The National Bank of Ukraine (NBU) has introduced a new tool to promptly assess and track economic development trends – the monthly Business Activity Outlook Index (BAOI). The NBU will calculate the index based on surveys of Ukrainian companies in the real sector of the economy. Through the BAOI, the NBU will gain the latest additional information to enhance the analytics that inform the central bank’s key decisions.
Unlike the now traditional quarterly Business Outlook Index (BOI), which captures the indicators of expected business development in the next 12 months, the BAOI will only focus on businesses’ estimates of current economic conditions. The NBU will thus conduct both surveys at the same time without them contradicting each other.
To compile the BAOI, the NBU will survey private companies in industry, construction, trade, and services on a monthly basis. Despite the significant share of agriculture in GDP, agricultural businesses will not participate in the survey. Excluding agricultural companies from business surveys is a global practice. The strong seasonality of agricultural production introduces a negative bias in survey results.
Based on respondents’ answers, the NBU will compile monthly sector-based BAOIs (for each sector of the economy) and the aggregate BAOI, which characterizes Ukraine’s economic development in a given month. The methodology for calculating these indexes takes into account global best practices for building monthly business activity indices, enabling the NBU to compare these indices with their global peers and make them clear to foreign investors.
Of the 106 companies the NBU polled in its pilot survey in July this year, 30% were industrial enterprises, 11% were construction companies, 22% were trade companies, and 37% were service providers.
With the BAOI for the overall economy standing at 52.4[1] in July, most respondents expected improvements in the economic performance of their businesses compared to the previous month, survey results showed.
All sectors but construction were optimistic about their economic standing in July. The most optimistic respondents were in industry (with the BAOI at 54.1).
Construction companies expected a slight slowdown in the sector’s economic trend in July compared to June.
For more on the results of the monthly survey of Ukrainian companies in July, see the Monthly Business Surveys link in the Publications section.
The results of the August survey will be published on the first business day of September 2019.
[1] A BAOI reading of about 50 is interpreted as neutral. A BAOI reading above the neutral level implies a positive business outlook.