Romania is now in a better position in the event of a crisis, both compared to the region and to previous crises. The main crisis Romania is currently experiencing is a demographic crisis, a crisis of vision and execution, according to the CEOs present at the presentation conference of the PwC CEO Survey 2023 report. In this context, companies must rethink themselves and develop their ability to adapt to change.

The 12th edition of CEO Survey 2023 Romania by PwC was held on March 29 at an event in which Dinu Bumbecea, Managing Partner of PwC in Romania, spoke with Omer Tetic, CEO of Banca Transilvania, Andrea Pipernea, CEO of NN Pensions, and Katelin Radu, General Manager of Bristol Myers Squibb. The event can be viewed here.

Key statements of the conference:

Dinu Bumbeca, CMP PwC Romania

62% of Romanian CEOs expect economic growth to slow next year, inflation is the top risk, followed by geopolitical conflicts and macroeconomic volatility.

This year’s response reflects the most pessimistic view since the report was prepared and significantly reverses the optimistic outlook of the past two years. I don’t think anyone can be surprised by the deterioration of perception, given the convulsions the world economy has experienced over the past year.

We live in a world that is experiencing multiple crises – the word polycrisis has gained a reputation in recent months – but also amazing transformations. Those who do not adapt will not survive.

Although the conclusions of the report are rather pessimistic at the moment and in the short term, on second glance we see that there are good preconditions for adaptation and, moreover, for transformation. I think that after two years of the pandemic, during which they showed resistance and acted maturely, Romanian company leaders are ready for the next level. It should be noted that company leaders remain moderately optimistic about the performance of their companies, are ready to make changes and investments to this end, and are aware of the urgent need to have a workforce capable of accepting these transformations for the future.

Andrea Pipernea, CEO of NN Pensii

If we look at the numbers, the GDP development, the exchange rate, the unemployment rate, there are still many that look good at the moment. I think we are by no means isolated, so any wave in the region affects us as well, but I think in relative terms, I see a good position for Romania, both compared to the region and compared to previous crises: financial , San. Now we are affected by a geopolitical crisis. These crises have made us more prepared.

Undoubtedly, the decision was primarily influenced by perception and expectation. Both within companies and within the market or customers. It is very important that those who run companies know well what kind of business they are running.

There are several things in our business that protect us by default, namely a certain immunity to economic cycles, as both investments and withdrawals and insurance products tend to be long-term, providing short-term protection against these fluctuations.

On the other hand, the vulnerability of this business is that savings, buying financial products, is not a very high part of the consumer’s budget priorities. And when there is a sense that a crisis is coming, or we hear news about Covid, war, inflation, then the disposable income that goes to such products will decrease significantly. And then, in the short term, a business like ours will definitely decline.

Omer Tetic, CEO of Banca Transilvania

I think the main crisis in Romania right now is the demographic crisis and the implementation crisis, because we also believe that there is a lot of opportunity and you can create a big impact. At the bank, in our day-to-day work, we are seeing a fairly sharp decline in mortgages – people are buying fewer houses, but being also a significant player in the leasing market, we see that people have not given up on buying cars and -they have been repurposing to cheaper ones. There was a slowdown in savings, but it picked up again, people began to take care of their personal budget. There was also a sudden shock of “helicopter money”, when all economies, countries, governments threw money into the markets. Suddenly it stopped and inflation came and stuck with us all.

We work with other people’s money, and then our challenges are a combination of other people’s challenges, what challenges customers have, what problems there are in different sectors. Speaking separately, the situation is the same as from the analysis of the CEO Survey: everyone talks about the crisis, about challenges, but speaking separately, there is actually optimism: we believe that we will have new opportunities, we will continue to invest. . We have also taken steps to slow down some investments, but not too dramatically. We continue to lend and have quite ambitious growth budgets, so after a long period of over-optimism and this ‘helicopter money’ we have now woken up to a somewhat harsher reality. economic doctrine is likely to be rewritten in the next period because there is inflation, but consumption has not disappeared. Inflation is not new, in the early 2000s, Romania grew with double-digit inflation, had economic growth, investments. Adaptation is important and we have this quality to adapt quite quickly.

