Austrian investors are alarmed, but say economy will grow

Erste Bank, petroleum company OMV, construction supplies company Wienerberger and Vienna Insurance Group (VIG), four Austrian companies that hold strategic positions in Romania, rely on the resilience of demand for basic products from the regular clients to successfully make it through the crisis, even though their sales have already gone down.

Each of the four companies is alarmed: Erste is taking money from the European Central Bank and the Austrian government, OMV is seeing its cash flow dwindle and reduces investments, Wienerberger can feel its sales going down and focuses production on its most efficient facilities, while VIG is no longer seeing demand for its unit-linked life insurance products. Romania is a crucial market, especially for Erste and OMV, because of the investments they made here and its weight in their overall business. “Our clients are normal people who do not have ten credit cards and are not over-indebted. They are trained in hardships and if they lose their job they look for another. They spend less, which shows in the consumer lending, but we believe that mortgage loans will continue to increase even more, which is healthy,” said Manfred Wimmer, CFO of Erste Group at a conference on Central and Eastern Europe that the Austrian bank organised in Vienna, Romania’s second economic capital, yesterday. He says Romania will be one of the few countries where people will have a chance of a real increase in incomes over the next two years. “The Romanian economy will continue to go up. Salaries are lower than in other EU countries and productivity increase is substantial, so that many companies will afford real salary raises.” As far as Erste is concerned, Wimmer says raises in 2009 will be lower than the inflation rate, which is estimated at some 5%. In turn, OMV says it will negotiate with its employees. Wolfgang Ruttenstorfer, the head of the petroleum group says OMV is experiencing a cash flow decline due to the decline of the petroleum price, which will affect profitability and investments scheduled. Under the circumstances, the sale of Arpechim “is no longer on the agenda”. Wienerberger is reeling from the decline of sales and is trying to cut fixed costs. VIG will focus on centralising back-office functions of the companies in its portfolio to cut costs. Erste Group, which is still in talks with the Austrian state over 2.7 billion euros in aid, continues to advocate an agreement with the IMF, even though Romania is not at the end of its rope.