The purpose of the business climate research carried out by the Institute for Economic and Enterprise Research (IEER) is to provide an empirical study of business surveys conducted on a quarterly basis and analyze the situation of the Hungarian corporate sector, the current state of business, future prospects, and factors affecting the situation of companies. In addition to questions related to the business climate of companies, other issues and problems -- and the reactions of companies to these -- are explored which play an important role in the adaptability of enterprises in terms of financial status and development. October 2011 was the eighth in a series of survey data collected.

In late 2011 Hungarian companies faced very difficult economic circumstances, and as a result no significant improvement is expected for 2012. Currently, a major obstacle for companies to expand their production and marketing activities is a contraction of credit. This unfavourable process was already underway at the beginning of the economic crisis, and in 2011 access to credit became ever more difficult as banks were put into a difficult situation because of the early payoffs of foreign currency based loans and the bank tax.

In the October 2011 survey we asked participating companies about their borrowing habits and their expectations in light of the credit crunch. The results show that because of the deterioration of credit conditions over the past 6 months 7% of the companies surveyed postponed making investments. Changes in the conditions for accessing credit in 2011 were viewed very negatively by Hungarian business leaders. For 28% of respondents it has become more difficult in recent years to obtain a loan. In addition, respondents expect even more difficult conditions for 2012 than in 2011. As a result of these loan conditions, the vast majority of companies surveyed (81%) expressed a very pessimistic outlook and don’t plan to obtain a bank loan in 2012.

October 2011 was the twenty-eighth occasion of the IEER business climate survey. This is being realized in April and October each year by contacting more than 14,000 companies in cooperation with the regional Chambers. This is the most extensive business climate survey of its kind in Hungary. This research is an integral part of the European business climate survey fulfilled by Eurochambers covering 14 million ventures. In October of this year 1,926 companies filled out our questionnaire – our study was based on these responses from company executives.

The results show that Hungarian enterprises have arrived at a new turning-point: in the autumn of 2011 the recovery, which had been on an upward trend since October 2009, came to an end and the business climate index, which depicts the current situation and expectations of comapanies, worsened again significantly. While the IEER Business Climate Index remained in positive territory, it nevertheless declined considerably from +16.8 points to +1.3 points. The IEER Uncertainty Index hasn’t changed significantly since April and it remains at a high level.

The economic crisis has strongly affected all sectors; the construction industry is especially exposed to the effects of the economic crisis. This sector has so far not shown any signs of recovery.

Unfavourable short-term expectations indicate that Hungarian enterprises anticipate a further deepening of the crisis rather than improvement in the first half of 2012.

For the twenty seventh time the SME Outlook, a joint research project of the IEER, the Observatory (Figyelő) and the Volksbank, examined in July 2011 the Hungarian small and medium enterprise sector, its financial position, prospects, and the factors that influence an individual company's business position. In addition to questions related to the current business situation, current topics and issues -- and the corporate responses to these -- are analyzed which, in turn, have an important role to play in this sector’s adaptability, financial standing and development.

The SME Business Climate Index only partially reflects the less favourable macroeconomic situation of the second quarter of 2011 as compared to the first: of all current business situation indicators only production levels and stock orders decreased while all others were able to rise. In addition, all indicators – with the exception of stock orders and production level indicators – achieved higher scores in the second quarter of 2011 than a year earlier. Despite the ambivalent assessment of the current situation, the short-term expectations of small and medium enterprises are almost uniformly negative toward the changes in the summer of 2011: each indicator has deteriorated, the expected business situation assessment being the only exception. In light of all this, the SME Business Climate Index fell again: whereas in January it was 12.7% and in April was 10.1%, in July it reached only 6.7%. The SME Uncertainty Index somewhat decreased (0.432) compared to its first quarter peak (0.451), indicating a decrease in the diversity of opinions with respect to the assessment of the current and expected business situation of small and medium businesses, that is, the deteriorating business climate is becoming clearly perceivable to all companies.

