Ukrainian businesses become less optimistic in mid-term outlook - poll

MOSCOW. Aug 19 (Interfax) - Ukrainian businesses have downgraded their H1 expectations and sharply slowed down the pace of recovery amid electricity problems in July 2024, as follows from the findings of a monthly survey of businesses conducted by the Institute for Economic Research and Policy Consulting (IER), Ukrainian media reported.

"The situation with power outages has negatively affected the six-month expectations (for the financial and economic situation at enterprises): we see a sharp drop from 0.55 in June to 0.22 in July," IER CEO Oksana Kuzyakiv was quoted as saying in the report.

According to the chart presented by IER, it was in January 2023 that this indicator of expectations was lower last time.

"The share of enterprises operating at full capacity has also almost halved. This is one of the signs that the recovery in the short term is being delayed. The only thing that has almost remained unchanged is the share of businesses that are not operating," Kuzyakiv added.

It is noted that the share of companies with 100% workload in July fell from 20% to 11%, and 75-99% - from 37% to 34%, while the share of companies with 50-74% workload increased from 25% to 33%, 25-49% - from 14% to 16%, under 25% - from 2% to 4%, and the share of those idle rose from 2% to 3%.

It is indicated that the index of business activity recovery (balance between better/worse assessments year-on-year) fell threefold from 0.37 to 0.13. In particular, the share of enterprises indicating that their business activity is higher than it was last year, dropped to 28.2% this July from 50.7% in June, and those indicating deterioration in activity rose to 15.3% from 13.3%, with microenterprises faring the worst.

In July, power outages remained the main obstacle to business activity accounting for 78% compared to 65% month-on-month. This figure corresponds to November 2022, when Ukrainian businesses first faced such severe power outages and recorded them until March 2023.

In addition, job hazards became higher among the obstacles in July, to 58% from 54% in June, and labor shortages rose to 47% from 42%.

"We again have labor shortages in the top three due to the draft and employees leaving abroad. This hurdle has shifted positions with rising raw material and commodity prices. We have previously observed that problems on the labor market are less of a concern for businesses, but they are still relevant, as almost every second business is now talking about labor shortages," IER expert Yevgeny Angel said.

The survey revealed that the share of those having difficulties in finding employees increased from 34.6% to 50.8%, while the share of unskilled employees went up from 28.7% to 37.8%.

In July, the share of those expecting prices to rise in the next three months rose significantly from 21.8% to 38.6%, though this factor dropped in the ranking of problems from the third to the fourth position, which it shared with the lower demand for products and services, which moved up in the survey.

At the same time, it is noted that the rate of declining optimism in the short term has halted, and long-term business plans have even improved slightly, with the percentage of businesses planning to expand rising from 13.3% to 15.3%.

The New Monthly Enterprises Survey (NRES) conducted by IER in July involved 483 Ukrainian industrial enterprises located in 21 Ukrainian regions.