HONG KONG Feb 9 Business sentiment in BRIC
economies has plunged as the financial crisis takes its toll,
with companies now bracing for a modest decline in revenues this
year in contrast to forecasts just last summer for strong
growth, a survey showed.
Manufacturers in Russia were more optimistic than their
peers in the other BRIC economies -- Brazil, Russia, India and
China -- while companies in Brazil are most pessimistic,
according to a survey by accountancy firm KPMG.
Overall, the survey reading of business confidence in the
BRICs came in at +3.5, indicating slightly more companies expect
growth in business activity this year than a decline. The score
plummeted however from +47.0 in a previous survey last summer.
The latest reading was boosted by relative optimism among
Russian companies. Russia's score was 21.2, down from 63.2 in
the previous survey, while Brazil's was -3.0, compared with
+65.3 six months ago. China's score was +2.6, down from 36.3
previously, while India's was -1.6, reversing a +62.9 reading in
the last survey.
"So much for de-coupling," Ian Gomes, chairman of KPMG's
emerging markets practice, said in the report. "The collapse in
confidence among BRIC manufacturers underscores the
vulnerability of emerging markets to the global economic crisis
and consequent drop in external demand."
On the outlook for business revenues, the survey score was
-4.7, compared with +49.5 in the previous survey, while the
survey reading on the outlook for net profits was -11.4 against
26.5 in the previous survey.
Survey scores indicate companies' degree of optimism or
pessimism on the outlook for each category and can vary between
-100 and +100. A 0 score signals a neutral outlook for the next
12 months, while a score above 0 signals optimism.
Further clouding the outlook for business this year is a
deflationary environment with manufacturers saying they expect
sharp declines in the prices of goods they buy and the prices
they can charge.
As companies expect profits to decline this year, they are
preparing to scale back investment and opt for modest reductions
in headcount, the report said.
The twice-yearly survey, produced by UK-based Markit
Economics for KPMG, covers around 1,800 companies in
manufacturing across the four emerging economies.
Growth in spending on research and development is set to
ease while capital expenditure will decline, the survey shows.
Companies in the textiles and clothing sectors were most
pessimistic about the outlook while sentiment was highest in the
food and drink sector.
(Reporting by Susan Fenton, Editing by Ken Wills)