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Businesses downgrade their economic outlook and expect no quick recovery: a survey of companies conducted in Q2 2020

Businesses downgrade their economic outlook and expect no quick recovery: a survey of companies conducted in Q2 2020

Businesses have lowered their expectations for economic growth, inflation, and their own financial performance and production output over the next 12 months. This is evidenced by the findings of a survey of company top managers that the NBU carried out in Q2 2020.

The level of companies’ business activity hit a low not seen since Q1 2015 – 90.8% (compared to 110.5% in Q1 2020). Companies lowered their assessments of their current financial and economic standings amid the coronavirus crisis and quarantine restrictions. Despite the lifting of a significant number of restrictions and the introduction of an adaptive quarantine regime after the first wave of the virus spread was curbed, businesses do not expect a rapid improvement in their performance.

Businesses’ Macroeconomic Expectations for Ukraine

Companies reported higher inflation expectations. Businesses expect that the rate of growth in consumer prices will rise to 7% yoy over the next 12 months (compared to 5.1% in Q1). Over half of the surveyed companies said that inflation would be below 7.5%. One out of five respondents expects inflation to be between 7.6% and 10.0%. Higher production costs were cited as the main factor influencing price growth.

Businesses expect that the domestic currency will depreciate more noticeably. The average UAH/USD exchange rate was projected to hit UAH 28.28 per USD 1 in 12 months (UAH 26.01 per USD 1 in the previous quarter). Most companies believe that the exchange rate will hover between UAH 27.00 per USD 1 and UAH 29.00 per USD 1.

For the first time since Q1 2016, companies said they expected a drop in the output of Ukrainian goods and services. Almost half of the companies had a more dismal outlook, while only one out of seven companies said output would rise. Insufficient demand was cited as the most important impediment to output growth.

Companies’ expectations of their business performance

Most companies expected no changes in their financial and economic standings over the next 12 months, while 22.0% of companies expected their standings to deteriorate. Overall, small- and medium-sized companies were more downbeat.

Respondents expected a decline in total sales, including external sales. In general, only respondents from manufacturing and trading companies expected sales to pick up, while those from construction and mining companies were the most pessimistic.

Weaker investment activity was expected by companies across all sectors. The lowest expectations were reported by respondents in the agricultural sector.

The percentage of companies that intend to lay off staff has been on the rise for three quarters running. Only 9.1% of companies said they planned to hire more staff over the next 12 months. Some 26.3% of the polled companies said they intended to cut their employee numbers. This produced a negative balance of expectations of (-17.3%) compared to (-3.9%) in the previous quarter. Respondents across almost all sectors are pessimistic, apart from those in the construction sector, where respondents expect their staff numbers to remain unchanged.

There was a dramatic decrease in the number of companies that plan to raise the wages of their workers over the next 12 months – to 36.5% compared to 63.4% in the previous quarter. Most companies said they would refrain from raising wages in the near future, while one in ten companies said they planned to cut back on their labor costs.

The percentage of companies that plan to take out domestic loans over the next 12 months was 39.2%, down from 44.4% in the previous quarter. Meanwhile, there was a slight increase in the percentage of companies that plan to take out foreign loans, to 9.5%. Overall, respondents reported rising borrowing needs. However, they were less confident that they would be able to meet their debt obligations as they fall due. Agricultural and manufacturing companies showed the greatest interest in loans. * 


This quarterly survey was carried out from 5 May through 3 June 2020. A total of 691 companies in 22 regions took part in the survey (excluding the temporarily occupied territory of Crimea, as well as Donetsk and Luhansk oblasts).

Out of the polled companies 18.8% were manufacturing companies, 15.5% wholesale companies, 14.9% agricultural companies, 13.0% transport and communications companies, 6.7% mining companies, 5.8% retail companies, 4.5% electricity and water supply companies, 3.0% construction companies, and 17.8% companies in other economic areas.

This survey only reflects the opinions of the respondents (top-managers of Ukrainian companies), and does not represent the NBU’s forecasts or assessments.The business outlook index is an aggregated indicator for companies’ development expectations over the next 12 months.

It is calculated on the basis of survey findings as the arithmetic mean of the balances of responses regarding companies’ financial and economic standings, total sales of their own products, investment spending on construction, machinery, equipment and tools, and staff numbers. An index above 100 indicates that positive economic sentiment prevails in society, while an index below 100 shows that negative economic sentiment prevails.


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