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Corporate responses to the economic crisis: The Hungarian case

Corporate responses to the economic crisis: The Hungarian case. Ágnes Czibik (GVI) – Ágnes Makó (GVI) – István János Tóth (MTA KTI). HCCI Institute f or Economic and Enterprise Research. 30th CIRET Conference – Economic Tendency Surveys and the Services Sector

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Corporate responses to the economic crisis: The Hungarian case

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  1. Corporate responses to the economic crisis:The Hungarian case Ágnes Czibik (GVI) – Ágnes Makó (GVI) – István János Tóth (MTA KTI) HCCI Institute for Economic and Enterprise Research 30th CIRET Conference – Economic Tendency Surveys and the Services Sector New York City, Westin New York at Times Square 14 October 2010 http://www.gvi.hu/

  2. Topics Motivation of the research Hungary in a nutshell - main problems of the economy Business situation and adaptation - results of three ad-hoc surveys Conclusions Topics Hungary in a nutshell  Business situation and adaptation: survey results Conclusions 2014.06.10. 6:23 http://www.gvi.hu/ 2

  3. Motivation A special crisis beyond the business cycle: structural changes – what happens to companies? Ad-hoc survey on business climate and on the reactions of firms – do they react as usual or is it special? Loan market crisis – examining companies with loan Topics Hungary in a nutshell  Business situation and adaptation: survey results Conclusions

  4. Hungary Topics  Hungary in a nutshell  Business situation and adaptation: survey results Conclusions • Central-Eastern Europe • Area: 93 030 km2 • Population: 10 001 000 (July 2010)

  5. Main problems of the Hungarian economy 2014.06.10. 6:23 http://www.gvi.hu/ 5

  6. Crisis before the crisis Topics  Hungary in a nutshell  Business situation and adaptation: survey results Conclusions • " Crisis before the crisis ":long period of recession2006.Q3 -2007.Q4 • Governmental measures • EU-markets • Beginning of the recovery - world crisis: 2008.Q2 – dramatic deterioration

  7. Lost position Topics  Hungary in a nutshell  Business situation and adaptation: survey results Conclusions • Falling behind the Central European region • Per capita GDP: 63% of theEU-27 (2009)

  8. Lost position Topics  Hungary in a nutshell  Business situation and adaptation: survey results Conclusions • Falling behind the Central European region • Per capita GDP: 63% of theEU-27 (2009) • Slovakia: overtook in 2006

  9. Lost position Topics  Hungary in a nutshell  Business situation and adaptation: survey results Conclusions • Falling behind the Central European region • Per capita GDP: 63% of theEU-27 (2009) • Slovakia: overtook in 2006 • Poland: catching up

  10. Lost position Topics  Hungary in a nutshell  Business situation and adaptation: survey results Conclusions • Falling behind the Central European region • Per capita GDP: 63% of theEU-27 (2009) • Slovakia: overtook in 2006 • Poland: catching up • Czech Republic: keeping good position

  11. Extremely high deficit Topics  Hungary in a nutshell  Business situation and adaptation: survey results Conclusions • One of the countries with the highest deficit in the EU • Governmental measures in 2006 • Decrease of government deficit

  12. Topics  Hungary in a nutshell  Business situation and adaptation: survey results Conclusions Lowemployment • One of the countries with the lowest employment rate in the EU • Reasons: transformation shock, tax burden, black work • Crisis – between 2008.Q4and 2010.Q1: the number of employed decreased by 200 000 2014.06.10. 6:23 2014.06.10. 6:23 http://www.gvi.hu/ 12 12

  13. A "province" of Germany? Topics  Hungary in a nutshell  Business situation and adaptation: survey results Conclusions • 2009: • Small open economy: export/GDP=64% • 2008: • 24% of FDI from Germany • 2009: • 25,6% of export • 24,8% of import

  14. Business situation and adaptation - results of three ad-hoc surveys Topics  Hungary in a nutshell  Business situation and adaptation: survey resultsConclusions 2014.06.10. 6:23 http://www.gvi.hu/ 14

  15. Survey parameters Period: March and June 2009, March 2010 Survey method: CATI Sample: Hungarian enterprises, quota sampling by bank loans Sectors: manufacturing, construction, trade and other services Case numbers: 314 companies in March, 302 companies in June, 300 companies in March 2010. Panel database: N=184 Test of homogeneity: identical sample distribution by company size and sectors The research was supported by the National Office for Research and Technology, Jedlik Ányos Programme. (Project number: NKFP_07_A2-TEXTREND, Contract number: OM-00002/2008) Topics  Hungary in a nutshell  Business situation and adaptation: survey resultsConclusions http://www.gvi.hu/ 15

