1. The Business Situation the Hungarian Enterprises and Their 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

2. 2015. 09. 13. 14:30http://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

3. 2015. 09. 13. 14:30http://www.gvi.hu/3 Macroeconomic data – a brief review Topics  Macro data  GVI survey  Steps of adaptation  Conclusions

4. 2015. 09. 13. 14:30http://www.gvi.hu/4 GDP growth rate: recession before the crisis Topics  Macro data  GVI survey  Steps of adaptation  Conclusions Long recession period before the crisis: 2006.q3 - 2007.q4 World crisis: 2008.q2 – Dramatic deterioration

5. 2015. 09. 13. 14:30http://www.gvi.hu/5 GDP growth rate: the German and Hungarian recession link up Topics  Macro data  GVI survey  Steps of adaptation  Conclusions

6. 2015. 09. 13. 14:30http://www.gvi.hu/6 Dramatic rise of unemployment from 2008.q4 Topics  Macro data  GVI survey  Steps of adaptation  Conclusions

7. 2015. 09. 13. 14:30http://www.gvi.hu/7 Rise in Unemployment: in developed regions Topics  Macro data  GVI survey  Steps of adaptation  Conclusions More developed regions, higher growth rate of unemployment Period of significant rise: from October 2008 to March 2009 higher growth rate lower growth rate

8. 2015. 09. 13. 14:30http://www.gvi.hu/8 The end of the crisis: When? Topics  Macro data  GVI survey  Steps of adaptation  Conclusions

9. 2015. 09. 13. 14:30http://www.gvi.hu/9 The end of the crisis: When? Topics  Macro data  GVI survey  Steps of adaptation  Conclusions

10. 2015. 09. 13. 14:30http://www.gvi.hu/10 The end of the crisis: When? Topics  Macro data  GVI survey  Steps of adaptation  Conclusions

11. 2015. 09. 13. 14:30http://www.gvi.hu/11 The end of the crisis: When? Topics  Macro data  GVI survey  Steps of adaptation  Conclusions

12. 2015. 09. 13. 14:30http://www.gvi.hu/12 The end of the crisis: When? Topics  Macro data  GVI survey  Steps of adaptation  Conclusions

13. 2015. 09. 13. 14:30http://www.gvi.hu/13 The end of the crisis: When? Topics  Macro data  GVI survey  Steps of adaptation  Conclusions

14. 2015. 09. 13. 14:30http://www.gvi.hu/14 Crisis in Hungary – results of GVI business tendency survey Topics  Macro data  GVI survey  Steps of adaptation  Conclusions

15. 2015. 09. 13. 14:30http://www.gvi.hu/15 Definition of GVI BCI Topics  Macro data  GVI survey  Steps of adaptation  Conclusions 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)

16. 2015. 09. 13. 14:30http://www.gvi.hu/16 Survey parameters Topics  Macro data  GVI survey  Steps of adaptation  Conclusions 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

17. 2015. 09. 13. 14:30http://www.gvi.hu/17 The performance of the GVI Business Tendency Survey - an illustrative analysis Topics  Macro data  GVI survey  Steps of adaptation  Conclusions

18. 2015. 09. 13. 14:30http://www.gvi.hu/18 1st step: Scatterplot of GDP growth rate and GVI BCI (t=24) Topics  Macro data  GVI survey  Steps of adaptation  Conclusions R = 0,891 p > 0,000 t = 24 Due to the unit root (cointegration) problem, we have to detrend the time series Simple method: differences dT = T i+1 - T i

19. 2015. 09. 13. 14:30http://www.gvi.hu/19 2nd step: GDP growth rate and GVI BCI (detrended by difference, t=23) Topics  Macro data  GVI survey  Steps of adaptation  Conclusions R = 0,583 p > 0,003

20. 2015. 09. 13. 14:30http://www.gvi.hu/20 Scatterplot of GDP growth rate and GVI BCI (detrended data, t=23) Topics  Macro data  GVI survey  Steps of adaptation  Conclusions R 2 = 0,34 p > 0,000 t = 23 Strong positive relationship The GVI BCI’s change is good predictor of the change of GDP growth rate

21. 2015. 09. 13. 14:30http://www.gvi.hu/21 Toward the turning point? Topics  Macro data  GVI survey  Steps of adaptation  Conclusions

22. 2015. 09. 13. 14:30http://www.gvi.hu/22 Topics  Macro data  GVI survey  Steps of adaptation  Conclusions

23. 2015. 09. 13. 14:30http://www.gvi.hu/23 Topics  Macro data  GVI survey  Steps of adaptation  Conclusions

24. 2015. 09. 13. 14:30http://www.gvi.hu/24 Topics  Macro data  GVI survey  Steps of adaptation  Conclusions

25. 2015. 09. 13. 14:30http://www.gvi.hu/25 Topics  Macro data  GVI survey  Steps of adaptation  Conclusions

26. 2015. 09. 13. 14:30http://www.gvi.hu/26 Topics  Macro data  GVI survey  Steps of adaptation  Conclusions

27. 2015. 09. 13. 14:30http://www.gvi.hu/27 Topics  Macro data  GVI survey  Steps of adaptation  Conclusions

28. 2015. 09. 13. 14:30http://www.gvi.hu/28 Topics  Macro data  GVI survey  Steps of adaptation  Conclusions

29. 2015. 09. 13. 14:30http://www.gvi.hu/29 Topics  Macro data  GVI survey  Steps of adaptation  Conclusions turning point in the crisis in Hungary ?

