The investment attractiveness index decreased to 2.40 points out of possible 5 in the second half of 2020, comparable to 2013 estimates, the most recent research conducted by the European Business Association in partnership with Vasyl Kisil & Partners law firm says.
“The results of the index show an unprecedented decline in CEO sentiment, comparable to 2013 estimates,” the EBA said in its press release.
According to the results of the first six months of 2020, this figure dropped to 2.51 points compared to 2.95 in the second half of 2019, the Association said.
“Most CEOs of the EBA member companies, namely 78%, consider the current investment climate unfavorable, and this figure has increased significantly since the beginning of the year – by 16%. Another 16% of respondents consider the current investment climate neutral. Only 6% of respondents consider the investment climate favorable, compared to 4% in the first half of 2020,” it says.
Thus, 66% of directors noticed that investment climate has become worse compared to the previous six months, another 29% are convinced that the business environment has not changed, and only 5% believe that it has improved slightly.
“Compared to the beginning of the year, the number of optimists has halved, and the percentage of CEOs who have noticed the deterioration has increased slightly,” the EBA note.
Forecasts issued for the next six months are also getting more pessimistic. Only 10% of CEOs expect the investment climate to improve over the next half-year period (at the beginning of the year, there were 15% of positive answers and, as the current wave of the survey shows, only 6% of those expectations came true).
“Other opinions appeared to be rather divided. Thus, 45% of respondents believe that the investment climate will not change in the next six months, and another 45% predict that the conditions for doing business in Ukraine will worsen,” the research reads.
Although the directors have not noticed many changes for the better in the last six months, business leaders have pointed out a relatively rapid economic recovery after the lockdown-induced recession, controlled inflation, lower interest rates, a stable exchange rate, simplification of foreign exchange operations, land market liberalization, and introduction of state e-services.
The effect of such negative factors as the crisis of the court system, the lack of the rule of law, the lack of progress in the fight against corruption, and the significant impact of the shadow economy, were exacerbated by the introduction of restrictive measures, instability of tax legislation, the situation around the Constitutional Court of Ukraine, the possible failure of negotiations with the IMF, complicated interaction with regulatory and law enforcement agencies.
The CEOs consider the following tasks to be of the highest priority for 2021 in order to improve the investment climate in Ukraine, namely, relaunching the court system, de-oligarchizing the state power, establishing an efficient and independent anti-corruption infrastructure, eradicating bureaucracy, reducing administrative and tax pressure on business, appointing pro-European reformers to public offices, resuming and supporting cooperation with international financial institutions, reforming law enforcement agencies and fighting effectively against smuggling with the help of strengthened fiscalization and development of equal rules of the game for doing business.
