«It is tough, but we will get through this»: business forecasts for 2023

22/ 09/ 2022

It has been seven months of the full-scale war based on which businesses can now summarize the first results of 2022, as well as make forecasts for 2023. Thus, on September 20, as part of the EBA Global Outlook autumn meeting, we spoke with the member companies of the European Business Association to find out the expectations and sentiments across the industries. Banking sector Oleksandr Pysaruk. Chairman of the Board of Raiffeisen Bank Aval . The restrained but optimistic sentiments are prevailing among banks, as told by Chairman of the Board of Raiffeisen Bank Aval Oleksandr Pysaruk. At the moment, banks are working without interruption, they have an excess supply of liquidity, so no bankfall is expected. Mr. Pysaruk explained this stable situation by the results of 2014-2015 reforms in the industry that had instilled modern standards of banking supervision, by the actions of the National Bank focused on maintaining macro-stability during the war. Of course, inflation and devaluation have an impact on the economy, but despite these challenges, the NBU is expected to maintain the current discount rate. Macro indicators will depend on how people will return to Ukraine because the war caused a huge wave of migration. The coronavirus pandemic has helped banks become operationally more flexible, digitalized, and in constant touch with customers. Thanks to this, credit discipline during the war is better than in 2008 or 2014. Since the beginning of the russian invasion, Raiffeisen Bank has provided new loans in the amount of more than 9 billion hryvnias. In particular, the bank participates in the state program 5-7-9% and lends to businesses operating in agriculture, energy, healthcare, food, etc. Despite the war situation, 2022 will be profitable for Raiffeisen Bank. Telecommunications Oleksandr Komarov. President of Kyivstar . Under martial law, the largest telecom companies in Ukraine have reduced competition, because now everyone works together for national security. We are talking not only about the launch of national roaming but also about the joint resolution of relevant crisis issues, namely, the restoration of telecommunications in the de-occupied territories. In general, telecom operators do not expect dramatic changes in the near future. According to President of Kyivstar Oleksandr Komarov, the company is currently discussing various possible development scenarios related to the further de-occupation of Ukraine. As for this years results, Kyivstar is optimistic. In the pre-war period, Kyivstar reinvested 19% of annual income in the business, and then one could expect a 3% growth in the industry in terms of subscribers. Everything depends on the return of Ukrainians from abroad because since the beginning of the war there has been a decrease in the subscription number. If the crisis continues, 15 to 20% of the subscriber base may be lost in the long term. Industrial parks Vasyl Khmelnytsky. Founder of UFuture Investment Holding and UNIT.City Innovation Park. An overview of a number of sectors was provided by Vasyl Khmelnytsky, founder of UFuture Investment Holding and UNIT.City Innovation Park. He noted that the situation is tough. Currently, 20% of projects have stopped completely, 60% have become unprofitable, including the Kyiv International Airport named after Igor Sikorsky, and only 20% remained profitable. In particular, the pharmaceutical plant Biopharma reoriented itself to the foreign market and was able to restore income at the level of 5% of the pre-war indicators. As for the UNIT.City innovation park, the occupancy fluctuates at the level of 25%, but the business will withstand this challenge. Mr. Khmelnytsky said that for the development of this project, even before the war, it was possible to attract a loan from the European Investment Bank. In total, the holding invested 180 million in the development of the project, of which 80 million were loan funds, on which UFuture continues to pay interest. According to Mr. Khmelnytsky, the recovery of Ukraine is a long process, and we will be able to see growth only in 15-20 years, and positive changes are already visible in the context of state support for business. The entrepreneur also noted that the key task for Ukraine is the return of talents when the war ends. For this, we need to create competitive conditions so that it is beneficial for people to return. Agrochemistry and seed production Serhii Kharin. Head of business in Eastern Europe, Corteva Agriscience. As a result of russian aggression, Ukraine lost up to 20% of its agricultural territories, which, surely, had a negative impact on the seed and agrochemical markets. According to estimates by Corteva Agriscience, both industries suffered a drop of about 15-17% in dollar terms compared to last year. Such data was shared by Serhii Kharin, Head of business in Eastern Europe, Corteva Agriscience. After the start of a full-scale invasion, Corteva immediately announced the cessation of operations in russia, and later withdrew from the market of the aggressor country. Having ensured the safety of its employees, the company quickly resumed its work. Shipments of seeds to farmers began already at the beginning of March, and later the companys seed factory resumed its work. Corteva has established logistics chains for the import of CCPs and seeds from other plants of the company in the EU and successfully conducted a sowing campaign for the seed production for the 2023 harvest. Among the significant changes are a stricter approach to lending, and an increase in the share of direct sales. From 2023, Corteva expects a certain recovery of the market – up to 5-8% from the current indicators. There are plans to increase seed production in Ukraine. Corteva has already allocated more than 46 million hryvnias for direct support of humanitarian and charitable projects in Ukraine and aims to continue its support, expressing solidarity with the Ukrainian people. Agricultural sector Vyacheslav Chuk. Commercial Director of Astarta-Kyiv. A diversified business model helped Astarta-Kyiv quickly adapt to new working conditions in the first months of a full-scale war. Besides, the internal demand for the companys products and the presence of its own internal processing made it possible to maintain, and in some cases increase production volumes. For example, soybean processing volumes increased by 15%, as told by Vyacheslav Chuk, Commercial Director of Astarta-Kyiv. Subsequently, the company managed to revive exports as well, as the holding believes, its public status also helped in this. Thus, it made it possible to find partners in Europe who help with logistics and implementation. These trade volumes were already sufficient to maintain cyclical production. Currently, Astarta-Kyiv is partially participating in the use of the grain corridor. In general, the war forced Ukrainian businesses to look for alternative logistics routes, which contributed to the development of river transport, namely through the Danube ports. If before they loaded about 20-30 thousand tons every month, now this figure has increased to 1.5 million tons. The European Business Association thanks the speakers for the professional discussion and continues to admire how business in Ukraine continues to work even in the most extreme conditions. So lets hope that the optimistic forecasts come true, and for now lets hold the economic front together!

