Ukrainian enterprises maintain positive expectations for macroeconomic conditions in Ukraine. The business outlook index for the next 12 months stands at 118.3%. The respondents have been forecasting an increased business activity for six quarters in a row. The enterprises’ expectations about the growth of output and sales are improving. This is evidenced by the results of the regular Business Outlook Survey conducted by the National Bank of Ukraine in Q2 2018.
Growth in economic activity remains rapid, mainly due to improved forecasts for the financial and economic standing of respondents’ own enterprises and construction investment.
Respondents continue to assess the financial and economic standing of their enterprises as positive. As in Q1 2018, some 88% of respondents consider the standing of their enterprises to be satisfactory or good. At the same time, they report a low level of final goods inventories and a lack of their own production capacities to respond to unexpected increases in demand.
Expectations for the further sale of own goods remain high, as do expectations for investment in machinery, equipment, and instruments.
Along with this, the enterprises slightly lowered their expectations about their borrowing needs. The share of respondents that are planning to take out bank loans amounts to 37.1% (down from 38.3% in Q1 2018). As in all previous surveys, the enterprises are more interested in hryvnia loans. At the same time, the high cost of credit, tightened requirements for collateral, and complicated paperwork remain the main factors holding back businesses from taking out new loans.
The enterprises’ expectations for growth in the output of Ukrainian goods and services over the next 12 months improved in Q2 2018 – the balance of expectations is at 22.2% (up from 19.0% in Q1 2018). The general trend has remained positive for nine straight quarters. In particular, 35% of respondents expect the output to grow, and more than half of all respondents are convinced that the output will remain at the same level. The enterprises of all major types expect growth. However, the power- and water-supply enterprises have the most positive attitude.
Although businesses’ inflation expectations for the next 12 months improved, they are still above the target – consumer prices are expected to grow by 9.6% (11.0% in Q1 2018). Production costs are among factors that have the strongest impact on the price level. FX market conditions remain an important factor here, but expectations about their influence are significantly reduced compared to the previous survey – 65.5% of responses, down by 15.6 pp. According to the business outlook, the price level will also be influenced by household income, world market prices, and social security expenditures.
For reference
The survey was conducted from 10 May through 5 June 2018. A total of 665 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 the respondents (top managers of Ukrainian enterprises) and does not represent the NBU’s estimates.