  16. Special Crisis Climate Index CCI = (a1 + a2 + a3 + a4 + a5) / 5 Topics  Hungary in a nutshell  Business situation and adaptation: survey resultsConclusions http://www.gvi.hu/ 16

  17. Topics  Hungary in a nutshell  Business situation and adaptation: survey resultsConclusions Results http://www.gvi.hu/

  18. Topics  Hungary in a nutshell  Business situation and adaptation: survey resultsConclusions Companies with credit: barely different CCI • Companies with credit were in worse situation only in March 2009 • The difference disappeared

  19. Exporting firms: steep falling - faster recovery Topics  Hungary in a nutshell  Business situation and adaptation: survey resultsConclusions • Crisis: driven by narrowing of export markets • Exporting firms’ CCI were positive in March 2010 2014.06.10. 6:23 http://www.gvi.hu/ 19

  20. Topics  Hungary in a nutshell  Business situation and adaptation: survey resultsConclusions Clustering method • Does the developed/less developed dichotomy appear in the data? • Two clusters for „developed” and „less developed” companies • Clustering by export, foreign ownership, net sales revenue, number of employees

  21. CCI by two different type of firms Topics  Hungary in a nutshell  Business situation and adaptation: survey resultsConclusions • Developed firms were in better situation in all three surveys • Absence of Dec 2008 survey 2014.06.10. 6:23 http://www.gvi.hu/ 21

  22. Topics  Hungary in a nutshell  Business situation and adaptation: survey resultsConclusions Regional impacts of the crisis • Crisis reached first the developed regions (West and Central Hungary) • Index of registered unemployment rose first here Sept 2008 Dec 2008 March 2009 June 2009 March 2010

  23. Topics  Hungary in a nutshell  Business situation and adaptation: survey resultsConclusions Corporateresponses 2014.06.10. 6:23 http://www.gvi.hu/ 23

  24. Topics  Hungary in a nutshell  Business situation and adaptation: survey resultsConclusions Main questions • Ordinal or special reactions? • Consciousness in corporate strategies or trial and error? • Which measures were effective?

  25. Topics  Hungary in a nutshell  Business situation and adaptation: survey resultsConclusions Measures examined • First survey: 18 measures • Afterwards: the 13 most common measures • Strategic measures • Seeking new markets • Launching new products • New strategic plan • Measures related to employment • Layoffs • Freezing or cutting wages • Shorter working hours • Other measures • Reducing receivables • Reducing dependence on suppliers • Reducing short-term debts • Government and EU benefits • Cost cutting measures • Postponing investments • Cutback of noncore services

  26. Topics  Hungary in a nutshell  Business situation and adaptation: survey resultsConclusions More variability in the first period • Average number of applied measures: • 2009 March: 5,5 • 2009 June: 5,6 • 2010 March: 5,8 • „All potential measures for surviving” 2014.06.10. 6:23 http://www.gvi.hu/ 26

  27. Topics  Hungary in a nutshell  Business situation and adaptation: survey resultsConclusions CCI by the the number of applied measures • Worse situation – more measures • Different measures? 2014.06.10. 6:23 http://www.gvi.hu/ 27

  28. Topics  Hungary in a nutshell  Business situation and adaptation: survey resultsConclusions Corporate responses: employment and strategic measures • Significance of seeking new markets • Less layoffs in 2010 • Shorter working hours rarely applied

  29. Topics  Hungary in a nutshell  Business situation and adaptation: survey resultsConclusions Corporate responses: cost cutting and other measures • Postponing investments and cutback of non-core services are also prevalent • Significance of government benefits is growing

  30. Topics  Hungary in a nutshell  Business situation and adaptation: survey resultsConclusions The most effective measures • Seeking new markets • Freezing wages

  31. Topics  Hungary in a nutshell  Business situation and adaptation: survey resultsConclusion Companies’ most effective measures and the CCI • Firms with higher CCI: government benefits, new products, new strategic plan • Lower CCI: cost cutting • Low case numbers

  32. Conclusion Topics  Hungary in a nutshell  Business situation and adaptation: survey results Conclusion • In an open economy like Hungary the crisis was driven mainly by narrowing of export markets. Credit crisis was secondary. • Exporting firms’ business situation worsened earlier but they also seem to recover earlier • Companies tried to apply many measures to minimize the unfavourable impacts of the crisis. Worse CCI – more measures. • Connection between CCI and type of most effective measure • Firms with worse situtation: cost cutting • Firms with better situation: strategic measures 2014.06.10. 6:23 http://www.gvi.hu/ 32

  33. Topics  Hungary in a nutshell  Business situation and adaptation: survey results Conclusions Further research • Further surveys – more data – higher case numbers • More complex analysis, methods • Following Hungarian firms’ situation and activity throughout the crisis

  34. Thank you for your attention!http://www.gvi.hu/ http://www.gvi.hu/

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