How the introduction of quarantine affected Ukrainian business
Before the government introduced quarantine in response to the spread of the COVID-19 epidemic, Ukrainian companies expected further economic growth and moderate inflation. However, following these events, business sentiment deteriorated as expected, the National Bank of Ukraine reported in reference to the results of a survey of company executives.
According to the NBU press service, the business mood has deteriorated significantly and rapidly since the introduction of quarantine measures. Therefore, according to the March results, the monthly index of business activity expectations (IODA) decreased by 5.4. The base indicates a level of 45.8. The index price, below 50 points, shows the predominance of pessimistic trading sentiment.
It is noted that Most pessimistic about the results of the month Service enterprises, because they suffered the biggest loss from quarantine. Their estimate of the volume of services rendered and new orders was at a low level. Pessimistic expectations pervading the industry.
Given the growing demand from the consumer sector (food and personal care products), the business sector had slightly better estimates, as well as the potential for significantly accelerated reintegration of the business to alternative sales and distribution channels.
In previous weekly economic surveys, which the National Bank began to do during the quarantine, it was noted that enterprises’ expectations for reducing trade and production volumes continued to deteriorate in April. In the labor market, the number of vacancies continued to decrease. Due to the increasing uncertainty, even IT companies that are least vulnerable to quarantine have suspended hiring new employees. In just three weeks of quarantine, the number of new vacancies dropped by 44%.
In the previous survey, National Bank showed a high level of business activity in the last four quarters: the Business Expectancy Index (IDI) for the next 12 months was 110.5%. Business forecast consumer price growth at 5.1% (7.0% in the fourth quarter) for 12 months, which actually coincides with the NBU’s medium-term inflation target, the regulatory report. About 70% of respondents predicted that consumer price growth would not exceed 6% in the next 12 months. A strong hryvnia exchange rate is expected in the trade: Over the next 12 months, respondents projected an average rate of USD 26.01 per USD (USD 27.43 per USD in the previous quarter).
The estimates of enterprises on the growth of production of goods and services in Ukraine were controlled, however, remained at a high level. About a third of respondents (30.8%) expected their growth, while nearly half (48.7%) believed that these indicators would remain at the same level. Sales of goods and services are forecast by more than a third of companies (36.2%) over the next 12 months. Only 13.2% expected their downfall.
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Previously, we wrote that the National Bank of Ukraine has deferred the requirements for use by the Business Registrar of Settlement Transactions (RROs), including the implementation of foreign exchange transactions until August 1, 2020. Earlier, these requirements were to be implemented on 19 April.
In addition, the Ukrainian government made changes to the state program “Available Loans 5-7-9%” for small and medium-sized businesses in relation to the spread of COVID-19 in the country.
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