Before introduction of quarantine business predicted fall in inflation, hryvnia strengthening – NBU
Before the introduction of quarantine due to the spread of the coronavirus disease (COVID-19) Ukrainian business improved its expectations regarding the slowdown in inflation in the next 12 months to 5.1% from 7% early this year and the strengthening of the hryvnia to UAH 26.01/$1 from UAH 27.43/$1.
According to the quarterly business outlook survey conducted by the National Bank of Ukraine (NBU) from February 4 through March 4, 2020, business was more restrained in expecting growth in production of goods and services in Ukraine in the next 12 months. Thus, almost 30.8% (37.6% a quarter earlier) of respondents expected an increase in this indicator, another 48.7% (45.5%) believed that they would remain at the same level.
According to the survey, business activity of Ukrainian enterprises decreased to a moderate level amid a reduction in the Business Outlook Index (BOI) for the next 12 months to 110.5% from 112% a quarter earlier.
The decrease in BOI was insignificant due to high business estimates for the total sales of own-produced products, investment costs for machinery, equipment and inventory, as well as the financial and economic condition of enterprises.
According to the survey, the share of companies expecting improvement in their financial and economic condition over the next 12 months fell to 27.6% from 28% the previous quarter, while those forecasting deterioration increased to 10.8% from about 10%. The regulator said that all surveyed enterprises, except for the water supply sector, had optimistic forecasts, and the mining industry had the most optimistic forecasts.
According to the report, the share of companies expecting sales growth in the next year fell by 0.4 percentage points (p.p.) to 36.2% after rapid growth a quarter earlier, and the number of companies forecasting a decline increased by 0.1 p.p. to 13.2%. In particular, positive forecasts were given by respondents involved in all types of economic activity, except for energy and water supply enterprises, and trade companies expected the greatest growth.
According to the report, for the fourth consecutive month there has been a downward trend in expectations both in terms of investment in construction and investment in machinery, equipment and inventory in the next 12 months, to 2.4% from 4.7% a quarter earlier and to 14.1% from 14.7%, respectively.
According to the survey, the share of enterprises planning staff reductions in the next 12 months has slightly increased, to 21% from 18.5% a quarter earlier, while the number of respondents expecting an increase in the number of employees also increased to 17.4% from 16.9% The construction companies were most optimistic, and the agricultural companies were pessimistic.
At the same time, before the introduction of COVID-19 measures, the number of companies planning to raise the salaries of their employees in the next 12 months decreased to 63.4% from 69.2% at the beginning of the year, and the number of enterprises expecting a decrease in the indicator increased to 2.7% from 2.2%.
The survey showed that in the first quarter the share of companies planning to attract loans in the next 12 months increased to 44.4% from 41.9%. The number of enterprises willing to take loans in hryvnia has increased to 78.2% from 75.7% at the beginning of the year.