The results of the Business Outlook Survey (BOS) conducted by the National Bank of Ukraine in Q1 2017 suggest that Ukrainian businesses have significantly improved their expectations about a pick-up in economic activity.
Respondents’ optimism reflects their improved outlook for total sales growth, as well as positive assessments of their financial and economic standing and resumed expectations for an increase in the number of employees.
The respondents polled in the survey continue to expect growth in the output of goods and services, with the balance of expectations standing at 6.1% (in Q4 2016 – 11.1%). High prices for energy, raw materials, and supplies were mentioned by respondents as the main impediments limiting their capacity to increase production.
The respondents expect a pick-up in economic activity for the fourth quarter in a row. The Business Outlook Index rose to 113.3%, up from 109.2% in the previous quarter. The processing, energy, and water supply enterprises, as well as trading enterprises were the most optimistic. Respondents from all main types of economic activity gave upbeat assessments, with respondents from transport, communication and processing industry being the most optimistic.
Respondents gave high assessments of prospects for total sales growth, with the highest assessments being reported by respondents from processing and trade enterprises. Meanwhile, enterprises representing all main types of economic activity expect, except a rise in sales of goods (services) in the external market, except for power and water supply enterprises.
Respondents have expected higher investment spending on machinery, equipment and inventory for the fifth quarter in a row. Expectations of higher investments in construction works have strengthened. Respondents kept on showing positive expectations about an increase foreign investment.
The respondents resumed expectations about an increase in the number of employees at their enterprises. In particular, an increase in the number of employees is projected by respondents from construction, manufacturing, trade and other types of economic activities. However, respondents from mining, agricultural and transport enterprises improved their expectations about a decline in the number of employees at their enterprises.
In Q1 2017, against the backdrop of slightly stronger depreciation pressures, inflation expectations of enterprises moved down to 15.6% (in Q4 2016– 16.2%). The main drivers of price growth continue to The exchange rate and production costs remained the main drivers of price growth. Meanwhile, the respondents expect tax changes to have a stronger impact on inflation developments.
The respondents have expected their borrowing needs to increase for the third quarter in a row. The share of respondents that plan to take out bank loans remained at the previous month’s level (34.0%, of which 85% of respondents intend to take out hryvnia loans. The respondents from agricultural, energy and water supply, as well as trade enterprises are most likely to take out hryvnia loans.
For reference
673 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.