Banking sector

Oleksandr Pysaruk Chairman of the Board of Raiffeisen Bank Aval

The restrained but optimistic sentiments are prevailing among banks, as told by Chairman of the Board of Raiffeisen Bank Aval Oleksandr Pysaruk. At the moment, banks are working without interruption, they have an excess supply of liquidity, so no “bankfall” is expected. Mr. Pysaruk explained this stable situation by the results of 2014-2015 reforms in the industry that had instilled modern standards of banking supervision, by the actions of the National Bank focused on maintaining macro-stability during the war. Of course, inflation and devaluation have an impact on the economy, but despite these challenges, the NBU is expected to maintain the current discount rate. Macro indicators will depend on how people will return to Ukraine because the war caused a huge wave of migration.

The coronavirus pandemic has helped banks become operationally more flexible, digitalized, and in constant touch with customers. Thanks to this, credit discipline during the war is better than in 2008 or 2014. Since the beginning of the russian invasion, Raiffeisen Bank has provided new loans in the amount of more than 9 billion hryvnias. In particular, the bank participates in the state program “5-7-9%” and lends to businesses operating in agriculture, energy, healthcare, food, etc. Despite the war situation, 2022 will be profitable for Raiffeisen Bank.

Telecommunications

Oleksandr Komarov President of Kyivstar

Under martial law, the largest telecom companies in Ukraine have reduced competition, because now everyone works together for national security. We are talking not only about the launch of national roaming but also about the joint resolution of relevant crisis issues, namely, the restoration of telecommunications in the de-occupied territories. In general, telecom operators do not expect dramatic changes in the near future. According to President of Kyivstar Oleksandr Komarov, the company is currently discussing various possible development scenarios related to the further de-occupation of Ukraine.

