Business worsens currency expectations and for the 3rd quarter in row positively assesses its development prospects

Business expects business activity to grow in the next 12 months for the third quarter in a row, albeit at a slightly slower pace.

This is stated in the message of the National Bank of Ukraine (NBU), Ukrainian News Agency reports.

Despite the security risks and logistical difficulties of crossing the border, the respondents predicted a significant increase in the volume of production of goods and services, and were also positive about the development of their own enterprises.

Inflationary expectations continued to improve, while exchange rate expectations slightly worsened.

The business activity expectations index (BAEI) of enterprises was 101.6% compared to 104.5% in the third quarter of 2023.

A slight revival of business activity is predicted due to the maintenance of positive expectations regarding the total volume of sales of products of own production, investment expenditures on machines, equipment and inventory, and the future financial and economic condition.

Hostilities and their consequences remain the dominant factor restraining the development of enterprises.

The impact of the lack of qualified workers has also increased significantly.

Business for the third quarter in a row predicted growth in the volume of production of goods and services in Ukraine in the next 12 months, reinforcing positive expectations: the balance of responses was 15.2% compared to 9.8% in the 3rd quarter.

Growth was expected by enterprises of all types of economic activity and sizes in terms of the number of employees, as well as most areas and types of activity, except for exporters.

The improvement in inflation expectations continues for the fifth quarter in a row: in the fourth quarter of 2023, the annual inflation expected in the next 12 months was 11.3% compared to 14.8% in the previous quarter.

Almost a quarter of respondents (24.8%) expected inflation in the range of 7.6% - 10.0%.

Military operations remain the most significant pro-inflationary factor for 83.0% of respondents.

The influence of the factors "increase in population income" (by 3.2 percentage points) and "social expenditures of the budget" (by 1.8 percentage points) continued to increase.

Instead, the influence of "tax changes" (by 6.3 percentage points) and "hryvnia exchange rate to foreign currencies" (by 4.1 percentage points) weakened.

Expectations regarding the level of devaluation of the national currency slightly worsened: the average value of the exchange rate, which respondents expect in 12 months, is UAH 40.06 per US dollar (in the previous quarter - UAH 40.00 per US dollar). The majority of respondents (55.4% compared to 56.5% in the 3rd quarter) expect that the hryvnia exchange rate will not exceed UAH 40.00 per US dollar in the next 12 months.

The quarterly survey was conducted from October 31 to November 28, 2023.

659 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, 21.4% are wholesale and retail trade companies, 18.1% are processing industry, 14.6% are agriculture enterprises, 13.8% are transport and communications enterprises, 7.0% are mining industry, 4.6% are energy and water supply, 3.2% are construction, 17.5% - others; 29.3% of respondents are large enterprises, 37.8% are medium-sized enterprises, and 32.9% are small enterprises.

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

The business activity expectations index (BAEI) 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 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.