As a consultant primarily engaged in restructuring as well as mergers and acquisitions, the owner of Instar Boris Teški is in constant contact with a diverse team of entrepreneurs, giving him a fairly clear and broad picture of the economic situation as it truly is 'on the ground'. Based on everything he sees among entrepreneurs, without waiting for it to be confirmed by statistical data, Teški concludes that the arrival of recession is inevitable this autumn, once the tourist season ends, although we do not yet know in what form it will appear, how deep it will be, and how long it will last.
What is behind your rather pessimistic view of autumn?
– The amount of price increases that have occurred in the last year, along with all the geopolitical changes and changes in the raw materials market, the level of consumption and entrepreneurial activity that we had a year or two ago, has simply become unrealistic. There is no longer capacity for that in the market at this moment.
Inflation, however, creates the impression that consumption is holding up very well!
– I would not say so. In consumer spending, there have already been some structural changes, which are already felt in certain higher-priced categories of products in retail. We see that people are starting to reduce their purchases of more expensive products and are choosing cheaper ones. This quantitative decline in sales is already visible, and that is one side of the upcoming recession. The other side is what is consequently happening in companies. The decline in the physical volume of production and sales that will occur, or is already slowly occurring in some cases, along with such high price increases for all inputs, will also have to factor in wage increases because we see what the situation is like in the labor market. Consequently, companies simply will not have the financial capacity to embark on any investments and to maintain market optimism as it was at the beginning of the year.
Yes, but it is about a minimal decline in the quantity of sales of certain types of food, and in the meantime, the tourist season has arrived which will 'consume' all of that.
– Regardless of the good season and the number of tourists, I think that sales this year will be quantitatively lower. Tourism will 'consume' a good part of that, but I believe that the structure of guest consumption in tourism this summer will be somewhat different from previous years. Their incomes are equally threatened as ours. The most changes will occur in the HoReCa channel. Prices in non-accommodation consumption have exploded this year and caught up with European destinations. Restaurateurs who were closed, who worked under abnormal conditions during the pandemic, who have raised wages for workers, and whose energy costs have dramatically increased, have no choice but to raise prices.
