Capital Confidence Barometer - Central and South East Europe

10 Noiembrie 2011

ERNST & YOUNG S.R.L.

Survey HighlightsOur findings point to:

• Companies well prepared to weather economic storms despite gloomy outlook for economy.
• Focus on maintaining stability and investing into organic growth.
• Strong potential for deal activity despite volatile environment.

 

Economic outlook

Economic outlook gloomy

July and August marked a return to intense volatility not seen since the early days of the economic crisis in 2008. The US credit rating downgrade, the debt crisis in the Eurozone and weakening economic data from around the world sparked dramatic stock market activity and ultimately the global re-pricing of risk.

Only 34% of respondents are optimistic, and even then only mildly so, about global economic prospects. Two-thirds (64%) said that they felt the global economy was declining. Pessimism was reflected in local economies as well. When asked their perspective on the state of their local economies, 66% cited a declining environment.

What is your perspective on the state of the economy today?

Choppy waters ahead

Despite the relative stabilization of the past months, 73% of respondents expect short-term volatility of the global markets to remain high. Local markets are perceived as slightly more stable with 56% expecting continued high volatility.

What is your view of the likely short-term volatility of the global markets?

What is your view of the likely short-term volatility of your home/ local markets?

 

Access to capital

Strong balance sheets

Corporates are well prepared for a further downturn as they have managed to maintain low levels of indebtedness. Typical balance sheet leverage is now less than 25% of debt to capital and 69% of the companies have a debt to capital ratio of less than 50%.

This low debt strategy is expected to continue as not less than 81% plan to maintain or further reduce their debt to capital ratio in the next 12 months. Only 19% intend to increase their leverage in the current environment.

What is your current debt to capital ratio?

Definition: Debt to capital ratio = “total debt” divided by “total debt + book equity

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