K&H: large domestic companies fear recession

Once again the growth index stood at 0 in the third quarter. Gábor Rajna, head of K&H’s business banking division has pointed out: while the main index stagnated, companies’ expectations regarding their own situation (reflected in the so-called corporate sub-index) improved slightly, but their expectations about macroeconomic development deteriorated significantly.

Looking behind the general trend in the index and breaking down companies by turnover, large companies with sales above HUF 10bn are the most optimistic. K&H sees the most negative expectations for the macroeconomy primarily from medium-sized companies, while smaller companies and enterprises show a stagnant value of 0 points. “The current economic conditions tend to have a strong impact on smaller companies. Retail is a sector where businesses are hit harder by the current situation”, says Gábor Rajna.

Higher sales and fewer investments are expected

There is a positive trend in companies’ expectations for sales and profits, as the majority calculates with higher sales and bigger profits. The positive developments are mainly driven by export markets – companies forecast export sales to grow dynamically. However, the number of firms planning to invest has been decreasing almost continuously since 2021, which is a natural phenomenon in a high interest rate environment and with an uncertain outlook. This is counterbalanced by the willingness to employ, which has been rising sharply since the fourth quarter of last year, with a 1.7% increase in the number of employees expected in the large company sector over the next year. Energy efficiency investments have been very popular recently.

Concerns about the regulatory environment, taxes and social contributions

While inflation, the domestic customer base, and supplier price hikes were previously seen as the most important factors affecting profitability, their importance has declined markedly in the 3rd quarter survey. In addition to inflation (43%), it is the regulatory environment (47%), the government’s economic policy (43%), and taxes and contributions (40%) that are now the factors companies believe will have the biggest impact on profitability in the coming year. “This may also be due to the fact that at this time of the year, changes for the coming year are typically not yet fully known, which can increase uncertainty and the feeling of more difficult planning for firms”, explains Gábor Rajna. //