2012 looks austere, with little or no top line growth and general cost cutting on the horizon

21 December 2011

MIHAI BARSAN

MIHAI BARSAN

Marketing Manager
SABMILLER SLOVAKIA

Following a period full of economic upheavals, 2011 has been awaited with great expectations; however all the hopes regarding a stronger recovery in the world economies fell like domino pieces in the second part of the year, when everybody started to prepare for a second wave of the crisis. The global economy has entered a new stage of the economic and financial crisis that began in 2007-2008, as one of the Business Digest contributors notes, after the initial state intervention intensified the sovereign debt problem for countries that were already highly indebted.

The slowdown in the global macroeconomic environment and the deepening of the sovereign debt crisis in Europe - with the increased chances of a default in the case of Greece but also with difficult financial position for countries like Ireland, Portugal, Italy or Spain – are issues that, if not quickly provided with solutions, could trigger a new financial turmoil with negative consequences on each and every country in the world.

As far as Eastern Europe is concerned, previous expectations that the region would be resilient to troubles in the Euro zone are proving misplaced, another of our contributors points out. Currencies and stock markets across the region have suffered sharp falls in recent months, the business and consumer sentiment is very fragile, and currency and bond markets are vulnerable to contagion from troubles in the Euro zone and heightened risk aversion. The negative consequences of a Greek sovereign default would hit the region even harder as the Greek banks are most active here and the economic recovery is still very fragile.

In this "puzzle", Romania is just a small "piece" that will be caught in the middle of global turbulence and, as the contagion risks from abroad have dramatically increased, has little chance of avoiding a negative impact. In this general context, the Digest wanted to explore, from "inside out" the economic developments taking place in other European and international markets, the ways the authorities and companies "there" are preparing for the challenges 2012 poses, and also trends that will most likely translate on the Romanian market. Therefore, we asked some of the Romanian managers who now lead operations in other countries of the world to share their opinions and views.

Q: WHAT ARE THE BIGGEST CHALLENGES YOU THINK 2012 WILL BRING FOR SLOVAKIA’S ECONOMY?

MIHAI BARSAN: The topic is undoubtedly the future of the Eurozone and its impact on a small economy like Slovakia, a member of Eurozone which is dependent on exports. The topic is hot and led to the fall of a government, with anticipated elections planned for March. The GDP growth is slowing down as the orders from abroad weaken, and domestic demand is weak with household spending and retail sales in a long time declining trend. 2012 looks austere, with little or no top line growth and general cost cutting on the horizon. This underlines even stronger the need for innovation and designing offers with better value for money to consumers.

Q: DO YOU THINK THERE WILL BE A "SECOND WAVE OF THE CRISIS"?

MIHAI BARSAN: I think there will be many waves of crisis, at least until we figure out a solution to the petrol problem, and therefore the biggest challenge we have in business is sustainability: how to run our businesses better with less resources? This puts tension between the needs to design novel approaches (inherently risky) and managing the anxiousness of the markets (inherently risk adverse in such an environment).

Q: ARE THE AUTHORITIES TAKING MEASURES TO HELP THE BUSINESS ENVIRONMENT?

MIHAI BARSAN: Slovakia has a very good experience of attracting foreign investors, and has a minister portfolio especially dedicated to this endeavour. Low tax rate, very good infrastructure and proximity to developed Western Europe countries (especially Austria and Germany) are important strengths for Slovakia, that in my own judgment the country has been utilising really well.

Q: WHAT WOULD YOU ADVISE ROMANIAN MANAGERS THROUGH THE EXPERIENCE THAT YOU HAVE NOW?

MIHAI BARSAN: To stop being victims of circumstances and look actively for the opportunities out there in the market – there are always opportunities even in a tough economy. Romania should embrace the crisis and become a heaven for investors – all major companies are looking for ways to streamline their operations and cut costs. We have still a well-educated work force and good strategic position. With further improvements of our transport infrastructure and less bureaucracy we could really turn this crisis into our advantage. The crisis is actually an even bigger opportunity for Romanian capitalists than for foreign investors: they have better knowledge and relations here. Almost everything can be produced in Romania for low price and excellent quality, both for the local market (which is of a respectable size) and for export, and it would be a great time for Romanian capitalists to follow the model of their Polish counterparts.