30. 2015. 09. 13. 14:30http://www.gvi.hu/30 Topics  Macro data  GVI survey  Steps of adaptation  Conclusions

31. 2015. 09. 13. 14:30http://www.gvi.hu/31 Steps of adaptation – results of two ad-hoc surveys Topics  Macro data  GVI survey  Steps of adaptation  Conclusions

32. 2015. 09. 13. 14:30http://www.gvi.hu/32 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 Topics  Macro data  GVI survey  Steps of adaptation  Conclusions

33. 2015. 09. 13. 14:30http://www.gvi.hu/33 Results Topics  Macro data  GVI survey  Steps of adaptation  Conclusions

34. 2015. 09. 13. 14:30http://www.gvi.hu/342015. 09. 13. 14:3034 Drop in domestic sales Decrease of sales in construction and in the processing industry Governmental spending-cut measures, fall of governmental investments Topics  Macro data  GVI survey  Steps of adaptation  Conclusions

35. 2015. 09. 13. 14:30http://www.gvi.hu/352015. 09. 13. 14:3035 Improving expectations of large companies Progressing expectations of the largest companies Dual economy in Hungary: efficiency – large company size, foreign ownership, production for export markets Topics  Macro data  GVI survey  Steps of adaptation  Conclusions

36. 2015. 09. 13. 14:30http://www.gvi.hu/362015. 09. 13. 14:3036 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) Topics  Macro data  GVI survey  Steps of adaptation  Conclusions

37. 2015. 09. 13. 14:30http://www.gvi.hu/372015. 09. 13. 14:3037 Panel data – classification of change MarchJuneChange stagnatingworsening improvingstagnatingworsening improvingworsening stagnation stagnating stagnation improving stagnation worseningstagnatingimprovement worseningimprovingimprovement stagnatingimprovingimprovement Topics  Macro data  GVI survey  Steps of adaptation  Conclusions

38. 2015. 09. 13. 14:30http://www.gvi.hu/38 Companies with loans vs. without loans Topics  Macro data  GVI survey  Steps of adaptation  Conclusions

39. 2015. 09. 13. 14:30http://www.gvi.hu/392015. 09. 13. 14:3039 Progressing expectations of companies with loans Raising loans – improving expectations Restoration of the loan market situation – recovery of the real economy Topics  Macro data  GVI survey  Steps of adaptation  Conclusions

40. 2015. 09. 13. 14:30http://www.gvi.hu/402015. 09. 13. 14:3040 Applied crisis management measures Topics  Macro data  GVI survey  Steps of adaptation  Conclusions

41. 2015. 09. 13. 14:30http://www.gvi.hu/412015. 09. 13. 14:3041 Applied crisis management measures I. Topics  Macro data  GVI survey  Steps of adaptation  Conclusions Rapid reaction to the crisis Several different measures Shorter working hours at 19% Workforce cut at 42% of the companies

42. 2015. 09. 13. 14:30http://www.gvi.hu/422015. 09. 13. 14:3042 Applied crisis management measures II. Topics  Macro data  GVI survey  Steps of adaptation  Conclusions Reducing costs is prevailing Searching for new markets: 82% Postpone the shrinking of the company

43. 2015. 09. 13. 14:30http://www.gvi.hu/432015. 09. 13. 14:3043 Searching for new markets Active and "expansionist" reaction at companies with export sales Appearance of the dual economy Topics  Macro data  GVI survey  Steps of adaptation  Conclusions

44. 2015. 09. 13. 14:30http://www.gvi.hu/44 Part-time working hours by exports Part-time working hours at companies with export sales Non-typical form of employment in Hungary Topics  Macro data  GVI survey  Steps of adaptation  Conclusions

45. 2015. 09. 13. 14:30http://www.gvi.hu/452015. 09. 13. 14:3045 Part-time working hours by company size Diminishing labor force demand Rising unemployment Topics  Macro data  GVI survey  Steps of adaptation  Conclusions

46. 2015. 09. 13. 14:30http://www.gvi.hu/462015. 09. 13. 14:3046 Dismissal and part-time work Workforce cut and part-time work – complementary crisis management measures Enterprises in unfavorable business situation apply several methods Topics  Macro data  GVI survey  Steps of adaptation  Conclusions

47. 2015. 09. 13. 14:30http://www.gvi.hu/472015. 09. 13. 14:3047 New long-term plans by foreign ownership Long-term planning at companies with foreign ownership A different business mentality? Topics  Macro data  GVI survey  Steps of adaptation  Conclusions

48. 2015. 09. 13. 14:30http://www.gvi.hu/482015. 09. 13. 14:3048 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 Topics  Macro data  GVI survey  Steps of adaptation  Conclusions

49. 2015. 09. 13. 14:30http://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/ Topics  Macro data  GVI survey  Steps of adaptation  Conclusions