What are the forecasts for Ukrainian economy and business environment?
68% of surveyed business representatives have already fully or partially returned to the office. Regarding the staff policy, 60% of the surveyed entrepreneurs plan to keep the company’s staff unchanged, 28% are thinking about downsizing, another 13% are looking for new employees. Over the next six months, 69% of respondents plan to preserve the same salary level, 21% think about a salary reduction, and only 9% are thinking about a salary increase. The express survey was conducted among the participants of the EBA Business Outlook: Crisis Management Lessons, organized on June 25.
During the event, the heads of EBA member companies shared their anti-crisis decision-making experience and the forecasts for Ukraine’s economy in the near future.
Tomas Fiala, CEO of Dragon Capital, EBA President, believes that due to consistent fiscal and monetary policy, Ukraine will emerge from this turbulent situation with less economic losses than it was during previous crises. Thus, the GDP is expected to drop by approximately 7% in 2020, while during the previous two crises the economic decline reached 15-16%. Now there is a current account surplus, as imports fell by 30% and exports by only 6% due to the large share of agricultural exports. In general, the company’s forecasts for Ukraine’s economy are moderately optimistic. It is expected that in 2021 the country’s GDP will grow by 4%. To maintain the positive dynamics, it is necessary to support the independent policy of the NBU, establish a transparent procedure for the privatization of state-owned enterprises, and ensure political stability.
Gosta Ljungman: “It’s important to keep both people and the economy healthy.” Thus, the IMF Resident Representative in Ukraine also noted that there will be slight improvements in the economic situation next year. However, even at the end of 2021, the GDP will be about 6% lower than in 2019. According to preliminary estimates, Ukraine will return to the pre-quarantine level only in 2024 Also, Mr. Ljungman listed the main priorities in Ukraine’s cooperation programs with the IMF. Among the long-term goals – the fight against corruption, reforming the law enforcement agencies, namely the Tax and Customs Services by creating a single legal entity, implementing a judicial reform, promoting the privatization process, developing the financial sector. It is important to combine effective short-term measures aimed at rapid economic recovery with the preservation of long-term structural reforms. Ukraine is also expected to resume fiscal consolidation, which will allow stabilizing public finances after the crisis in the near future.
Oleksandr Pysaruk, Chairman of the Board of Raiffeisen Bank Aval, agreed that the banking system was better prepared for this crisis than in previous years due to the NBU ensuring financial stability. Before the crisis, all large banks were actively implementing online customer service channels. Therefore, when the quarantine started, banks were able to quickly switch to remote operation. Thus, Raiffeisen Bank Aval needed only two weeks to organize remote work for 7.5 thousand employees. According to Mr. Pysaruk, the new reality requires companies to effectively mix online and offline modes of operation and review the existing distribution models. Currently, the bank has started a gradual resumption of its online activities which includes 4 stages. According to the plan, no more than 60% of employees will return to the office. It was also noted that there was no significant increase in the number of bankruptcies among bank’s corporate clients, but the situation may change in the fall after the end of the credit vacation.
Andriy Gorokhov, CEO of UMG Investments, talked about the situation across various areas of his investment portfolio, represented by 11 companies that export products to more than 40 markets around the world. Thus, the decline in profits affected all industries, but the agricultural sector will be able to recover to pre-crisis levels this year. The fertilizer industry decreased by 30-40% in monetary terms, the metallurgical industry – by 10%, railway logistics – by 50%. The energy sector causes the greatest concern, as it still suffers from the crisis caused by a possible four-fold increase of Ukrenergo’s tariffs, which could negatively affect other areas of the economy. The state infrastructure projects are now looking good, with more than $ 3 billion planned for road construction in 2020. At the same time, due to the uncertainty of the situation, European markets are not ready to import Ukrainian products in large quantities. “In all markets where we sell our products, there is declining demand. There are some companies in our portfolio that have even improved their performance, but the average “drop” is still about 20%. I can say that we expected the worst but now the situation is under control, “Mr. Gorokhov commented.
According to Vasyl Bovdilov, General Director of Unilever Ukraine, the situation on the market of household chemicals is also ambiguous. During the quarantine, the demand for sanitizers, hand hygiene, and cleaning products increased. The crisis has severely hit the cosmetics industry. At the same time, the company was able to quickly adapt to remote work, providing active support to its employees during the crisis. Also, Unilever Ukraine has helped hospitals and participated in a number of social initiatives with UNICEF and the Ministry of Education. In total, the company spent three million hryvnias on charity.
According to Dmytro Sholomko, CEO of Google Ukraine, the current crisis has fueled the development of e-commerce in the country. So, for the last three months, the volume of online sales has grown by 270%. Besides e-commerce, the field of automation and electronic services were given a big boost. At the same time, the consumer sentiment of Ukrainians has changed significantly during the quarantine and it has not yet fully established.