By Sylvia Westall
VIENNA, Dec 8 (Reuters) - Business sentiment in central and
eastern Europe darkened this autumn with the economic crisis
taking a toll particularly on the banking and real estate
sectors, according to a survey released on Monday.
The Thomson Reuters & OeKB CEE Business Climate index
<REUTERSOEKB> fell to 29 in October, compared with 44 in the
previous survey in July.
The poll of 400 international firms managing 1,400 companies
in the region was taken as the global financial crisis gained
speed with the collapse of U.S. investment bank Lehman Brothers
and began to seriously hit central and Eastern European states.
"The results show that the mood has worsened amongst direct
investors in central and eastern Europe," said Austrian export
financing bank Oesterreichische Kontrollbank (OeKB), which
prepared the survey.
"The growth outlook is going to get much worse, business
expectations will be sharply reduced and some investment
projects will be put on ice for now."
Any figure above zero indicates corporate morale is positive
so, despite the steep fall, the survey suggested some companies
felt relatively positive about the business climate, their
business expectations and current conditions.
However, the score for the economic outlook fell into
negative territory for the first time, to -1, from 31 in the
previous quarter.
"The vast majority of direct investors expect that economic
growth will clearly weaken in the next 12 months," OeKB said.
The banking sector was the most negative, with 40 percent of
banks expecting growth in the region to falter.
NO WINNERS
October was a particularly bad month for central and Eastern
Europe. Investors ditched assets from the region, bond markets
froze up, and the credit crunch squeezed firms and consumers
already facing a growth slowdown and vanishing orders and jobs.
Following the example of Iceland, Ukraine, Hungary, Serbia
and Latvia have turned to the International Monetary Fund for
rescue lines to pull themselves back from the brink of crisis,
and all countries in the region have slashed growth outlooks.
The October survey showed the mood in the banking and real
estate sectors was hit especially hard, although scores across
all sectors weakened.
A real estate boom in Baltic countries and parts of Romania
and Bulgaria had come to an abrupt end after credit markets
dried up, and the future looks just as sombre, the OeKB said.
Banks in the region have suffered as their parent companies
take the heat from the global credit crunch and reduce or cut
off refinancing for their eastern units.
The business climate in the banking sector dropped to 23
from 49 in July and in real estate to 18 from 41.
Russia, a top performer in July, saw all its components in
the survey slip sharply, with expectations for the economy
plummeting to -6, from 77 previously.
Russia's poor performance may be down to the economy's
dependence on the price of oil, which suffered a steep fall
during the quarter, the OeKB said.
In the region as a whole, all component parts of the survey
tumbled, especially for the growth outlook and business
expectations.
Hungary, which the IMF and the EU agreed to rescue with a
$25.1 billion economic package at the end of October, performed
badly once again and was the most downbeat of all countries with
business climate falling to 12 from 22.
The Czech Republic's business climate outlook slipped to 30,
from 41 in the previous report. Poland, the biggest ex-communist
economy to have joined the EU, sagged to 32 from 57. All other
countries fell, but Romania was relatively the most upbeat.
The survey was first published in January 2007, and was
issued three times last year -- January, July and September. It
is now quarterly.
FOR A TABLE OF DATA, DOUBLE CLICK ON []
NOTE - Distributed exclusively on the Reuters System, the
Reuters & OeKB Central European Business Climate Index is based
on quarterly surveys of 400 international companies with
regional headquarters in Austria, which manage 1,400 affiliate
companies in 19 countries in central and eastern Europe.
(Editing by Andy Bruce)