For the twenty seventh time the SME Outlook, a joint research project of the MKIK Institute for Economic and Enterprise Research (IEER), the Observatory (Figyelő) and the Volksbank, examined in July 2011 the Hungarian small and medium enterprise sector, its financial position, prospects, and the factors that influence an individual company's business position. In addition to questions related to the current business situation some current topics and issues and the corporate responses to these are analyzed which have an important role to play in this sector’s adaptability, financial standing and development. In the July 2011 survey problems of late payments and debt queues were examined among Hungarian firms.

The July 2011 survey found that one third of the business partners of small and medium-sized enterprises pay after the payment deadline routinely and that these late payments represent 38% of total sales, thus the breadth and depth of late payments in mid-2011 was similar to that of six months ago. The problem of late payments mostly affects construction companies; firms mainly involved in exporting are among the least affected by this problem. The rate of companies taking part in a debt queue rose to 45% in the last six months. The problem of the debt queue most frequently occurs at construction companies: more than 70% of them are afflicted with this.

July 2011 marked the seventh occasion of the MKIK Institute for Economic and Enterprise Research (IEER) quarterly business climate survey. This study involves 400 listed companies involved in manufacturing, construction and services, which are representative of Hungary's economic performance and sector distribution, and is done on a quarterly basis.

According to the results from the July 2011 survey, the business climate indicators pertaining to the current situation of Hungarian enterprises – with the exception of production level indicators – all showed an increase in July 2011, leaving only a partial indication of the less favourable macroeconomic situation. The short-term expectations of companies, however, show a significant negative shift: with the exception of the expected state of business situation, all other indicators for the next six months fell. As a result, the IEER quarterly Business Climate Index continued to decline in the second quarter after a peak in January, and the Uncertainty Index is in decline compared to the previous quarter.

Looking at the export turnover of businesses it was mostly the exporting firms that showed the highest score in the business climate index. The steady increasing tendency of the index since July 2010, however, turned negative in the summer of 2011. Exporters as well as producers for the domestic market are generally more optimistic in their outlook of their business situation for the next half-year; however, job creation will come from domestic firms only. As for the development of investment activity, the data suggests that it is more likely to decline in the coming months among companies operating in Hungary.

In April 2011 for the twenty-seventh time the Institute for Economic and Enterprise Research (MKIK GVI) conducted its business climate survey, in where 14,000 companies are examined biannually (April and October) with the assistance of regional commercial chambers. This is the largest and most comprehensive survey of its kind within Hungary, and is part of the Eurochambres business climate survey of 14 million companies as well. Based on the number of responses received, 1,803 business managers replied to our questionnaire in April.

In the April 2011 survey, we recorded the attitudes and opinions of managers toward the New Széchenyi Plan (USzT), a framework program for tender opportunities. The results show that 78% of respondents are familiar with the USzT, yet only 43% plan to use it. Familiarity with the USzT is very similar by different parameters of the companies, and we can say that most domestically owned enterprises are aware of the program and that most of these companies are intending to apply for tenders within the auspices of the USzT.

Slightly more than half of our respondents applied for public and EU tenders in the last five years, with large companies being the most active. The data suggest that the proportion of successful tenders increases with company size. As for the Széchenyi Card Program, 16% of the respondents presently take part. Among the examined companies this program is most widespread among small enterprises of ten employees or less and construction firms.

The joint research efforts of SME Panorama, the Monitor, the Economic and Enterprise Research Institute (GVI) and the Volksbank have set a target of making available, on a quarterly basis, corporate empirical surveys based on the study and analysis of Hungarian small and medium enterprises (SMEs) -- their financial position, prospects and the factors affecting their businesses. A government proposal to the Hungarian National Assembly in 2011 substantially changed personal taxation in several important ways. The expectation was that no one would be worse off with the introduction of the new system; however, several studies pointed out that not everyone will be positively affected by this change. The aim of the MKIK GVI study is to illustrate the proportion of SME workers adversely affected by the introduction of a flat personal income tax in 2011, as well as show which employees were most affected by the law. A third aspect will be an examination of how the companies responded to the changes in personal income, that is, what adjustments were observable until April 2011, when the survey was completed.

