bond defaults and corporate insolvencies, accompanied by restructuring efforts in the banking sector, are to be expected.

  • China’s first ever negative quarterly GDP growth

    China’s first ever negative quarterly GDP growth

    China published its GDP growth rate for the first quarter of 2020. GDP grew by -6.8% y/y in Q1 and -9.8% q/q, the first ever negative figure since the start of the Economic Reform in 1978.

    This number is not surprising given the lockdown brought the economy to a near standstill for almost two months.

    China’s latest data bears more significance than normal. With many around the world still in lockdown, they are looking to China to size the economic costs of COVID-19 containment. The key takeaway is that the costs of lockdown are indeed large.

    Economic costs of the COVID-19 lockdown

    China’s economy contracted by 6.8% in Q1 2020, marking it the first contraction since the quarterly data were published since 1992. The previous official contraction in China was recorded in 1976 on an annual basis.

    Industrial production, a gauge of manufacturing, mining and utilities fell by 8.4% in Q1. But withing that IP rose by 1.1% in March. relative to a 13.5% decline in January and February. The March IP figure was much better than expectations of a 6.2% decline from Bloomberg.

  • Moody’s changes outlook on five European banking systems to negative

    Moody’s changes outlook on five European banking systems to negative

    Moody’s has reviewed the outlooks on nine European banking systems in light of the coronavirus pandemic, and changed the outlook to negative on five of them.

    These are Norway, Finland, Hungary and Portugal, which changed to negative from stable, and Slovakia, which changed to negative from positive.

    The outlooks on four other banking systems – the Czech Republic, Poland, Austria and Ireland – remained stable.

    Today’s outlook changes reflect the likely consequences of the coronavirus outbreak in Europe. Moody’s projects a cumulative contraction of the economy over the first and second quarters of 2020. Although supportive fiscal and monetary policy measures will likely aid recoveries with above-trend growth in subsequent quarters and in 2021, the output loss in the second quarter is unlikely to be recovered. In this environment, banks’ problem loans will rise, and their increased loan loss provisions will reduce profitability. Most European banks’ profitability is already low relative to global peers.

    Still, in most of the banking systems, liquidity is strong and capital buffers are substantial, providing a solid base to absorb unexpected losses.

    The change in the outlook on the Norwegian, Finnish, Hungarian and Portuguese banking systems to negative from stable reflects Moody’s expectation that all four countries will experience a sharp contraction in economic growth. Banks’ profitability will weaken due to rising loan loss provisions and reduced lending growth.

    While Norwegian banks currently exhibit low volumes of non-performing loans and very high levels of capitalisation, and benefit from generous crisis support measures underpinned by the country’s sovereign wealth fund, the impact of the coronavirus on their asset risk will be exacerbated by the fall in oil prices.

    In Slovakia, where the outlook for the banking system has changed to negative from positive, the coronavirus-induced slowdown will reverse a previous improvement in asset quality. Slovakia’s high levels of household debt and significant dependence on exports could exacerbate the impact of the downturn.

    Moody’s has kept stable outlooks on the Czech, Polish, Austrian and Irish banking systems

    In the Czech Republic and Austria, the increase in problem loans will start from a low base, and stronger bank profitability than in many other European banking systems adds to resilience.

    The deterioration of loan quality in Poland will likely be moderate as lending growth has been relatively subdued.

    In Ireland, problems loans had been reducing rapidly due to restructurings and portfolio sales. However, Moody’s expect a delay in asset sales and an increase in new arrears. Even so, solvency is expected to remain strong.

  • Google searches for business loan up by 317% amid coronavirus pandemic

    Google searches for business loan up by 317% amid coronavirus pandemic

    Data gathered by Learnbonds.com indicates that global interest in business loans has risen on the search engine Google. According to the data, between the first week of April last year and a similar period in 2020, the queries have gone up by 317%.

    Coronavirus impact on businesses

    According to the data, most months saw interest in the subject remain largely constant with an average popularity score of 25. However, a notable spike was witnessed from the second week of March 2020 when the score reached 30. During this period, the Coronavirus pandemic had begun taking a toll on many businesses across the globe.

    In the third week of March, the popularity score significantly rose by 90% to 57. During the last week of March, the score was 89. By the first week of April 2020, the searches had achieved the peak popularity of 100 representing a 317% growth from a year ago. During a similar period last year, the score was 24.

