February 9, 2009 / 3:59 AM / 9 years ago

Business confidence in BRICs plummets -KPMG

HONG KONG, Feb 9 (Reuters) - 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)

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