Despite a full-scale Russian invasion, Ukrainian business expectations remain optimistic in the short term. Business is gradually adapting to work in war conditions. These are the main results of the second monthly business survey conducted by the Institute for Economic Research and Policy Consulting in June 2022.
Production volumes: sharp fall, slow recovery.
The start of a full-scale Russian invasion has become a real challenge for Ukrainian business. While some companies have only experienced supply chain disruption, fuel shortages or reduced demand, others have suffered property damage or have been forced to embark on a lengthy process of relocating production capacity..
The results of the survey show that the majority of enterprises (particularly industrial ones) have reduced production volumes or closed altogether (see. rice. one). In June, almost 8% of businesses reported that they had ceased operations during the war. This is approximately at the level of May (10%), which confirms the slow recovery of production among businesses that completely stopped working.. Microbusiness suffers the most, with the largest share of non-performing businesses (16% in June vs. 18% in May). At the same time, among large enterprises that have more opportunities to overcome crisis situations, only 1% are “inactive”.
In contrast, in June, 12% of those surveyed are working at 100 percent or more compared to pre-war volumes (15% in May). The share of enterprises operating at almost full production volumes almost doubled (by 75-99% of the pre-war scale), from 17% in May to 30% in June. We see a faster recovery of production volumes among some of the surveyed enterprises.
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Optimism in the short term - production expectations.
Production plans of enterprises for the next three months are quite optimistic. The share of enterprises where production growth is planned even slightly increased, from 32.2% in May to 37.7% in June (see. rice. 2). At the same time, the share of those who plan to reduce production decreased from 17.9% to 14.0%..
Most of the “optimists” are among small enterprises, where production growth is expected by as many as 42.4% of respondents, and a decrease – by only 7.6%. But, for example, among micro-enterprises, as many as 25% of respondents have negative expectations. At the same time, large enterprises have the lowest share of positive expectations (32.9%).
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Optimism in the long term - the economic environment, market conditions and the situation at the enterprise.
Business assessments of the business environment are low but improving (see. rice. 3). If in May the general economic situation was assessed as bad by 60.7% of respondents, then in June it was already 49.1%. Also, the share of those who believe that the general economic environment is satisfactory increased from 34.6 to 46.2%.. But the share of positive ratings has not changed and is 4.7%.
Forecasts for the next six months were optimistic in the past, but this month is even better. The percentage of " At the same time, 25.4% of respondents do not expect changes.
At the same time, expectations regarding the financial and economic situation at the enterprise for the next six months improved (see. rice. four). Here the share of "
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Optimism rises, but uncertainty remains.
Long-term uncertainty remains a challenge for business. The share of respondents who could not give a forecast on changes in the financial and economic situation at the enterprise (43.3%) and the general economic situation (43.6%) in the future for six months continues to be quite high.
The level of uncertainty and its dynamics depend on the size of enterprises. Here we see an interesting situation, since according to the results of our twenty years of observation in quarterly surveys, it is small businesses that usually face a higher level of uncertainty.. During the war the situation changed.. The proportion of those who could not decide what would happen in six months increases precisely with the growth of the size of the enterprise. The share of microenterprises that failed to forecast changes in the general economic environment for six months fell from 56.3% in May to 34.6% in June. But the share of large "
It is important to highlight that, in the shorter term, uncertainty has decreased substantially for businesses of all sizes.. The share of respondents who could not predict the change in certain performance indicators in the three-month period decreased by three times. This applies to all indicators, except for exports.. For exports, the share of those who could not decide decreased by only 5.5 percentage points.
Business is gradually restoring export activities.
The war has become a serious obstacle to foreign economic activity. 40% of exporters surveyed stopped exporting after February 24, 2022 and were unable to resume exports as of June (see. rice. 5). At the same time, the share of such enterprises decreased: in the previous month it was 47%. But enterprises are working to restore exports. The share of enterprises that stopped exporting, but restored it, increased from 9 to 20%.
During the war, micro and small businesses suffer more from new problems and challenges. In particular, as many as 62% of micro and 43% of small enterprises stopped exporting and could not restore it, but at the same time 35% of medium and 37% of large businesses. For comparison, in May, the negative impact of the war was more felt in general by the entire SME sector (65% of small and 51% of medium-sized enterprises versus 33% of large ones in May). Small and medium-sized businesses in late spring were able to partially close the gap and restore exports.
What the business expects? Major steps and changes.
Ukrainian business, like the whole country, is waiting for victory and the end of the war, which will allow them to return to a peaceful rhythm of life.. 90% of respondents believe that the end of the war can best affect the situation of their business (see. rice. 6). Every second business representative is waiting for the de-occupation of the territories of Ukraine (51%). Ending the war is a top priority for businesses of all sizes.
Solutions to the fuel crisis are expected by 40% of survey participants - it has reached the third step in the rating of needs. The next most important steps, according to enterprises, are the reduction of taxes and excises (35%), obtaining government orders (28%) and simplifying legal requirements (26%). Business has supported these steps before, but they became even more relevant during the war..
Traditionally, needs differ for businesses of different sizes.. Microbusiness pays more attention than other enterprises to reducing corruption: 33% of microenterprises expect this, while among other business groups in size this share does not exceed 26%. The need for affordable loans is also more acute for smaller businesses:
if among large enterprises such loans are expected by 16%, then among medium enterprises - already 20%, among small ones - 28%, and in microbusiness most of all - 33% of enterprises.
About the survey. In order to quickly collect information about the current state of the economy at the level of enterprises (primarily manufacturing), IEIPC began a monthly survey of enterprises. The methodology was developed to assess the situation from the " The field stage of the second monthly survey took place on May 31 - June 10, 2022. The article was prepared as part of the implementation of the project "
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