The results of the Business Outlook Survey (BOS)  conducted by the National Bank of Ukraine in Q4 2016 suggest that in late 2016 Ukrainian businesses   improved their expectations about the output of goods and services in Ukraine in 2017.  The balance of expectations of the growth in the output of goods and services improved to 11.1% (vs 5.4% in Q3 2016);

High energy prices and political instability were mentioned by respondents as the main impediments limiting their capacity to increase production.

The respondents expect economic activity to recover for the third quarter in a row. The Business Outlook Index stood at 108.7% (109.2% in the previous quarter). The processing, energy, and water supply enterprises, as well as trading enterprises were the most optimistic.

As in the previous quarter, the respondents were most optimistic about the growth in sales volumes and higher investment spending on   machinery, equipment and inventory. The respondents expect growth of both total and external sales. The respondents continue to expect the number of employees at their enterprises to decrease in 2017.

In the meantime, businesses’ inflation expectations increased in Q4 2016.  While in Q3 2016 the respondents projected inflation at 13.8% over the next 12 months, in Q4 2016 they expected inflation at 16.2% by the end of 2017.

Heightened exchange rate volatility, as well as expectations about higher households' income and, consequently, stronger consumer demand have caused inflation expectations to worsen.

Given the expected recovery in manufacturing activity, the respondents expect their borrowing needs to increase in the near term. Almost 35% of respondents intend to take out loans, with the majority of respondents (85% of polled respondents) planning to take out national currency loans.

For reference

682 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 estimates.