After a tumultuous year of quarantine restrictions, business confidence has returned to pre-pandemic levels, according to a survey conducted by the National Bank of Ukraine (NBU) conducted between June 3 and June 22, 2021.
The business activity expectations index (BAEI), which is calculated on a monthly basis and helps detect trends in economic development, has moved up from 50.5 to 51.6 in June 2021.
According to the index, a value of 50 corresponds to a neutral level, so anything above the neutral level indicates positive expectations for business’ future performance.
This is the highest BAEI since October 2019.
Companies across most of the surveyed sectors are optimistic as shown by the growth in the indices of the construction, industrial, and services sectors. Only companies in the trade sector reported negative expectations for three months running.
The manufacturing sector’s index moved up from 50.8 in May to 52.5 in June, showing the companies’ increasingly confident expectations for the increase of demand for manufactured goods, including exports.
The service sector also has demonstrated an increase in its expectations for positive results and growth with its index moving up from 50.7 in May to 52.3 in June.
The highest index increase with a jump from 49.4 in May to 58.1 in June was seen in the construction sector. Residential housing and non-residential facility construction companies expect a continued increase in demand for their services and an expansion of the industry’s workforce.
Real estate prices have been steadily rising in Kyiv, where the average apartment space per resident in square meters is almost half the European average. Prices are driven up by higher demand for larger spaces, which simultaneously forces growth in the construction industry.
The trading sector was the only one to remain below the neutral performance level for three months in a row with its index dropping from 49.9 in May to 48.2 in June. Trading companies expect a withering of trade turnover and staff numbers.
As the world economy begins to recover, Ukrainian companies across all sectors expect a rise in their selling prices – and for a good reason. A new commodities “supercycle” – a period of prolonged economic growth – is predicted to bring about an increase in government spending on infrastructure across the globe, which in turn will increase the demand for raw materials.
Enter, Ukraine. An active producer of said raw materials whose exports have reportedly jumped 25% in the first five months of 2021 compared to the same period last year, according to the State Customs Service.
Monthly business activity expectations indices are based on the respondents’ replies and comprise of sectoral indices and a composite index describing the country’s economic development over a month. Of the companies polled, 42.1% are manufacturing companies, while the rest are trading or construction companies, or in the services sector; all of the companies surveyed are an even mix of large, medium, and small.
The June 2021 BAEI communicates one thing – a hopeful return to a pre-pandemic state of the Ukrainian market, and room for growth beyond that.
