The regular quarterly survey of enterprises' presidents/managers on their assessments of the current and future business activity, inflation and exchange rate expectations, and changes of the business environment in the country was held in February 2009. 1,242 enterprises from all regions, which represented the economy according to principal types of activity, forms of ownership, and size measured by the number of employees, were interviewed.

The exceedingly difficult situation for the Ukrainian economy, caused by the destructive impact of the economic and financial crisis, led to respondents' assessment aggravation for the second consecutive quarter. At the same time, enterprises assess their own development somewhat more optimistically that in the previous quarter, therefore the crisis bottom can be reached soon.

According to the survey results the respondents marked down assessment of their own current financial and economic standing. The balance of expectations (calculated as the difference between the percentage of positive and negative answers) appeared to be negative (-27.8%). However, percentage of the respondents that considered the position of their enterprises as satisfactory dropped to the minimum level during the period of survey conducting (since 2006) and came to 60.2%. The use intensity of production capacities reduced at enterprises of almost all types of economic activity. However, compared with the 4th quarter of 2008, the level of residue of finished goods fell, which could be attributed to the export activation of agricultural products and increase of demand for domestic products due to the rising prices for import caused by the Hryvnia depreciation.

For the next 12 months, respondents of all types of economic activity expect slower decrease of sales (balance of expectations fell by 10 p.p. against the 50 p.p. decrease in the previous quarter). However, deterioration of the financial and economic standing of enterprises, drop in investment volumes and reduction in the employment level will last.

In the next 12 months, the production expenses and sales (output) prices are expected to continue falling, which was connected with the worsening of assessment of own production development. Expectations of prices growth for purchasable goods and services have intensified considerably, which means a drop in production profitability in the future. The rising prices for raw

materials and energy sources remain the key factors in the change of output price level and the main deterrents of enterprises' income increase Impact of the exchange rate on expenses and prices has intensified (59.6% against 45.9% of respondents in the previous quarter). The expected drop in demand for labor power has considerably slackened the respondents' assessment of the impact of labor power value on the output prices and the influence of the lack of qualified employees on profit growth.

The expected recession of production and investment activity has reduced the need for borrowing facilities (only 52.8% plan to obtain new loans against 58.4% in the previous quarter). According to the respondents, the access to bank loans continued to worsen as a result of increase of loan interest rates, Hryvnia depreciation and problems in the financial sector. At the same time, the majority of enterprises trust the Ukrainian banking system. State banks and domestic banks with participation of foreign capital can boast the highest level of trust.

The inflationary expectations worsened: for the next 12 months the consumer prices growth is expected by the respondents at the level of 20.6% against 18.6% in the previous quarter. 57% of enterprises expect the rise of prices by more than 20%. The general economic and political situations remain the key factors of the prices growth. The impact of the exchange rate on the prices growth has continued to get stronger, more than 50% of enterprises note this factor. The respondents continue to show an increased interest in the NBU activity (23.2% of the respondents has followed the NBU activity on a regular basis against 20.1% in the previous quarter).

Enterprises of all types of economic activity expect the deterioration of the economic situation in Ukraine for the next 12 months. The percentage of respondents that expect the economic recession in the next 12 months has grown (by 9.9 p.p. against 81.7%). The exchange rate uncertainty decreased. The percentage of enterprises that have no expectations of exchange rate changes has somewhat increased from 16.2% in the 4th quarter of 2008 to 18.4% in the 1st quarter of 2009.

The provided data are reflection of the respondents' views – Ukraine's enterprises as of February 2009, and do not represent NBU's forecasts and assessments.