    With the current pandemic, most businesses are looking for a bailout to remain in operation for the next few months. According to the report:

    Jamaicans are the most interested in a business loan

    From a geographical point of view, Jamaicans are the most interested in a business loan with a Google search popularity score of 100. South Africa comes second with a score of 59 followed by Nigeria with a score of 56. Other countries with more interest in business loans include Australia (54), Singapore (49), India (47 ), New Zealand (43), UK (42) Pakistan (42) and the United States (40).

    Business loans are specifically intended for business purposes and they are available in bank loans, mezzanine financing, asset-based financing, invoice financing, microloans, business cash advances, and cash flow loans.

  • Impact of COVID-19 on businesses: 37% interrupted their activity

    Impact of COVID-19 on businesses: 37% interrupted their activity

    37% of companies surveyed have fully or partially interrupted their operations after declaring the state of emergency due to COVID-19 pandemic and 20% have reduced their activity, according to the PwC Romania HR Barometer conducted by PwC Romania at the end of March.

    In this context, 27% say they will definitely apply for technical unemployment.

    The survey included a series of questions regarding the total or partial interruption of the activity, its reduction, the decrease of the turnover and the ability to pay wages. According to the answers:

    • 19% have stopped the activity altogether
    • 18% partially interrupted the activity
    • 19% haven’t interrupted their activity, estimate a decrease by 25% of the turnover and have the ability to pay salaries
    • 10% haven’t interrupted the activity, anticipate the reduction of the turnover by 25% and don’t have the ability to pay salaries
    • 20% reduced their activity, and business will be reduced by more than 25%
    • 14% don’t expect a decrease in turnover.

    In this context, work from home is an opportunity for companies that can implement it due to the specific nature of the activity. According to the study, 19% of companies implemented mandatory work from home for all employees.

    Companies whose activity specificity doesn’t allow them to work from home and whose businesses are affected take into account technical unemployment provisions, as follows:

    • 27% say they will definitely apply for technical unemployment
    • 18% still don’t know if they will apply because the technical unemployment provisions are unclear
    • 18% still don’t know if they will apply because they haven’t analyzed them
    • 5% indicate that they won’t apply them because the current provisions don’t correspond to their activity specificity.

    According to the survey, almost 30% of those surveyed anticipate that they will have the ability to pay wages in the next three months, while 42% didn’t estimate yet.

  • Czech banks and covered bonds will benefit from central bank’s coronavirus response

    Czech banks and covered bonds will benefit from central bank’s coronavirus response

    Czech National Bank (CNB) implemented a series of proactive measures to assist Czech banks weathering the negative economic effects of the coronavirus outbreak, a credit positive. The measures include a 50 basis point (bp) cut in the two-week repo rate to 1.75%, lowering the Lombard rate to 2.75% and the discount rate to 0.75%, and postponing a planned increase in the countercyclical buffer (CCyB) rate.

    The CNB enhanced banks’ access to liquidity by having repurchase (repo) auctions three times a week (instead of once a week). Czech banks can borrow central bank funds at the new 1.75% two-week repo rate, down from 2.25% previously, allowing them to cover shortterm financing needs if needed.

    The banks hold large pools of liquid assets to collateralize repo transactions and to protect them from potential funding squeezes in stressed market conditions. The CNB’s action followed European Central Bank (ECB) recommendations on 12 March.

    The implemented measures give the banks more flexibility to increase lending and a bit more leeway to absorb pressure on asset quality from the coronavirus’ extraordinary shock on the Czech economy, the full extent of which will be unclear for some time.

    Banks’ recently favorable operating conditions are deteriorating and a broad range of economic disruptions, especially in the automotive sector, will likely slow economic growth, particularly in the first half of this year.

    The CNB also encouraged banks – at their discretion – to assist struggling borrowers by postponing loan repayments. The Czech Banking Association agreed on three-month payment deferment to support retail borrowers whose income is reduced by the current situation.

    This optional measure, which some Czech banks already offer and may include the deferred principal and interest payments, allows borrowers to avoid default and allows banks to avoid immediate credit losses. Ultimately, however, a longer economic disruption will adversely affect loan quality.

  • COVID-19 impact on business: 18% of companies estimate a decrease of revenues up to 20%

    COVID-19 impact on business: 18% of companies estimate a decrease of revenues up to 20%

    18% of the surveyed companies estimate a reduction up to 20% of the revenues as a result of COVID-19 pandemic impact on business, while the majority (65%) haven’t made assessments yet, according to the PwC Romania HR Barometer.

