PwC Research: CEOs of Croatian Companies Optimistic but Fearful of Pandemic Spread

PwC Croatia has presented the results of a survey of the opinions of Croatian CEOs for 2020, which largely align with the views of CEOs worldwide, but there are also significant differences.

A year after COVID-19 was declared a pandemic, CEOs around the world express record levels of optimism regarding global economic recovery, with 64% of business leaders in Southeast Europe (SEE) predicting an improvement in economic growth in 2021.

Great optimism regarding the state of the global economy

Croatian CEOs share the same opinion, expressing high optimism regarding the state of the global economy, with as many as 67% believing that growth will improve during 2021.

No less important, the optimism of CEOs in the Republic of Croatia extends to their companies: 84% expect their company’s revenue to increase over the next year, while 71% also expect an increase in profitability. 65% believe that their number of employees will increase in the next 12 months. Salaries and other benefits are one of the main incentives for the workforce in Croatia, while in contrast, in the SEE region, other factors take higher priority.

New products and services, organic growth, and improved operational efficiency will be the main levers of growth, while new strategic alliances and joint investments will impact growth more in the Republic of Croatia than in the SEE region.

With the exception of the USA, Croatian CEOs consider European countries to be the most important for the growth of their companies in the next 12 months, with Serbia, Austria, Germany, Slovenia, and Bosnia and Herzegovina leading the way.

– The survey of Croatian CEOs we conducted earlier this year includes the opinions of leading figures from companies in the service and manufacturing sectors, thus covering the entire spectrum of our economy, and conveys a main message of optimism for business in the upcoming period, which is in line with the global results of the 24th PwC survey of CEOs worldwide – emphasized John Gašparac, CEO of PwC Croatia.

What has certainly played a significant role in this level of optimism, given the situation the entire world has found itself in due to the coronavirus pandemic, is the development of vaccines and their implementation worldwide, which ensures the necessary perspectives for the future and clear visions of the next steps for company leaders. The pandemic has required all of us to respond quickly and make necessary transformations, so we are all coming out of it stronger and richer. The launch of new products, optimizing business operations, and emphasizing efficiency are priorities for future development, as are strategic partnerships and joint investments. Croatian managers, in fact, see mergers and acquisitions as a quality opportunity for good and valuable companies that have not navigated the crisis in the best way, to move forward through the sharing of knowledge and resources, aware of the advantages they can secure together. This should also facilitate easier digital transformation, which has already established itself as an imperative for future business and has opened new paths for all of us, faster than we expected, on which we all must take many more steps together.

When observing the markets that Croatian CEOs consider the most important for business growth, it should be noted that today’s globalization for Croatian companies is, on one hand, localization, as it is wise to expose themselves as little as possible and to develop ecosystems that can succeed as much as possible, given the current circumstances, in order to ensure efficiency and profitability, so we must be ready for business in different markets, within which our neighboring markets currently have a primacy.

Increasing investment in digital transformation is imperative for future business, with the pandemic at the top of the list of threats to business.

As a result of the COVID-19 pandemic, 81% of Croatian CEOs plan to increase investment in digital transformation in the long term, while 42% plan to increase their rate of investment in digital transformation by 10% or more. On the other hand, only 10% of Croatian CEOs want to significantly increase investments in sustainability and ESG initiatives for environmental protection.

As expected, CEOs worldwide consider the coronavirus pandemic and other health crises to be the main threat to their business, and 61% of Croatian CEOs have already included the threat of the pandemic in their strategic risk management activities.

In addition to the pandemic, Croatian CEOs highlight the following threats: populism and excessive regulation, while at the level of the SEE region, CEOs are also concerned about the uncertainty of the political environment and the insecurity of tax policy.

A quality tax system should be the most important priority for the government, believes 71% of Croatian CEOs, while 25% believe that changes in tax policy will increase the overall tax obligations of the organization (compared to 49% in the SEE region).

A significant difference in the opinions of CEOs globally and in the Republic of Croatia relates to cyber threats, for which company leaders in Croatia are less concerned than their global counterparts, with 68% stating they are somewhat or extremely concerned (compared to 85% globally).

Additional progress is needed in the area of workforce and the impact of organizations on the environment

Croatian CEOs emphasize that their organizations need to do more to report on their experiences with the workforce and business strategy, while globally there is a greater emphasis on improving the disclosure of organizations’ impact on the environment.

Only 20% of Croatian CEOs believe that the government’s recovery plan related to long-term environmental protection goals is effective, compared to 31% at the SEE level, but climate change and environmental damage have been classified as part of their organization’s strategic risk management activities, which is the highest level compared to SEE countries.

61% of Croatian CEOs highlighted the availability of key skills as a threat to their business that is included in strategic risk management activities. 58% believe that a skilled, educated, and adaptable workforce should be one of the government’s priorities in Croatia. These numbers reflect the concerns of CEOs caused by the lack of available and skilled labor.

An additional quality of this Croatian part of the survey of CEOs’ opinions, as well as the global one, is that it consistently points to the expected growth of the economy year after year.

– The global survey of CEOs’ opinions has shown that the sentiment of CEOs for optimism within the stated frameworks has always been accurate. We believe that the improvement in global economic growth could reach up to 5%, which could realistically be achieved in the last quarter of 2021 and the first quarter of 2022, when we should all return to pre-COVID-19 pandemic indicators. Based on global expectations and the structure of Croatian GDP, economic growth of 3% is projected for Croatia by the end of the year – concluded John Gašparac, CEO of PwC Croatia.

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