On 23 June 2017, the National Bank of Ukraine for the first time held a meeting with the top managers of enterprises polled by the regulator for its Business Outlook Survey. The workshop was attended by 30 representatives from enterprises operating in different oblasts of Ukraine representing the economy in terms of main economic activities, including processing, mining and energy supply industries, as well as other types of economic activities.
The Statistics and reporting Department presented the results of the Business Outlook Survey for Q2 2017 at the workshop. The NBU representatives explained to the workshop participants what the monetary policy decision-making process was guided by and why it had been necessary to reform the banking system and what had been done to mitigate risks to the financial stability and unveiled the NBU’s plans to relax FX controls.
The speakers at the workshop included the top managers of the NBU and heads of the NBU’s subdivisions responsible for conducting surveys, preparing analytical reports on the Business Outlook Survey, project and program managers of the projects implemented at the NBU.
In opening the workshop, NBU Deputy Governor Dmytro Sologub underlined the importance of the top managers’ participation in surveys conducted by the regulator. “It is equally important for the NBU to cooperate with both real sector enterprises and financial institutions. Having a clear understanding of your expectations enables the NBU staff to make realistic forecasts and the right decisions, especially monetary policy decisions”.
Mr Sologub said that both the NBU and business would benefit from further continuation and development of cooperation: “Our goal is to develop businesses' ability not only to rationally assess the current situation but also to conduct a forward-looking assessment of future developments over a half-year or a year’s horizon. This is how business works across the civilized world. Ukrainian businesses should adopt similar practices,” said the NBU Deputy Governor.
Director of the NBU Statistics and Reporting Department Yurii Polovniov briefed the workshop participants about efforts to upgrade the NBU’s statistical function, develop new methodological approaches and a toolkit for conducting surveys, and unveiled plans and projects that are currently being implemented. “Over the past two years, the NBU has made a great stride in the survey front. Significant progress has made in automating the processing of questionnaires – over 75% of the questionnaires respondents fill in electronically,” Mr Polovniov said.
The workshop agenda covered the most relevant issues for businesses. In particular, Director of Monetary Policy and Economic Analysis Department Sergiy Nikolaychuk highlighted the role of expectations in the monetary policy decision making process, which is based on the inflation targeting framework. “Trust that lies at the core of a new monetary policy regime is earned step by step through the NBU’s actions and decisions. The NBU is guided by the rule: “Say what you do, and do what you say. This is the only way to earn confidence of the public and business and maintain their confidence in forecasts and decisions made by the central bank,” said Sergiy Nikolaychuk.
In his speech, Director of the Financial Stability Department Vitalii Vavryschuk briefed the participants about the progress in implementing the banking sector reform and the NBU’s financial stability policy. When answering the questions put by the top managers regarding a full-fledged recovery of lending, Mr Vavryschuk said that the problem is not that banks have a shortage of funds or are unwilling to lend to businesses. The problem is a lack of solvent borrowers.
“Banks are currently competing for solvent borrowers with acceptable leverage ratios that are capable of servicing debt liabilities and new loans. Most borrowers have high debt-to-operating income ratios,” said Mr Vavryschuk. Director of the Financial Stability Department emphasized that the banking system is ready to resume lending: “The banking sector has emerged from the crisis and is liquid and generating profits while risks have abated significantly – banks are ready to resume”.
Head of the NBU Survey Division Olha Vozniuk shared the NBU’s experience in conducting surveys with the workshop participants, provided an overview of international practices and approachesand highlighted the development of survey practices at the NBU as part of the transformation project, and unveiled the regulator’s plans. Ms Vozniuk said that the NBU has a ten-year experience in conducting business outlook surveys.
“Currently, surveys conducted by the NBU are in line with international best standards. The survey sample comprises about 700 enterprises representing 22 oblasts of Ukraine in terms of main economic activities,” said Ms Vozniuk. Ms Vozniuk also briefed the participants about the survey techniques and efforts to make questionnaires easier to process and more respondent-friendly: “The deployment of web technology to receive input from respondents enabled a shift to a new report format summarizing the results of the Business Outlook Survey and allowed the NBU to focus efforts on the creation of new products.
Senior economist of the Survey Division Dmytro Ogol presented the preliminary results of the Business Outlook Survey regarding macroeconomic expectations in Q2 2017. Mr Ogol pointed out that respondents reported an improvement in their macroeconomic expectations over the next 12 month – they expect output growth, a slowdown of inflation and a strengthening of the hryvnia against the US dollar.
Chief economist of the Survey Division Anastasia Nazarenko spoke about an instrument for assessing economic activity of enterprises developed and put in place by the NBU – the Business Outlook Index. This index has no analogues in Ukraine and is calculated based on the survey results. The Business Outlook Index shows the future path of the business cycle at a one or two quarter horizon. Hence, it can be used in economic forecasts, in particular, projections of changes in GDP.
Chief Economist of the Survey Division Nataliia Shukalo briefed the workshop participants about the preliminary results of the Business Outlook Survey in Q2 2017 regarding the price policy and enterprises’ expenditures and their plans to raise additional financing.
During the workshop the participants also discussed another important issue for businesses – the need to reform the foreign exchange regulation system. Project leader of the Open Market Operations Department Emal Bakhtari unveiled the regulator’s plans for further foreign exchange liberalization and outlined a framework for new foreign exchange regulation and controls which is to replace the obsolete one, which is overregulated and red-taped.
Videos and presentations can be found here.