Ukraine business confidence improves in 1Q19, NBU says

Ukrainian companies improved their expectations for
economic advancement and the development of their own business in the nearest
12 months, the National Bank of Ukraine (NBU) reported on Apr. 18, citing the
results of its survey conducted in 1Q19. The surveyed companies also expect
inflation slowdown and moderate depreciation of the national currency.

The index of business expectations improved to 119.7%
in 1Q19 from 117.3% in the previous quarter. Around 40% of companies expect
their sales to increase within the nearest 12 months. Meanwhile, only 8.7% of
surveyed enterprises expect their sales to decline. Around one-third of
enterprises expect their export sales to increase.

In addition, 33.6% of companies plan to boost CapEx,
while only 9% of enterprises plan to reduce investment in the nearest 12
months. Three-quarters of enterprises expect their payroll expenditures to
increase, while less than 1% of enterprises do not plan to raise the salaries
of their employees. Entrepreneurs cited high prices for energy resources and
raw materials as major restraining factors.

As for macroeconomic expectations, 38% of respondents
expect Ukraine’s output to increase in the nearest 12 months, while 12.7% of
respondents have the opposite view. The balance of responses to this question
improved to 25.3% in 1Q19 from 18.2% in the previous quarter. Businesspeople
expect inflation to rise about 9% in the nearest 12 months (vs. 9.5% during the
previous survey).

Expectations on hryvnia devaluation also improved as
the average forecast of the exchange rate in the nearest 12 months declined to
UAH 29.32/USD from UAH 29.99/USD in the previous quarter.

Evgeniya Akhtyrko: Overall,
the survey results demonstrate reduced negativity on economic trends rather
than significant growth in optimism. Nonetheless, improved business confidence
is a positive development that stems from accelerated economic growth in 2018,
cooled consumer inflation and the
stability of the exchange rate during the last six months.

We expect Ukraine’s GDP to slow to 2.3% yoy growth
in 2019 (vs. 3.3% yoy growth in 2018). The expected economic slowdown is not
likely to add much optimism to business confidence in the nearest time.