As for this year’s results, Kyivstar is optimistic. In the pre-war period, Kyivstar reinvested 19% of annual income in the business, and then one could expect a 3% growth in the industry in terms of subscribers. Everything depends on the return of Ukrainians from abroad because since the beginning of the war there has been a decrease in the subscription number. If the crisis continues, 15 to 20% of the subscriber base may be lost in the long term.”

Industrial parks

Vasyl Khmelnytsky Founder of UFuture Investment Holding and UNIT.City Innovation Park

An overview of a number of sectors was provided by Vasyl Khmelnytsky, founder of UFuture Investment Holding and UNIT.City Innovation Park.

He noted that the situation is tough. Currently, 20% of projects have stopped completely, 60% have become unprofitable, including the Kyiv International Airport named after Igor Sikorsky, and only 20% remained profitable. In particular, the pharmaceutical plant Biopharma reoriented itself to the foreign market and was able to restore income at the level of 5% of the pre-war indicators.

As for the UNIT.City innovation park, the occupancy fluctuates at the level of 25%, but the business will withstand this challenge. Mr. Khmelnytsky said that for the development of this project, even before the war, it was possible to attract a loan from the European Investment Bank. In total, the holding invested 180 million in the development of the project, of which 80 million were loan funds, on which UFuture continues to pay interest. According to Mr. Khmelnytsky, the recovery of Ukraine is a long process, and we will be able to see growth only in 15-20 years, and positive changes are already visible in the context of state support for business.

The entrepreneur also noted that the key task for Ukraine is the return of talents when the war ends. For this, we need to create competitive conditions so that it is beneficial for people to return.

Agrochemistry and seed production

Serhii Kharin Head of business in Eastern Europe, Corteva Agriscience

As a result of russian aggression, Ukraine lost up to 20% of its agricultural territories, which, surely, had a negative impact on the seed and agrochemical markets. According to estimates by Corteva Agriscience, both industries suffered a drop of about 15-17% in dollar terms compared to last year. Such data was shared by Serhii Kharin, Head of business in Eastern Europe, Corteva Agriscience.

After the start of a full-scale invasion, Corteva immediately announced the cessation of operations in russia, and later withdrew from the market of the aggressor country. Having ensured the safety of its employees, the company quickly resumed its work. Shipments of seeds to farmers began already at the beginning of March, and later the company’s seed factory resumed its work. Corteva has established logistics chains for the import of CCPs and seeds from other plants of the company in the EU and successfully conducted a sowing campaign for the seed production for the 2023 harvest. Among the significant changes are a stricter approach to lending, and an increase in the share of direct sales. From 2023, Corteva expects a certain recovery of the market – up to 5-8% from the current indicators. There are plans to increase seed production in Ukraine. Corteva has already allocated more than 46 million hryvnias for direct support of humanitarian and charitable projects in Ukraine and aims to continue its support, expressing solidarity with the Ukrainian people.

Agricultural sector

Vyacheslav Chuk Commercial Director of Astarta-Kyiv

A diversified business model helped Astarta-Kyiv quickly adapt to new working conditions in the first months of a full-scale war. Besides, the internal demand for the company’s products and the presence of its own internal processing made it possible to maintain, and in some cases increase production volumes. For example, soybean processing volumes increased by 15%, as told by Vyacheslav Chuk, Commercial Director of Astarta-Kyiv.

Subsequently, the company managed to revive exports as well, as the holding believes, its public status also helped in this. Thus, it made it possible to find partners in Europe who help with logistics and implementation. These trade volumes were already sufficient to maintain cyclical production. Currently, Astarta-Kyiv is partially participating in the use of the “grain corridor”.

In general, the war forced Ukrainian businesses to look for alternative logistics routes, which contributed to the development of river transport, namely through the Danube ports. If before they loaded about 20-30 thousand tons every month, now this figure has increased to 1.5 million tons.

The European Business Association thanks the speakers for the professional discussion and continues to admire how business in Ukraine continues to work even in the most extreme conditions. So let’s hope that the optimistic forecasts come true, and for now let’s hold the economic front together!