Business believes in stirring up business activities, expects inflation, devaluation to accelerate
Ukrainian business significantly improved it expectations regarding the volumes of goods and services production in 2017: the balance of expectations for production of goods and services in the fourth quarter 2016 grew to 11.1% compared to 5.4% in the third quarter of 2016.
Such estimates are recorded in a survey conducted by the National Bank of Ukraine (NBU) among the country's business leaders in the fourth quarter of 2016.
"The main obstacles restricting the ability of enterprises to boost production are high prices of energy and unstable political situation, they said," the NBU said.
In particular, 50.6% of respondents (42.9% in the previous quarter) named too high prices of energy as the obstacle, 45% (44.5%) – political instability, 43.1% (40.5%) – hryvnia exchange rate fluctuations, 42.2% (40.2%) – too high prices of raw materials and products and 36.4% (32.9%) – extra tax pressure.
Worsening of these indicators affected the business activity index: it fell to 108.7% from 109.2% in the third quarter, while it is higher than 100%. Top managers of processing industry, electricity and water supply and trade are most optimistic.
Inflation and devaluation expectations of business worsened in the fourth quarter. If in the third quarter the companies anticipated that inflation will be 13.8% in 12 months, in the fourth quarter they expected that inflation will be 16.2% at the end of 2017.
"Too high volatility of the hryvnia exchange rate and expectations that public income and consumer demand will grow resulted in the worsening of expectations," the NBU said.
According to the poll (in the period when it was conducted the average exchange rate on the interbank currency market was UAH 25.78/$1), respondents anticipated that the exchange rate would be UAH 29.16/$1 in 12 months, while in the previous quarter with the average exchange rate at the moment when the poll was conducted of UAH 25.60/$1, average expectations were UAH 28.03/$1.
"The share of respondents expecting that the exchange rate would be more than UAH 30/$1 considerably grew – to 30.4% from 17.2% in the third quarter," the NBU said.
The share of respondents seeking to take loans fell from 36.7% to 34.6% despite the improvement of the balance of answers regarding toughening of crediting conditions from 32.8% to 30.3%, the central bank said.
The NBU said that the major part of companies (80% of respondents) prefer loans in the national currency.