Business continues to be optimistic about the macroeconomic situation in Ukraine in 2018. In particular, consumer prices are expected to increase by 10.4% compared with 10% in the previous quarter. At the same time, top-managers expect a rise in the output of Ukrainian goods and services. It is evidenced by results of the regularBusiness Outlook Survey conducted by the National Bank of Ukraine in Q4 2017.
Similar to Q3, four out of ten respondents project that rise in consumer prices will not exceed 9.0% or will even decrease over the next 12 months. Such expectations can be explained, first of all, by the situation in the foreign exchange market; 78% of respondents consider it as the key reason. This factor remains to be important for business amid worsened depreciation expectations. As a result of stronger hryvnia exchange rate fluctuations during the survey (November–December 2017), the percentage of respondents that expected the national currency to weaken over the next 12 months has grown to 88.5% from 79.4% in Q3.
At the same time, impact of household income and social spending on inflation expectations has increased considerably compared with the previous surveys.
For seven consecutive quarters, businesses have been forecasting a pickup in production across Ukraine.Respondents from manufacturing, trade, power and water supply, and agriculture are the most optimistic.
As a result, respondents continue to expect a high level of business activity – the business outlook index (BOI) is 115.2% (compared with 117.4% in Q3). High growth rates of economic activity are sustaining mostly due to better forecasts for growth of output sales volumes and persistently high indicators of investment spending on machinery, equipment, and inventory.
Respondents also note positive changes at the level of their own companies. Businesses continue to positively assesstheir financial and economic standing, same as in five previous surveys. Some 88% of respondents consider their financial and economic standing satisfactory or good. At the same time, 76% of respondents expect an upturn of financial and economic standing of their companies over the next 12 months.
However, for the first time since the start of the surveys, businesses have reported being unable to satisfy an unexpected increase in demand by means of their own production capacities. In particular, agriculture and trade experience the most significant deficit of spare capacity.
Companies’ borrowing needs remain high, with mining industry demonstrating the largest appetite for borrowed funds (balance of responses 69%). Respondents that plan to take out bank loans prefer loans in the national currency. High loan rates continue to be the main factor that deter them from getting new loans. Meanwhile, the share of respondents that intend to take out foreign loans has been increasing for the second consecutive quarter (8.3% compared with 7.4% in the previous survey).
For reference
The Business Outlook Survey was conducted from 3 November through 5 December 2017. A total of 670 companies from 22 regions took part in the survey (excluding the temporarily occupied territory of Crimea, as well as Donetsk and Luhanskoblasts). The respondents were chosen to represent a range of main economic activities, types of ownership, and sizes based on staff numbers. The survey only reflects opinions of the respondents (top-managers of Ukrainian companies), and does not represent the NBU’s forecasts or assessments.