The latest regular quarterly survey of company managers regarding their assessment of current and future business activity, inflation and exchange rate expectations and changes in the business climate in the country was conducted in November 2009. In total, 1245 enterprises from all regions were interviewed. They were selected to reflect the economy structure with regard to principal types of activity, forms of ownership and size of enterprises as measured by the number of employees.
Conclusions
In Q4, respondents’ assessment of their own situation and prospects for the economy in general improved, but all expectations did not achieve the levels observed before the crisis.
According to the survey results, the respondents left the assessment of their own current financial and economic situation at the level of the previous quarter. The balance of opinions (calculated as the difference between the percentage of positive and negative responses) has remained negative (-18.6%). The respondents reported an increase in inventories, capacity utilization has declined. However, agriculture firms reported a decrease in inventories and intensive capacity utilization due to the increase of demand and active exports of agriculture products.
Financial and economic situation expectations over the next 12 months have moved to positive for the first time since the crisis started. The balance of opinions improved to 6.6% vs. - 2.0% in the previous quarter. Industry firms’ expectations of the financial and economic situation have been improving for the third quarter in a row. For 2010, respondents of all types of economic activities expect growth in sales volumes both in the domestic and external markets. Investment expectations improved the second quarter in a row. Industrial sector expects an increase in investments for machinery and equipment. The mining industry expects an increase of investments in construction, among other sectors. Respondents of all types of economic activities do not expect employment growth for the fifth quarter in a row, but the negative expectations have softened a bit.
Inflation pressure is unlikely to become stronger in 2010, according to the opinions. Input prices and output prices are expected to grow slowly. The cost of raw materials and energy are expected to remain the key factors of the change in output price level. The same factors are likely to remain a drag on profits. Impact of the exchange rate on profits has decreased, whereas it has intensified with regard to prices and expenses (51.8% of respondents in comparison with 50.4% in the previous quarter).
The respondents expect an increase in borrowing needs and note a reduction of credit availability for the seventh quarter in a row. The percentage of respondents that plan to obtain bank loans has declined by 0.2 p.p. to 46.3%. The high level of interest rates, short terms of lending and excessive collateral requirements remains the key restraining factors for borrowings from banks. Influence of exchange rate volatility factor has decreased.
Inflationary expectations have essentially declined. The weighted average expected inflation rate decreased to 15.1% against 17.5% in the previous quarter. Most companies (52.9%) expect that the consumer price inflation will be between 10-20% over the next 12 months. The general economic climate and political uncertainty were named as the key factors for the high expected inflation. The influence of exchange rate and the NBU activity has become weaker.
The assessment of the general economic situation for the next 12 months has considerably improved. Share of the respondents who expect no growth in the economy over the next 12 months decreased to 41.9% vs. 48.8% in the previous quarter. Assessments of hryvnia exchange rate stability also improved: 33.3% of respondents expect the UAH to USD exchange rate to remain unchanged (as compared with 16.5% in the previous quarter).
Disclaimer: The results of the survey reflect the opinions of respondents – Ukrainian business managers - as of November 2009 and do not represent the views and policies of the NBU.