Results of the annual survey of BIA
On December 17th , 2020, BIA presented the results of its annual online survey , conducted among the Associations’ members in the period November 10th - December 10th , 2020, including 810 micro, small, medium and large enterprises across the country and from all economic sectors.
The survey is conducted for the 16th consecutive year, and its aim is to examine the state of business in the current macroeconomic conditions. The main topics are related to the impact of political processes internationally and nationally on the business in Bulgaria, as well as business planning for the next year. This year, special emphasis is placed on the impact of the corona crisis on the business.
86% of the surveyed enterprises are micro and small (with up to 50 employees), 10% are medium (with 50 to 250 employees), and 4% are large (with over 250 employees).
58% of the participants in the survey are enterprises from the services sector, 12% - from the manufacturing industry, 16% - from the trade sector, 3% from the construction sector, 2% - from the agriculture sector, 2% - "Mining and quarrying", other activities (including education, culture, healthcare) - 7%.
19% of the surveyed enterprises operate in the South-West planning region, 17% - in the North-East, 8% - in the North-Central, 13% - in the South-Central, 7% - in the North-West, 10% - in the South-East. 26% operate throughout the country.
OVERALL MACROECONOMIC ASSESSMENT OF 2020
Compared to previous research, the assessment of the business climate has deteriorated sharply, which was provoked by the covid crisis over the past year. 89% of respondents see a deterioration in the business climate, 9% believe that there is no change, and only 2% are optimistic. The assessments of the condition of the enterprises are similar - 71% declare deterioration of their economic indicators, 22% declare no change, and only 7% have achieved growth.
There is also a clearly noted negativity in the assessment towards the institutions, as the Presidential Institution, the regional health inspectorates and the Ombudsman of the Republic of Bulgaria have the relatively highest level of trust, but they also have a decrease compared to the previous year. Traditionally, the negative ranking is headed by the National Assembly (90% distrust), the Council of Ministers (83%) and the judiciary (76%). The municipal and tax administrations are in the "golden mean", but they also show a decline in confidence compared to the previous year.
The government's anti-crisis and anti-epidemic measures are rated extremely low - 17% of respondents approve of economic measures, and 27% support anti-epidemic measures. The vast majority of respondents do not approve of the undertaken measures. For comparison, in the previous economic crisis in 2009-2010, the then anti-crisis measures were positively assessed by 29% of businesses. The refusal of changes in the ordinance for the cash registers is definitely approved. Respondents are hesitant about the differentiated VAT rate and the admission of our country in the so-called "Waiting room" of the Eurozone.
As a result of the covid pandemic, 56% of respondents were forced to give up their investment intentions, as well as to start optimizing costs, and 36% stopped working for a certain period. In terms of staff, the actions that were taken are in several areas - 42% of companies (mainly in the hotel, restaurant and travel agency) have made cuts, 41% have introduced partial or full telecommuting, and 33% have used the opportunities for paid or unpaid leave of their employees.
In the conditions of a pandemic, the business looked for new ways to survive, incl. by launching or developing online sales (23%), as well as transforming production into new products and / or markets (19%).
36% of the enterprises have made investments in order to comply with the anti-epidemic regulations. Only 2% have increased their teams with new appointments.
A small number of enterprises have benefited from anti-crisis measures in support of the business. The "60/40" measure is the most popular, as 28% of the questioned have benefited from it. The next preferred measure is the grant for micro and small enterprises in the amount of BGN 3 to 10 thousand, used by 27% of the respondents, and on the third position is the moratorium on loan payments - 17%. 12% of the companies in the sectors “Transport” and “Tourism” have benefited from the measure for preservation of employment, expressed in BGN 290 / month. Only 1% of the respondents have benefited from the measures through BDB, and 2-5% are considering / exploring the possibilities. For all others, these measures are either inapplicable or remain unknown.
40% of those who have used anti-crisis measures complain about the slow process, and 35% - from the bureaucracy and heavy documentation. 11% did not face any obstacles in receiving the aid.
The lack of liquidity in the crisis is the main reason why respondents expect support in retaining staff by receiving help for some part of their remuneration (56%), as well as reducing or postponing state (52%) and municipal (38%) payments, incl. taxes, fees and rents. Business also expects the state support for low-interest loans (35%), for deferral of payments on existing loans (27%), as well as for modernization and technological renewal (26%). Only 9% of respondents declare that they do not need state support.
