The results of the Business Outlook Survey conducted by the National Bank of Ukraine in August-September 2015 suggest that the inflation expectations of Ukrainian business have been on the decline for the second running quarter.  The respondents expect the consumer prices to rise by an average of 25.5% over the next 12 months (27.3% in Q1 2015).

The respondents assume that the exchange rate movements and the growth in production costs are behind the upward trend in consumer prices. Money supply, budget expenditures on social welfare and global prices were perceived as having the weakest impact on price increases.

Even the fact that the FX market had remained stable for six consecutive months failed to alleviate the devaluation expectations of the top managers of Ukrainian enterprises.  The devaluation expectations have become somewhat stronger in response to the slight fluctuations of the hryvnia exchange rate seen in the past few months.  80.7% of respondents expect the domestic currency to depreciate over the next 12 months.

The respondents expect economic activity to recover over the next 12 months. For the first time since the second quarter of 2014, the Business Outlook Index (BOI) exceeded 100% and reached 100.2% in Q3 2015. In particular, the Business Outlook Index increased by 5.6 q-o-q. The most optimistic expectations were expressed by the respondents from agricultural and trade enterprises, as well as enterprises performing import transactions,

 reflecting the more optimistic expectations of businesses with regard to their development prospects. The respondents expect growth in sales volumes, an increase in investment spending on machinery, equipment and inventory. They also expect that the financial and economic standing of their enterprises will improve.  In Q3, the proportion of respondents expecting a decrease in sales volumes fell to 37.3% versus 50.2% in the previous quarter.

Given the expected recovery in manufacturing activity, the respondents expect their borrowing needs to increase in the nearest future. Among those who intend to take loans to finance their business activities (34.9% of polled enterprises), the majoity respondents plan on taking hryvnia loans (87.1% of respondents).

The percentage of respondents who said that they had no difficulties with effecting transactions using funds in bank accounts has been on the rise for the second running quarter (90.9% of respondents compared with 84.3% in the second quarter of 2015).

For reference. 858 enterprises from 22 regions of Ukraine (excluding temporarily occupied Crimea and Donetsk and Luhansk regions), representing the economy in terms of main economic activities, patterns of ownership, size and staff number, were polled in the survey . The survey only reflects the opinions of respondents (heads/managers of Ukrainian enterprises) who were polled, and does not represent NBU forecasts or estimates.