Ukrainian business community expects inflation to accelerate, hryvnia to devalue - National Bank poll

MOSCOW. Oct 18 (Interfax) - The Ukrainian business community's inflation expectations for the next 12 months worsened to 25.2% in the third quarter of 2022 from 21.7% in the previous quarter, and those regarding the hryvnia's devaluation worsened to 41.93 hryvni/$1 from 36.06 hryvni/$1.

Ukrainian media have reported with reference to the findings of a regular quarterly poll of business expectations of business organizations conducted by the National Bank of Ukraine (NBU) and published on its website on Monday that the business expectations index (BEI) grew to 79.5% from 72.6% compared to the previous quarter, showing that a negative economic outlook has somewhat eased.

This indicator has grown due to the improvement of evaluations of all BEI components, mostly as regards the overall volumes of sales of own products, the NBU said.

The poll has found that businesses are expecting the reduction in the volume of the production of goods and services in Ukraine to slow down in the next 12 months, the balance of answers being minus 37.9% in the third quarter compared to minus 48.7% in the second quarter of 2022.

More than half of all the companies polled (52.4%) expect their financial and economic standing to remain stable in the next 12 months, 31.3% expect it to worsen, and 16.2% to improve.

As many as 31.7% of the companies polled expect their sells, including on foreign markets, to shrink (against 43% in the second quarter), while 44.4% anticipate their sales to remain roughly the same.

The poll found that 32.9% of businesses plan to resort to staff cuts and 59.7% have no such plans.

The businesses' expectations of increasing the wages of their employees within the next 12 months have shrunk, as 41.4% of those polled plan to increase wages, 50.8% to leave them at the current level, and 7.9% to reduce them.

The share of businesses planning to draw foreign investment has decreased to 22.2% from 24.1%, it said.

As many as 86.3% of companies plan to raise loans denominated in the national currency, an increase from 84.6% in the previous quarter.

The NBU polled 642 businesses from 21 Ukrainian regions to find out their business expectations from August 1 to 31, 2022. Among the respondents, 18.2% companies represented the processing industry, 21.2% wholesale and retail trade, 14.6% the agricultural sector, 13.2% transport and communications, 6.4% extraction industries, 5.1% the power and water supply sector, 3% the construction sector, and 18.2% others.

BEI is an aggregated indicator showing businesses' expectations regarding their development in the next 12 months. It is calculated based on polls of enterprises as the average arithmetic value of the balances of their answers regarding their financial and economic position, the total sales of their their own products, investment expenses for carrying out construction work, investment expenses for machines, equipment and accessories, and the number of workers.

The BEI of above 100 indicates a predominantly positive and below 100 a predominantly negative economic outlook.