The Quarterly Business Climate Survey of IEER is based on the answers of 400 CEO respondents, now surveyed about their business situation and expectations. The Quarterly Business Climate Index and the Quarterly Uncertainty Index were calculated from the full sample of 300 small and medium-sized enterprises (20-249 employees) and 100 large enterprises (250+ employees). For small and medium-sized enterprises, the SME Outlook Business Climate Index and the SME Outlook Uncertainty Index were calculated.

The Quarterly Business Climate Index survey of IEER reveals the opinion of 400 managers on the situation and the outlook of their businesses. The basis used for calculating the Quarterly Business Climate Index and the Quarterly Uncertainty Index is a sample of 300 small and medium-sized enterprises (20-249 employees) and 100 large enterprises (employing 250 persons or more). Surveyed small and medium-sized enterprises were evaluated by using our SME Outlook Business Climate Index and SME Outlook Uncertainty Index.

For concluding its Quarterly Business Climate Index survey, IEER asked 400 CEOs about the situation and the outlook of their businesses. The basis used for calculating the Quarterly Business Climate Index and the Quarterly Uncertainty Index was a sample of 300 small and medium-sized enterprises (20-249 employees) and 100 large enterprises (employing 250 people or more). Surveyed small and medium-sized enterprises were evaluated by using our SME Outlook Business Climate Index and SME Outlook Uncertainty Index.

The quarterly corporate business climate survey of Institute for Economic and Enterprise Research (IEER) is based on the opinions of 400 chief executives about the current state and outlook of their businesses. From the companies surveyed, 300 small and medium-sized enterprises (with 20-249 employees) were selected to calculate the Comprehensive SME Business Climate Index and the Comprehensive SME Uncertainty Index. For the greater sample of 400, including large enterprises employing over 249 people, a Quarterly Business Climate Index and a Quarterly Uncertainty Index were calculated.

The results of the latest IEER SME Outlook business climate survey reveal that the business confidence significantly increased compared to the previous quarter: the Business Climate Index rose from 18 to 24 points. Thus, the decreasing tendency that started in January 2017 has been broken.

In the following short analysis the Institute for Economic and Enterprise Research (IEER) examines the factors determining corporate borrowing and willingness to invest in Hungary. In the recent years several policies aimed to stimulate borrowing activity among Hungarian companies such as the reduction and the continuously low level of the central bank’s base rate or the Growth Loan program announced by the Hungarian National Bank. In our analysis three factors influencing the willingness to invest are examined: (i) interest margin and the development of interest rate environment, (ii) the quality of institutional and regulatory environment and (iii) the business climate and expectations of companies. Despite the policies implemented by the Hungarian National Bank interest margin is relatively high in Hungary in regional comparison making it difficult for companies to access financial resources. The uncertainty of institutional environment can make market players cautious as well. Business climate however, shows positive prospects, which means that business outlook does not explain the low demand for loans. In the future the reduction of interest margin, the improvement of institutional environment and competitiveness could have a positive effect on corporate borrowing and investments.

In its analysis the Institute for Economic and Enterprise Research examined the practices relating to internet usage among domestic small and medium sized companies. The analysis is based on the data of the January 2017 SME Outlook survey of 300 small and medium enterprises that have at least 20 employees. Beside the most general uses (maintaining contact with clients, maintaining an own website, administration) the Hungarian SMEs mostly use the internet to seek information. Among larger companies, among those that have foreign ownership, and among those of the commerce and manufacturing sector internet usage is more prevalent than in the case of other types of companies. 84 percent of the SMEs have an own website and these are mainly maintained by a professional. A clear evidence of the importance of internet usage among domestic companies is that 90 percent of them claim that if the internet did not work at their company for a week, it would mean a serious problem for the functioning of their businesses. At the same time however, most of the responding companies invest less than 1 percent of their income in purchasing and maintaining IT devices.

The results of the latest IEER SME Outlook business climate survey reveal that the business confidence slightly decreased compared to the previous quarter: the Business Climate Index fell from 28 to 25 points. The value of the index was 25 points in January 2016.

The Uncertainty Index is at a current level of 38 points, which is the same as in the previous quarter. The value of the Uncertainty Index indicates that the current trend is not uniform within the private sector, and that it will continue to be confined to one part of the economy and will not be felt by all small and medium sized companies.

In sum, we can assess that the Business Climate Index after the peak (33 points) in April 2016 dropped to 27 points in July 2016 and it was 28 points in October 2016, now a decrease (25 points) occurred again.

The results of the latest IEER SME Outlook business climate survey reveal that the economic condition remains the same as that in the previous quarter: the Business Climate Index increased from 27 to 28 points. This is due to the fact that the vast majority of the sub-indicators stagnated compared to July 2016. Only three sub-indicators moved relative to the previous quarter: the production of level of the previous quarter dropped significantly, however, the expected business situation and the expected profitability slightly increased compared to July.

The Uncertainty Index is at a current level of 38 points, which is 2 point higher than in the previous quarter (it was 33 points in July 2016). The value of the Uncertainty Index indicates that the current trend is not uniform within the private sector, and that it will continue to be confined to one part of the economy and will not be felt by all small and medium sized companies.

In sum, we can assess that the Business Climate Index dropped to 27 points in July 2016 and 28 points in October 2016 compared to the peak of April 2016 (33 points).

The results of the latest IEER SME Outlook business climate survey reveal less favourable economic conditions compared to the previous quarter: the Business Climate Index decreased from 31 to 27 points. Thus the upward trend since last October was broken. While enterprises regard their current situation more favourable compared to the previous quarter, they consider their future prospects more negatively than in April. It means that the SME sector predicts a turning point in the trends of domestic business climate.

The Uncertainty Index is at a current level of 36 points, which is almost the same as the value measured in the preceding quarter (it was 37 points in April 2016). The value of the Uncertainty Index indicates that the current trend is not uniform within the private sector, and that it will continue to be confined to one part of the economy and will not be felt by all small and medium sized companies.