    Another 6% of the respondents estimated a decrease of revenues between 20-50%, 2% consider that the decrease will be between 50-80%, while 9% don’t expect a reduction.

    Of the economic sectors that expect a decrease of the incomes up to 20%, transports are detached with a large percentage of answers (75% of the respondents in this sector gave this answer). Also, 25% of the companies surveyed in the automotive industry (manufacturers and distributors) believe that the decrease in revenues will be up to 20%.

    The same estimate was made by 22% of responding companies in financial services, 21% of consumer goods (distribution, logistics) and 20% of energy.

    Measures to protect employees

    The study aims to find out what measures have been taken to protect employees against infection with COVID-19, as well as the period during which they will be applied.

    According to the answers, 89% of the study participants performed disinfection in the office, 85% limited the interactions, 58% instituted work from home only for those who can work remotely, 40% offered protective equipment, 25% implemented work at home for all employees, 13% decided on mandatory  work from home and 13% only for the employees who traveled to risk areas.

    Interaction-limiting measures

    Another question concerned the options considered for limiting interactions in the context of COVID-19.

    Respondents took the following measures: 81% canceled internal and external events; 79% limited foreign travel; 72% limited domestic travel; 55% limited internal and external events; 24% applied the work in turns to avoid crowding.

  • Insolvencies in Romania decreased by 22% in 2019, at its lowest level over the last decade

    Insolvencies in Romania decreased by 22% in 2019, at its lowest level over the last decade

    The majority of insolvencies were registered in the wholesale and distribution sector followed by the constructions and retail sectors

    The most recent Coface Romania study shows that in 2019 there were 6,384 insolvent companies, -22% less compared to the level registered in the previous year. The data also indicate a gradual decrease of insolvent companies with revenues over EUR 0.5 million (medium and large companies).

    The latter reached 444 companies during 2019, below the average of 550 over the last three years. This evolution was also reflected in the decrease of financial losses of only RON 4.6 billion in 2019, half of the average for the last three years.

    The active business environment situation in Romania

    Coface analysis also reveals a number of vulnerabilities that put pressure on the Romanian companies. The amounts refused to pay with debit instruments during the year 2019 amounted to RON 3.2 billion in total, with 67% increase from the previous year, respectively RON 1.9 billion. The number of companies that interrupted their activity in 2019 increased to almost 160,000, the maximum of the last decade.

    At the same time, the number of SRL companies newly registered last year remained relatively close to 90,000. In other words, for each new company established in 2019, there were almost 1.8 companies that interrupted their activity, compared to the OUT: IN ratio of 1.6 in 2018.

    In comparison to the regional evolutions, active companies in Romania are characterized by an average lifespan of only 10 years, the lowest in the EU. Also, the number of companies that ended their activity is constantly above the ones newly established. Last but not least, the local business environment is characterized by a high degree of concentration amongst the big companies, the first 1,000 companies concentrating half of all the revenues from the entire business environment, respectively 500,000 companies.

    Sectorial and regional distribution of insolvencies

    Most insolvencies opened in 2019 were registered in the wholesale and distribution sector (1,037), followed by constructions (936) and retail (899). Analyzing the evolution of the cases of insolvency over the last 5 years, there is a tendency to consolidate the degree of concentration of volumes in the first 3, respectively 5 sectors.

    The territorial distribution of insolvency cases in 2019 did not undergo significant changes compared to the situation in the previous year. Thus, despite the decrease of -26%, Bucharest ranked first in terms of the insolvencies number, followed by the regions N/V and S. The largest decreases in the number of insolvent companies were registered in the N/E area (-35%), S/E (-27%) and Bucharest (-26%).

    Business environment – main challenges

    Compared to what is happening in the region, the companies active in Romania are very young. Thus, 55% of the companies active today in Romania were established after 2010, while only 15% started their activity before 2000. Only 15% of the companies active today have been in business for over two decades, concentrating almost 40% of revenues, half of assets and one third of employees.

    The data show that almost 1.4 million companies have interrupted their activity after 2010, while the total of the newly registered companies is only half that level. Also, at the end of 2019, Romania registered only 25 companies per 1,000 inhabitants, twice below the ECE (Central and Eastern Europe) average, as well as three times more insolvencies in relation to the number of companies.