Business continues to be optimistic about economic growth in Ukraine in 2019. The business outlook index for the next 12 months is at 117.3% (up from 117.2% a quarter earlier). Respondents in the latest Business Outlook Survey conducted by the National Bank of Ukraine in Q4 2018 have been forecasting an increased business activity for two quarters in a row.
The expectations of rapid growth in economic activity are primarily driven by optimistic predictions of increases in total sales of own-produced goods and investment in machinery, equipment, and instruments.
All businesses said they expected a pick-up in business activity. The most optimistic forecasts came from enterprises in the manufacturing industry. By region, companies in every oblast except Kirovograd continued to have optimistic expectations, while enterprises in Ternopil and Lviv oblasts reported the highest expectations.
Expectations for the output of own-produced goods and services in Ukraine in 2019 remain high for all enterprises. A third of respondents expect production to grow, and every other company believes that production will at least remain at the current level. Respondents have been reporting positive expectations for 11 consecutive quarters.
All respondents anticipate growth in total sales and better financial and economic standing, apart from energy and water supply companies. The highest expectations were reported by trade and manufacturing companies.
Business, with the exception of energy and water supply and agriculture enterprises, also expects an increase in the number of employees. Companies in Lviv and Ternopil oblasts experience the greatest need for job openings.
The upbeat output forecasts increase the borrowing needs of businesses. A significant percentage of respondents plan to take out new loans in the near future to finance their businesses. Companies intending to apply for loans continue to prefer hryvnia loans. Businesses cited high loan rates, collateral requirements, and complicated paperwork as factors that deterred them from applying for loans.
In addition, businesses expect to meet the projected rise in investment needs by stepping up efforts to attract foreign investment.
Respondents reported slightly higher expectations of consumer price growth over the next 12 months – at 9.5% compared to 8.9% in the previous quarter. Respondents continue to cite the hryvnia exchange rate as the most important driver of price growth (79.3% of responses). At the same time, expectations regarding the effect of the exchange rate on inflation were somewhat weaker compared to the previous survey. The increasing production costs, which enterprises believe are mostly driven by wage increases, will have a significant influence on price dynamics.
For reference
The Business Outlook Survey was conducted between 5 November and 4 December 2018. A total of 675 enterprises from 22 regions took part in the survey (excluding the temporarily occupied territory of Crimea and that of Donetsk and Luhansk oblasts). The respondents were selected to represent a range of main economic activities, types of ownership, and sizes by manpower. This survey only reflects the opinions of respondents (managers of Ukrainian companies) and does not represent NBU forecasts or estimates.