* Business climate indicator rises to -7 from -15
* Business expectations better than current situation
* Climate turns positive in Poland, Czech Republic
* First increase since indicator started in 2007
By Boris Groendahl and Michael Winfrey
VIENNA/PRAGUE, Aug 11 (Reuters) - Business sentiment among
foreign companies operating in emerging Europe improved for the
first time since early 2007 as expectations for business in the
next six months, and for the overall economy, rose markedly.
The Thomson Reuters & OeKB Central and Eastern European
Business Climate index <REUTERSOEKB> released on Tuesday showed
improved morale in every country of the region, although it
remained negative on balance. []
The index rose to minus 7 in July, from minus 15 in April,
turning positive again in Poland and the Czech Republic, and to
zero for Russia, which showed the biggest change from minus 20.
IMF bailout recipients Hungary and Ukraine fared the worst.
The rise in the index adds to improving signs from other
leading indicators such as the Purchasing Managers' Index (PMI)
data for Hungary, Poland and the Czech Republic, but this trend
has yet to filter through into real output data. []
While survey panelists still judge the current business
situation as slightly worse than three months ago, their
business expectations for the next six months improved by 20
points, to minus 3 in the quarter.
The view of the overall economy also brightened. Only 39
percent of the surveyed companies expect the economy to shrink
over the next 12 months, down from 65 percent at the start of
the year. Fifteen percent now expect improvement, up from five.
"Overall, the results give reason to hope for a change in
trend for central and eastern Europe," said Austrian export
financing bank OeKB, which compiles the survey of 400
international companies with 1,400 affiliates in the region.
"Across all countries and virtually all sectors, the
economic outlook of the foreign direct investors is marked by
cautious optimism," OeKB said in a statement.
The survey bolsters the view, reflected in rising currencies
and stock markets, that the worst of the economic crisis has
passed for emerging Europe, and although countries face
continued risks, cash injections from the IMF and European Union
have tamed the threat of region-wide meltdown. []
BANKS INVESTING AGAIN
This is also underpinned by increased confidence among banks
in the region. The survey shows that they plan, on balance, to
invest in their subsidiaries over the next 12 months, rather
than pull out, as indicated three months ago.
"Business climate among lenders has brightened particularly
since April, and especially business expectations have risen,"
OeKB said. "A quarter of the banks (surveyed) expect business to
improve over the next six month.
Western banks, especially from Austria, Italy, France,
Sweden and Greece have acquired most of the banking sector in
emerging Europe and dominate lending in all countries except
Poland and Russia.
When the crisis struck the region earlier this year, mainly
triggered by the expectation of lower export demand from western
Europe, fears emerged that they could pull out of the region or
curb lending significantly. []
But those fears have faded since the IMF and the European
Union showed they stood ready to avoid a meltdown, and when the
foreign banks said they were committed to their franchises.
By country, the biggest sentiment improvements were recorded
in Russia, where positive and negative expectations balanced
after the index reached minus 20 in April, and in Bulgaria,
where they improved by almost the same amount.
The index rose only four points, to negative 28, for
Hungary, which remained at the bottom of the ranking by country.
Ukraine, whose economy is headed for a contraction of 14
percent to 15 percent this year, according to IMF and World Bank
[], remained the second-worst performer in the list.
The quarterly survey, launched in 2007, was done in July.
NOTE - Distributed exclusively on the Reuters System, the
Thomson 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)
