site.bta Bulgarian Industrial Association's Poll Shows Slight Improvement in Business Climate Estimates

Bulgarian Industrial Association's Poll Shows Slight Improvement  in Business Climate Estimates

Sofia, December 20 (BTA) - The Bulgarian Industrial Association (BIA) Monday presented the results of the 12th annual poll on how the business community perceived the outgoing year. The poll shows a slight improvement of the estimates of the business climate in 2016 and moderate optimism about 2017, which, however, are marred by a high degree of dissatisfaction with the performance of the government institutions, concerns about rising prices, tax and regulatory burdens.

The poll was conducted online among 715 undertakings between November 10 and December 15, 2016.

Only one in ten respondents perceives improvement in the business climate in both 2015 and 2016. The situation of companies improved too. One in three business people declared improved state of their businesses in 2016, up from a share of 12 per cent in 2015. The share of companies with worsening indicators remains high at 35 per cent.

The poll also examines the opinion of the business in respect of key events in 2016 and about proposed legislative amendments. The proposals about abolishing minimum contributory incomes and about scrapping the practice of bridge holidays were most approved, by 71.5 per cent on average. The idea to determine the minimum working wage using a clear methodology and objective criteria is approved by 66 per cent of the respondents in the poll. The idea to introduce extraordinary powers to lawyers receives strongly negative assessments and is disapproved by 86 per cent of the respondents in the poll. The business has doubts as to the speedy accession to the Eurozone. More than half of the interviewees do not expect Brexit to impact their business, while nine per cent expect a negative effect, and three per cent think that Brexit will have a positive effect.

The level of corruption was perceived as extremely high in 2016 by 46 per cent of the respondents, as were the levels of the shadow economy, 45 per cent, crime, 42 per cent, and regulatory burden, 55 per cent.

Access to lending was perceived as improving by 26 per cent in 2016, against 20 per cent in 2015. Only nine per cent of the respondents saw an improvement in the access to justice, more than 60 per cent said that the situation did not change, and 12 per cent said it worsened.

In 2016, the tax administration and local government again have the highest approval rating (about 40 per cent on average). The approval ratings of the judiciary, the President and the Council of Ministers remain extremely low. Parliament has the highest disapproval rating at 75 per cent of respondents. This is the first time the legislature has met with stronger disapproval than the judiciary.

The rated institutions include several regulators and control bodies which are key to businesses: the Energy and Water Regulatory Commission (EWRC), the Commission for Protection of Competition, the Bulgarian Food Safety Agency, the General Labour Inspectorate Executive Agency, and the regional inspectorates of environment and water. The General Labour Inspectorate has the highest approval rating of them all at 28 per cent, and the EWRC is at the opposite end of the table with 2 per cent approval.

Compared to 2015, a larger share of companies posted a decrease in production volume and sales/turnover, while the share of businesses with an increase in these indicators remained roughly the same. Access to foreign markets remained more or less the same as in 2015. Negative job trends were registered, with one in three respondents reporting job cuts. At the same time, over 40 per cent of respondents said they introduced pay rises in 2016.

In 2015 the investment priorities were, by order of importance, new capacity/buildings, new products/services, and human resources, whereas in 2016 investments in human resources increased most, followed by new production capacity and the creation of new products.

As to the labour force, narrow specialists and order takers were in short supply in 2016, while administrative and auxiliary staff were abundant.

Businesses' debts to the Exchequer and to financial institutions increased compared to 2015. Indebtedness to counterparties and to staff edged down. At the same time, there was a substantial increase of overdue uncollected receivables from counterparties (17 per cent in 2015 and 37 per cent in 2016), as well as from central and local government and from wholly or partly State- and municipal-owned enterprises.

On the positive side, over-one-year arrears were nearly halved (from 50 per cent in 2015 to 28 per cent in 2016), at the expense of one-to-three-month arrears and up to twelve months' arrears.

More than half of those polled expect energy and raw material prices to increase and a heavier fiscal and regulatory burden in 2016. Respondents are guarded optimists about the cost of business credit. Against this background, the substantial growth of jobs (42 per cent) that is predicted seems wishful thinking rather than a realistic prospect. One in three of the interviewees is rather optimistic about overall economic development, but 25 per cent remain pessimistic, while another 31 per cent do not expect any change.

For 2017, respondents plan above all to increase their production volume, develop new products, and seek new markets. More than half of the participants in the poll do not plan to incur more credit debts, and one in four even intends to reduce their outstanding obligations (including bank loans and leases).

Next year, too, employers are planning to prioritize investments in human resource development, with a substantial growth compared to 2015. The share of those undecided has plummeted: from 23 per cent in 2015 to a mere 5 per cent in 2016. More investments in production capacity than in 2015 are also planned now.