Cătălin Radu, CEO of Bristol Myers Squibb Romania

In Europe, in 2008-2009, everyone was “tensing up” (preparing for a crisis), but here, in Romania, the economy was “bubbling”. Then a wave came and washed us away, and most likely it will. However, I remain optimistic about my health.

Any crisis for the health care industry was an opportunity because it was seen how vulnerable we are, how ill-prepared the system is, how low the level of investment is, and it gave an impetus for innovation in the field of health care.

We spend approximately 1,300 dollars per inhabitant on health, compared to 3,500, which is the European average. It’s hard to find a place other than second to last. You can take the last one, but I think we’re not going there, but the other way. Much progress has been made. We still have a long way to go, but the changes are noticeable.

The real crisis I see in Romania is a crisis of vision, a lack of vision. We lacked infrastructure for over 30 years, war broke out, and any crisis like that brings opportunity. We are hardly moving on the infrastructure side to facilitate transit. For years they have been talking about a crisis of doctors, perhaps an even more serious crisis of mid-level personnel. It takes at least 10 years to become a doctor. Therefore, what we would do now would have an effect some 10 years from now. 75% of residency graduates leave us. This health care system needs a radical reform from the point of view of mentality, it is still an outdated system. The salary is decent, but if you compare it with Western Europe in terms of absolute income, you earn more in the west, then there is a donation part, a chance to practice medicine, as every medical student imagines. There are millions of limitations.

Results of the survey of CEOs of PwC in Romania for 2023

Half (52%) of CEOs in Romania say they are confidentin the revenue growth prospects of the companies they lead over the next year, according to the PwC CEO Survey 2023 report. At the same time, a quarter of respondents (27%) believe that their organizations will not survive the decade if they continue on the current course and do not make decisions about the transformation of the companies.

The most important factor affecting long-term profitability is a lack of workers and skills, say 70% of respondents, other threats are: changing consumer preferences, new regulations, the emergence of new technologies, the transition to new energy sources and distorting supply chains.

In the short term, about three-quarters of respondents (73%) plan to invest in process automation, new technologies, and employee development.

Three main problems: inflation, macroeconomic volatility and geopolitical conflicts

Romanian leaders consider inflation to be the main risk for business development in the coming year (48%), followed by geopolitical conflict (42%) and macroeconomic instability (38%).

The picture changes somewhat as the time horizon expands, with macroeconomic instability becoming the most important issue over the next five years, followed by inflation and geopolitical conflict. More than a third of CEOs in Romania experience high or very high exposure to each of the three risk factors.

They cut costs but avoid layoffs or reduced investment

In response to the coming economic challenges, executives say they are taking steps to boost revenue and cut costs. Yes, 92% say they are already cutting operating costs or plan to do so in the next 12 months. However, roughly two-thirds of CEOs in Romania say they are not considering layoffs, while another third of those surveyed admit they have started a layoff program or plan to do so (globally, the percentage is even higher at 39%). Overall, about three in five CEOs say they are not considering a hiring freeze.

Regarding the possible postponement of investments, the proportion of general managers in Romania who say that they maintain the investment rhythm (52%) is higher than those who say that they have started a step to reduce investments or are planning such an initiative (44%).

To better understand the vision of the company’s economic and business leaders, we conducted a series of interviews for the “In the head of the CEO” section of the report with: Omer Tetic, CEO Banca Transilvania, Andrea Pipernea, CEO NN Pensions, Cătălin Radu, CEO Bristol Myers Squibb , Mihaela Bîtu, CEO ING Bank, Julien Munch, CEO Carrefour, Raffel Volker, CEO E.ON Romania, Sergiu Manea, CEO BCR, Francois Bloch, CEO BRD Groupe Société Générale and Kelin Kostinas, Deputy CEO of Profi Rom Food. The full interviews are published in the CEO Survey report

here and on the blog of PwC in Romania here.

Article supported by PwC Romania