The increased number of infected and / or quarantined workers leads to a significant burden on other employees - 47% of the surveyed employers think so, and 12% of them complain that the lack of workers leads to delays in the execution of assigned orders / contracts, which is reason for reduced turnover / revenue (7%). 30% of the respondents indicate that the absent workers are not more than every other year, and 4% declare that they have no quarantined staff at all.
MAIN BARRIERS IN FRONT OF THE BUSINESS 2010-2020
Lack of working capital (78%), bureaucracy and regulatory burdens, administrative pressure and the lack of an e-government (74%), as well as frequently changing regulations (67%) are the biggest obstacles of the business this year. Despite the Covid pandemic, the lack of skilled labor (65%) remains a problem, although there has been a reduction in this deficit compared to previous years, when it was over 70%.
The gray economy, illegal imports and unfair competition are a problem for 45% of businesses, and 51% cite slow and inefficient justice as obstacles. The feeling of corruption is growing sharply - 69% compared to 42% in 2019. Visible improvement is reported in terms of infrastructure, the quality of which only 18% of respondents complain.
Interest in participating in public procurement competitions remains at the levels of previous years. It should be noted that there is a reduction of incorrect / illegal practices in this area, especially the serious decline in cases of late payments, the replacement of subcontractors and biased evaluation of bids.
SITUATION OF THE ENTERPRISES IN 2020
The COVID crisis has seriously affected the performance of companies, all of which marked drastic declines compared to the previous year, incl. production volumes decreased in 66% of companies, sales / turnover - by 73% of them, foreign markets - by 43%, jobs - by 56%. Wages are the least affected, falling in only 26% of companies.
A drastic decline is also reported in terms of investment, incl. in human resources (44% less than 2019), new products (-45%) and new capacity (-50%).
At the same time, liabilities to financial institutions (30% more than last year), to counterparties (also 30%), to the budget (33%) and to staff (21%) increased.
With this in background, the cases of overdue uncollected receivables from counterparties decrease, as well as the periods of arrears, and in their predominant part they are up to 6-7 months.
EXPECTATIONS FOR 2021
The skepticism of the current year is transferred into the expectations for the next one. 70% of respondents expect an economic downturn in 2021, 16% do not expect any change, and only 11% are optimistic.
The majority of respondents expect rising prices, fiscal and regulatory burdens, and a decline in the number of jobs.
More than 80% of respondents expect the COVID crisis and the slowdown in global growth to have a negative impact on their business performance in 2021. There is less towards moderate pessimism about the European environmental regulations, with only 36% of the respondents, who expect a negative impact.
Moderation and caution are present in the business development plans in 2021. Production growth, new products / services and new markets are planned by an average of 35-37% of respondents, while last year they were 57%.
Investments in production facilities, innovation and human resources development are included in the plans of an average of 23% of respondents, while last year the average was 38.
32% of the respondents plan to increase their salaries, whereas during last year's survey 76% of the respondents answered positively. With regard to remuneration, the effect of the administrative increase in the minimum wage must also be taken into account.
There is a slight increase this year in the intentions for loans and leasing (19% compared to 17% last year), as well as for the implementation of European projects (32% compared to 27% last year).
For the last decade, 2020 is the most saturated year with business negativity - both as an assessment of the current situation and as a vision for the future. The only similar rates were given in 2011, when the fatigue from the previous economic crisis was still felt.
The reasons for this are complex, the biggest of which, of course, is the COVID crisis, which has had an extremely negative impact on the business processes. There is an unprecedented economic downturn and pessimism.
The assessment of the institutions is very negative, and their reactions in times of crisis are met with strong dissatisfaction on the part of the business community. The general feeling is of this of inadequacy, insufficiency and bureaucratic slowness of support measures. It is therefore not surprising that less than the half of the companies applied and took advantage of some of the anti-crisis measures - especially those to support employment. Real measures to support corporate liquidity are missing or not attractive and just not popular enough.
As a result, businesses are doing the (im)possible to save jobs and market positions, incl. cost optimization, production transformation, online sales development, teleworking, flexible working hours, unpaid leave and ... staff reductions.
The COVID crisis has created a shortage of the working capital in almost 80% of enterprises. This, combined with years of problems with bureaucracy, regulatory and administrative burdens, an unstable regulatory environment, corruption and inefficient administration of justice, leads to heavy pressure on any business venture.
Pressed with backs against the wall, the business has totally lost its optimism, so its expectations and plans for the future are too cautious, subjected to pragmatism in conditions of unclear prospects (mainly due to how the COVID pandemic played out).