Business news from Ukraine

44% of Ukrainian enterprises are ready to invest in development

Despite problems with finding workers, rising prices of raw materials and physical threats, Ukrainian businesses are optimistic about the future, 44% of surveyed enterprises are ready to invest in their development or recovery, these are the results of the February New Monthly Enterprises Survey (#NRES) of the Institute for Economic and Policy Research (IEP).

“Businesses are quite optimistic about investment given that a full-scale war is ongoing. For example, 42% of businesses believe that now is more or less a favorable time to invest in equipment. For comparison, at the beginning of 2015, when the ATO was in an active phase, the share of such enterprises amounted to only 14%”, – commented the results of the study, Eugene Angel, a senior researcher at the IEI.

The IEI also pointed out that business is gradually coming out of the state of complete uncertainty and begins to make plans for the future: in February 2024, only about 15% of business owners and managers could not give an answer about their business plans for the next six months, while a year ago there were about 40% of them.

At the same time, the level of uncertainty in the perspective of two years is still quite high – about 50% of respondents.

“A significant decrease in the number of those who find it difficult to make plans for the next six months indicates that optimism is returning to Ukrainian businesses. Moreover, the share of enterprises operating at 100% capacity is gradually increasing: in February 2023 there were 6% of such enterprises, now there are already 15%. But, of course, it is difficult for businessmen to make plans for the long term (2 years) in the conditions of war”, – said Oksana Kuzyakiv, Executive Director of IEI.

According to the published data, for the second month in a row the Business Activity Recovery Index (BAI) decreased – by almost 10 p.p. – From 0.43 to 0.34. As for its components, the share of enterprises that reported that their business activity was better than in the previous year decreased from 56.0% in January to 44.8% in February, nothing changed for 44.0% (30.9% in January), the share of those for whom the situation was worse than a year ago remained without significant changes for several months in a row (13.1% in January and 11.2% in February).

According to the survey, the main obstacles to investment are economic uncertainty, political instability and insufficient corporate profits.

As for the obstacles to doing business, February 2024 saw some changes in the list of obstacles: the assessment of rising prices for raw materials and commodities rose from 46% to 49%, and labor shortages rose from 41% to 46%, which respectively moved them to the 1st and 2nd places.

At the same time, the obstacle “not safe to work” dropped from 1st to 3rd place, although its value decreased slightly from 46% to 45%.

Estimates of power outages dropped from 26% to 24%, which is only the 7th most important obstacle, while corruption and pressure from law enforcement agencies ranked even lower in the survey.

In February, compared to January, the share of enterprises operating at full capacity slightly increased – from 13% to 15%, while the share of non-operating enterprises remains unchanged for half a year and amounts to 2% of respondents.

The survey emphasizes that the share of positive assessments of the government’s policy to support business is 8% and has remained unchanged for more than half a year, while 55% (58% in January) assess it neutrally, and 18% negatively (16% a month earlier).

IEI specialists also recorded a slight decrease in problems with finding labor: qualified workers are difficult to find for 31% of surveyed entrepreneurs (32.4% in January), and unskilled workers – for 26.5% of respondents (27.4% a month earlier).

The monthly IEI survey in February involved 542 Ukrainian enterprises located in 21 out of 27 regions of Ukraine. The field stage of the 22nd wave of the survey lasted from February 19 to February 29, 2024.

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Business Activity Recovery Index in Ukraine declined to 43% in January

After two months of stable performance, the index of business activity recovery (IER) in January decreased by 7 p.p. to 43%, according to the 21st NRES (New Monthly Enterprises Survey) conducted by the Institute for Economic Research and Policy Consulting (IER).

“In addition to the growing uncertainty related to export prospects, the surveyed enterprises report a direct reduction in exports. Thus, in January, 34% of respondents had to reduce exports (in December, the number was 20%). The share of enterprises reporting export growth decreased from 31% in December to 19% in January,” the IER reports.

According to the published information, the share of enterprises that reduced production volumes increased from 16.8% in December to 23.2% in January, and the share of enterprises that increased production volumes decreased from 34.4% to 23.2%.

It is noted that employment rates have also slightly decreased: 2.7% of respondents plan to increase it (5.1% in December), 11.5% intend to reduce the number of employees (6.7% in December), and 85.8% do not expect changes in employment (88.3% a month earlier).

The business itself is experiencing problems with finding qualified employees – 32.4% of companies have difficulty finding such employees (29.1% in December). Although, according to Oksana Kuziakiv, Executive Director of the IER, the decline in employment may be a seasonal trend.

Among the obstacles to growth, the first place in the list of obstacles is shared by “working dangerously” and rising prices for raw materials: 46% of respondents indicated them.

Lack of labor moved from second to third place in the list of barriers with a decrease from 46% to 41%, and power outages moved from fifth to seventh place (from 30% to 26%).

Corruption and pressure from law enforcement agencies are still not significant problems: in January, they were reported as obstacles by 7% of respondents.

In addition, more than a fifth of the surveyed Ukrainian enterprises named the lifting of the blockade of the western borders as an expected change needed to improve the business climate in the country.

As for the results of 2023, 56% of the surveyed enterprises said that the previous year met their expectations, and for 8% it even exceeded their expectations. At the same time, the IER clarifies that there is a connection between the compliance of 2023 with expectations and the size of the enterprise. Thus, 77% of large enterprises called 2023 expected or exceeding their expectations. At the same time, only 54% of microbusinesses said the same.

“The result we got is quite optimistic. I did not expect to see such figures given the turbulence and events that Ukrainian business experienced in 2023. This means that most companies are realistic about planning,” Kuziakiv commented on the results.

The survey, which was conducted from January 16 to January 31, 2024, involved 552 enterprises from 21 regions of Ukraine operating in the industrial, retail and agribusiness sectors.