The results show that the gross wages of employees at 35 percent of the companies surveyed has not changed in 2011, and declined for 1 percent of SMEs. A majority of businesses in turn raised wages: 27 percent of companies raised wages by less than 5 percent while 36 percent raised wages over 5 percent. The wage rate together with a company's business situation and outlook for the future are significantly related: a favorable business outlook means that a higher wage increase will be more likely. The results found that 82 percent of SMEs have workers whose real incomes fell as a result of the tax system changes introduced in 2011. For those businesses that are entirely Hungarian owned an average of 53% of workers are adversely affected by the new income tax law, while at entirely foreign-owned companies it’s only about 36%.

The changes in personal income tax rules may lead to the beginning of different adaptation strategies by companies. 52 percent of companies claim to fully compensate workers for lost wages, while another 19 percent claim to only partially offset lost wages. The remaining 29 percent, however, are unable to compensate their workers at all for the loss of income. Thus, companies in a favorable business position are able to wholly or partially offset the loss of wages, while those in an unfavorable financial situation are typically unable to compensate their workers for a loss of income.

It was the 27th occasion in April 2011 when the Institute for Economic and Enterprise Research (HCCI IEER) carried out its business climate survey. This is being realized in April and October each year by contacting more than 14.000 companies in cooperation with the regional Chambers. In Hungary this is considered to be the most extensive business climate survey involving the highest number of companies. It is also a part of the European business climate survey fulfilled by Eurochambers covering 14 million ventures. From among the companies contacted 1803 CEOs have filled out our questionnaires – our research results are based on their responses.

According to our April 2011 database the amelioration of business climate has been further continuing on since October 2009. The IEER Business Climate Index /BCI/ showed an improvement in comparison with the past six months: from the October +10,4 value a change to +16,8 points could be observed. The value of the IEER Uncertainty Index has not changed compared to the outcome of our October research: it is still rather high being at the level of 45,5 points. Consequently as per our results the improvement of business climate has been steadily developing in the Hungarian enterprise sector although the uncertainty factor related to the expectations and to the judgement of business situation can still be considered as significant. On long-term bases – in view of the April data of the previous years – this year’s outcome indicates improvement as well. However, the fact that the level of our business climate index recently reached is still inferior to that of the period 1998 – 2002 is to be taken into account. Within the Hungarian economy the recovery process from the crisis is still on but is rather slow in respect of the economic events of the last three years.

The “Geography of Recession” research programme of the Institute for Economic and Enterprise Research (HCCI IEER), set the aim of analyzing the economic crisis from a regional point of view. Within this framework we provide detailed analyses on the changes of regional differences in the field of unemployment, layoffs and labour market quitting since the beginning of the economic crisis.

According to the latest figures, the amelioration that had started on the labour market in the first half year continued in the second half of 2010, although the degree of the improvement was very low. From May 2010 the registry showed relatively fewer job-seekers every month than in the previous year. On the basis of the survey of Hungarian Central Statistical Office it can be stated that though the number of employed increased and the number of unemployed decreased in the second half of 2010, these changes still do not mean a real breakthrough.

The regions of the north-western segment of the country having a more favourable economic position remained the winners of the upturn. In the micro-regions concentrating the export-oriented processing industry, the former downturn turned to a dynamic improvement. On the contrary, in the more backward southern and eastern regions the tendencies of unemployment have taken again an unfavourable turn in the winter months. Signs of any positive change are not discernible in the suburbia of the capital either: the number and the rate of job seekers is still increasing, though the rate does not even reach half of the national average. It seems that the capital’s labour market gives a belated response to cyclical fluctuations in the boom period as well.