Bulgarian CEOs upbeat about economic prospects for coming years

Bulgarian CEOs are optimistic about the global economy, as well as the growth prospects of their companies, according to a recent survey. Interestingly, CEO optimism in Bulgaria is stronger than that of even their relatively upbeat Central European and global peers.

The 21st edition of the PwC’s annual CEO survey has revealed that business leaders are increasingly optimistic about the global economy, with 57% very confident that the world will experience economic growth over the next 12 months – up from only 29% in the firm’s same CEO survey for the year previous. With most major national economies experiencing positive growth over the past while, CEO confidence has surged.

The 113 CEOs in Bulgaria surveyed by the Big Four firm are among the most optimistic group, with 71% expecting the global economy to improve over the next year. This is a sharp increase in optimism compared to last year, when only 39% expected global economic growth. The only CEOs with a more positive outlook on global growth were from Canada and Brazil.

The survey reveals that Bulgarian CEOs are more optimistic about their firms’ short-term and long-term prospects than both their global and Central and Eastern European (CEE) peers. 66% of Bulgaria business leaders are very confident in their companies’ revenue growth prospects over the next 12 months – 26% higher than CEE respondents and 24% more than global CEOs. Bulgarian CEO confidence in short term company prospects jumped 25% from last year, when it was 41%.

Bulgarian CEOs are also more confident in the long term prospects of their companies compared to CEE and global business leaders: 55% are very confident that company revenues will grow over the next three years, as opposed to 45% globally and 32% in CEE. Bulgarian CEOs moreover seem to not share the same degree of long-term uncertainty felt by other Central and Eastern Europe CEOs – who are increasingly worried about the impact of geopolitics (Russia versus the West, Brexit), workforce quality, and shifting demographics.

Commenting on the optimism, Jock Nunan, a Partner in PwC’s Assurance practice in Bulgaria, said, “Robust domestic and regional growth has resulted in employment levels approaching what could be considered close to full employment, driving wage growth and domestic consumption. This should continue in the short to medium term.”

“In the absence of a ‘black swan event’, there doesn’t appear to be much in the way of negative sentiment which could disrupt the favourable economic trends impacting Bulgaria over recent years,” Nunan added.

Realising growth

A majority of Bulgarian CEOs will focus on organic growth over the next year in order to drive their company’s growth: 79% said they would grow organically – the same proportion as global respondents. Bulgarian CEOs are less eager to use mergers and acquisitions (M&A) as an avenue for growth, with only 27% planning to have new M&A projects, in contrast to 42% globally. The figure is similar to last year’s, when 29% of Bulgarian CEOs said they would utilise M&A; only 10% of this year’s respondents said that they actually acquired a firm in the past 12 months, however.

Bulgarian CEOs are also less likely to implement cost-cutting initiatives to spur growth, with 42% saying they would do so in the next year as opposed to 62% of global CEOs. Notably, the proportion of Bulgarian CEOs planning to enter into new strategic alliances or joint ventures jumped 10% from last year (31% in 2017) to 41% in 2018. Though still short of the global level of 49%, the figure reveals a growing enthusiasm for corporate partnerships and collaboration in Bulgaria.

Bulgarian CEOs continue to see Germany as the most important market for their firms’ growth prospects, with 41% picking the European economic dynamo. This is unsurprising, as Germany has traditionally been a key trading partner with Bulgaria. The USA comes in at second, with a quarter of respondents listing it as an important country for their firm’s overall growth prospects in the next 12 months. China, the second most important market for global respondents, is not an important market for Bulgarian CEOs, currently.

Romania has increased in importance to Bulgarian business leaders, reaching third place with 23% (up from 12% in 2017) and replacing the UK, which fell to fifth place. Greece also grew in importance, reaching fourth place with 17% after being outside the top six last year. The report surmises that the shift in rankings is a result of Bulgarian CEOs looking to countries closer to home – due in large part to economic uncertainty from Brexit.

Threats for business

The most pressing business threats identified by CEOs in Bulgaria are broadly similar to those of their peers in CEE and the world, with the top concerns being geopolitical uncertainty, cyber threats, and the availability of key skills. Within the context of skills availability, Bulgarian CEOs – and to a higher degree, other CEE CEOS – are worried about skilled workers leaving to work in more prosperous economies.

Commenting on the situation, PwC Tax Partner Orlin Hadjiiski said, “A top concern for Bulgarian CEOs and their CEE colleagues is the availability of key skills, which is understandable in view of the ongoing process of the constant move of qualified labour to bigger and more developed countries.”

Bulgaria and CEE are, in turn, more concerned than the rest of the world about changing workforce demographics, as they experience declining populations due to low birth rates, high emigration, and low immigration – compounding the effects of an aging workforce.

Bulgarian and CEE business leaders are less concerned about populism and terror than the rest of the world, but are more concerned about the future of the Eurozone – as Bulgaria and many countries in the CEE are part of the Eurozone and thus more likely to be worried about the integrity of the economic union in light of financial crises and Brexit.

In other country snapshots of CEO optimism, PwC’s researchers found that both CEOs in Hungary and CEOs in Cyprus are upbeat on their outlook.