Ukrainian businesses have improved their expectations for Ukrainian macroeconomic conditions and their own development prospects. The business outlook index for the next 12 months, at 120.6%, reached a new high since Q2 2011. A rebound in business activity was expected by all businesses, as evidenced by results of the Q1 2018 Business Outlook Survey.
Economic activity keeps picking up at a high pace, largely due to respondents improving their forecasts for growth in total sales and investment in machinery, equipment and instruments.
Businesses have increased assessment of their financial and economic standing for seven quarters running. A total of 88% of respondents said their financial and economic standing was satisfactory or good, with the percentage of those describing their standing as good rising from 20% to 22%. There was also an increase in the number of businesses that were upbeat about their financial and economic standing over the next 12 months. An improvement in the financial and economic standing was expected by 29% of respondents, compared to 24% last quarter.
An upswing in investment spending due to foreign investment growth was anticipated by all businesses.
In addition, the survey revealed that borrowing needs had reached a new high ever since it started. A significant percentage of respondents plan receive new loans in the near future to finance their businesses. Companies that intend to receive loans continue to prefer hryvnia loans. Businesses cited high loan rates, collateral requirements and complicated paperwork as the factors that deterred them from receiving loans.
Respondents are upbeat about their outlook for output growth, while also expecting output to increase in Ukraine at a fast pace.Such expectations have persisted for two years in a row. One in three surveyed businesses anticipated output growth, while another 50% of businesses said that output would remain at the current level. Respondents from manufacturing, trade and agricultural companies were the most optimistic.
Respondents reported slightly higher expectations of a consumer price rise over the next 12 months - 11.0% compared to 10.4% in the previous quarter. This was mainly attributed to some deterioration in businesses’ expectations of FX market conditions, with 81% of respondents referring to it as a key factor. This factor remains to be important for businesses amid a slight deterioration in depreciation expectations, due to a temporary turbulence seen on the FX market at the start of the year. Other price drivers cited by respondents included production costs, household income, and budgetary social spending.
For reference
The survey was carried out from 5 February through 6 March 2018. 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 Luhansk oblasts). The respondents were chosen to represent a range of main economic activities, types of ownership, and sizes based on staff numbers. This survey only reflects opinions of the respondents (top-managers of Ukrainian companies), and does not represent the NBU’s forecasts or assessments.