The regular quarterly survey of enterprise 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 May 2007. 1266 enterprises from all regions were interviewed, which represented the economy according to principal types of activity, forms of ownership, and size measured by the number of employees.
Main Research Results of Ukrainian Business Expectations:
The assessment of general economic prospects for the next 12 months continued to get worse (for the third quarter consecutively). The negative balance of expectations (calculated as the difference between positive and negative answers) increased and reached (-17.9%) versus (-11.2%) in the 1st quarter of 2007.
The inflationary expectations decreased for the fourth quarter consecutively. The expected average inflation for the next 12 months amounted to 10.9% versus 11.6% in the previous quarter.
The most influential inflation factors were traditionally considered to be economical and political situation in the country, although for the first time during the period of surveys the political situation is considered to have decisive influence (78.7% of responses). The negative impact of economical situation on inflation was reported by 69.0% of respondents versus 77.2% in the 1st quarter.
The reduction of finished good inventory, having been reported by the respondents since the 4th quarter of 2006, stopped, but keeping the inventory at the minimum for the whole period of surveys level shows retention of high demand within the economy.
Traditionally, the exchange rate and the NBU actions were not considered by respondents as factors of inflation pressure. Percentage of the respondents that mentioned these factors amounted to only 5.1% and 0.7%. These data show once more the positive assessment of the National Bank of Ukraine activity in the area of price stability maintenance.
Expectations of the exchange rate stability remain high. Percentage of respondents expecting the UAH to USD exchange rate to remain unchanged continued to increase (to 74% versus 73.6% in the first quarter). Expectations of the hryvnia depreciation against Euro have increased.
Investment activity in the next 12 months is likely to remain at a high level, but the investment demand expectations were getting weaker for the second quarter consecutively (expectations balance went down to 29.3% versus 31.9% in the 1st quarter).
Further creation of new jobs is expected for the following 12 months (balance is 13.8% versus 15.2% in the 1st quarter).
The respondents' assessment of their current financial and economic standing also continued to improve. Further improvement of financial and economic standing is expected in the following 12 months: balance of expectations rose by 0.9 p.p. and reached 28.9%.
The growth of prices for energy sources and raw materials remained the main restraining factor for enterprises' income growth and factors of influence on changes in selling prices, but the respondents refer to reduction of their influence (70.5% and 77% of responses respectively versus 74.1% and 80% in the 1st quarter).
The next 12 months are expected to show the growth of output sales volumes for the third quarter consecutively ((-11.1%) versus (-14.7%) in the 1st quarter), although preservation of negative balance values confirms that their rates continue to become slower. The respondents involved into some types of economic activity for the first time expect either preservation (in construction) or acceleration ("other" types of economic activity) of output sales rates.
The respondents have noted a further improvement in the access to bank loans. The balance of responses increased for the third quarter consecutively and made 21.5% versus 15.5% in the 1st quarter of 2007.
The respondents continued to name the high level of interest rates (76.1% of responses, decline by 2.2 p.p.) and excessive LTV (loan-to-value) requirements (42.0% of responses, reduction by 3.7 p.p.) as the main restraining factors for bank loans.
The percentage of respondents that had an intention to take bank loans grew for the second quarter consecutively (by 1.9 p.p. to 63.1%), among them the share of those planning to take the next loan in hryvnias reduced (by 1.1 p.p. down to 74.5%).
More that 80% of respondents admitted that they kept an eye on the NBU activity, out of them 11% – on a regular basis. Analysis of the received information showed a close connection between the respondents’ awareness of the NBU activity and higher indicators of their own development.
The provided data are reflection only of the respondents' opinions – Ukraine's enterprises as of May 2007, and do not represent the NBU's forecasts and assessments.