Business Mitigates Negative Expectations Regarding Its Own Business Activity, Inflation And Exchange Rates

Business, despite active hostilities and shelling of civilian infrastructure, continued to mitigate negative expectations both regarding its own development and the dynamics of production volumes of goods and services in Ukraine in the next 12 months.

This is evidenced by the results of a survey of company managers conducted by the National Bank in the first quarter of 2023, Ukrainian News Agency reports.

At the same time, inflation estimates and exchange rate expectations improved.

The business activity expectations index (BAEI) increased to 91.2% compared to 83.5% in the fourth quarter of 2022.

The improvement of assessments occurred in enterprises of almost all types of economic activity, except for construction and trade, as well as in all components of the index.

Business significantly mitigated the negative expectations regarding the dynamics of the volume of production of goods and services in Ukraine in the next 12 months.

The balance of responses was "minus" 16.7% compared to "minus" 32.3% in the fourth quarter.

Inflation expectations have improved: in the first quarter of 2023, the expected annual inflation was 20.7% compared to 23.3% in the previous quarter.

46.8% of surveyed enterprises believe that inflation in the next 12 months will not exceed 20.0%.

On the other hand, the share of those who expect inflation to exceed 30.0% has significantly decreased to 16.2%.

According to 88.4% of respondents, the most significant pro-inflationary factor remains military operations.

Instead, the influence of the "exchange rate factor" and "production costs" weakened somewhat.

A slight weakening of devaluation processes is expected: the average value of the exchange rate, which respondents expect in 12 months, is 42.18 UAH/USD (in the previous quarter - 42.59 UAH/USD).

48.3% of respondents expect that the exchange rate of the national currency in the next 12 months will not exceed 42.00 UAH/USD.

The quarterly survey was conducted from January 30 to February 28, 2023.

644 enterprises from 21 regions of the country participated in the survey (excluding the temporarily occupied territory of the Autonomous Republic of Crimea, as well as the Donetsk, Luhansk and Kherson Regions).

Among the surveyed enterprises, 21.0% are wholesale and retail trade companies, 18.2% are processing industry, 14.4% are agriculture, 13.2% are transport and communications, 7.0% are mining industry, 5.3% are energy and water supply, 3.3% are construction, 17.7% - others.

As Ukrainian News Agency earlier reported, the results of the polls reflect only the opinion of the respondents - company managers, and not the assessments of the National Bank of Ukraine.

The business activity expectations index is an aggregate indicator of the expected development of enterprises in the next 12 months.

It is calculated based on the results of surveys of enterprises, as the arithmetic mean value of the balances of answers regarding the financial and economic status of enterprises, the total volume of sales of products of own production, investment expenditures for construction works, investment expenditures for machines, equipment and inventory, and the number of employees.

The value of the index above 100 means the predominance of positive economic sentiments in the society, below 100 - negative economic sentiments.