Hungarian SMEs Expect Profits to Rise, but Cautious

Domestic small and medium-sized enterprises (SMEs) are expecting rising profits, but are holding back, as their willingness to invest has declined, according to the third quarterly data of the K&H SME Confidence Index, which shows the expectations of domestic micro, small and medium-sized enterprises (SMEs) for the next 12 months.

According to a statement sent to MTI on Wednesday, the index, which measures the turnover of the Hungarian SME segment, continues to stagnate. In terms of company size, the smallest companies, those with a turnover of HUF 20-100 million, are more optimistic, while companies with a turnover of HUF 100-300 million became more pessimistic in the third quarter compared to the previous quarter. The expectations of SMEs with turnover above HUF 300 million remained unchanged.

With unchanged turnover, firms expect profits to increase, and the scale of expectations for profitability has started to rise again after a slight dip. The smallest and medium-sized SMEs have become more sanguine in this respect, while large SMEs are unchanged from the previous quarter.

The K&H SME Confidence Index's sub-index on investment propensity declined by four points to 56 points in the third quarter. There was a decline in the propensity to buy machinery and invest in quality assurance, and a decrease in the propensity to invest in IT upgrades and start-ups. At the same time, slightly more people than in the previous quarter are planning to make improvements to real estate and to their vehicle fleet.

The publication quotes Ildikó Oravecz Németh, Head of Retail and SME Segment Marketing at K&H, as saying that there is uncertainty among domestic SMEs, which seem to be trying to build up a reserve of profits to be prepared for the economic challenges ahead.