ResultsРезультати of surveys Business опитувань of VinnitsaOutlook керівників regionSurvey enterprises підприєм managersств м.of ChernivtsiКиєва regarding і Київської Oblast their * області щодоbusiness їх ділових expectations очікувань* * Q2 2020 This survey was conducted after theQ2 government 2018 announcedI квартал it would relax 2018 the quarantine року

*Надані результати*This survey є відображенням only reflects лишеthe opinions думки ofреспондентів respondents – in керівників Chernivtsi підприємствoblast (top managers Вінницької of companies) who were polled in Q2 2020, and does not represent NBU forecasts or estimates області в IІ кварталі 2018 року і не є прогнозами та оцінками Національного банку України.

Business Outlook Survey of Chernivtsi Oblast Q2 2020

A survey of companies carried out in Chernivtsi oblast in Q2 2020 showed that respondents expected a drop in the output of Ukrainian goods and services over the next 12 months and had moderate expectations for the performance of their companies over the next 12 months, on the back of the quarantine imposed. Respondents expected an increase in prices and domestic currency depreciation.1 The top managers of companies said they expected that over the next 12 months:

. the output of Ukrainian goods and services would drop: the balance of expectations was (-27.3%) compared with 9.1% in Q1 2020 (Figure 1) and (-34.1%) across Ukraine

. prices for consumer goods and services would grow: a total of 54.5% of respondents expected that inflation would not exceed 7.5% compared with 54.9% across Ukraine. Respondents referred to production costs and the hryvnia exchange rate as the main inflation drivers (Figure 2)

. the domestic currency would depreciate: 54.5% of respondents (compared with 45.5% in the previous quarter) expected the hryvnia to weaken against the US dollar, the figure across Ukraine being 68.2%

. the financial and economic standings of their companies would remain at their current levels: the balance of expectations was 0.0% compared with 9.1% in Q1 2020. Companies across Ukraine expected a deterioration in their financial and economic standings, with the balance of responses of (-1.8%) (see Table)

. total sales would decrease: the balance of responses was (-27.3%) compared with 9.1% in Q1 2020. Respondents also expected a drop in external sales, the balance of responses being (-66.7%) compared with 0.0% in Q1 2020. Overall, respondents expected sales to decrease slightly across Ukraine, the balances of responses being (-0.1%) and (-0.7)% respectively

. investment in construction and in machinery, equipment, and tools would decrease: the balances of responses were (-10.0%) and (-20.0%), respectively, compared with 10.0% and 0.0% in the previous quarter. The balances of responses across Ukraine were (-16.1%) and (-10.5%), respectively

. staff numbers would decrease: the balance of responses was (-9.1%) compared to (-20.0%) in Q1 2020 and (-17.3%) across Ukraine (Figure 4)

. purchase prices would rise at a faster pace (the balance of responses was 70.0%) than selling prices (the balance of responses was 27.3%) (Figure 6). Raw material and supplies prices and the hryvnia exchange rate were referred to as the main selling price drivers (Figure 7)

. per-unit production costs and wage costs per staff member would grow: the balances of responses were 54.5% and 36.4%, respectively, compared with 54.5% and 90.9% in Q1 2020 (Figures 4 and 6). High raw material and supplies prices were mentioned as the main drag on the ability of the companies to boost production (Figure 5). Companies that planned to take out corporate loans opted for domestic currency loans only. Other funding sources were cited as the main deterrent to taking out corporate loans (Figure 9). All of the respondents reported that they had encountered no difficulties in effecting transactions with funds deposited in bank accounts (96.5% across Ukraine).

Assessments of financial and economic standings as of the time of the survey (Figure 3)

. The current financial and economic standings of companies deteriorated and were assessed as bad: the balance of responses was (-18.2%) compared with 9.1% in the previous quarter and (-11.6%) across Ukraine. . Finished goods stocks had increased significantly and were assessed at a level higher than the normal one: the balance of responses was 50.0% compared with 0.0% in Q1 2020

. Spare production capacity increased. Companies had a sufficient amount of unutilized production capacity to meet any unexpected rise in demand: the balance of responses was 9.1% compared to 0.0% in Q1 2020.

1 This survey was conducted after the government announced it would relax the quarantine.

2 Business Outlook Survey of Chernivtsi Oblast Q2 2020

Survey Details2,3

Respondents in terms of main economic Respondents in terms of enterprise size based Respondents in terms of business activities, % on staff number, % activities,% Exporters only Large (more Other Agriculture 10.0 18.2 than 250 Neither exporters 27.3 persons) Small (up to 50 nor importers 18.2 persons) 80.0 Both exporters 27.3 and importers Manufacturing 10.0 9.1

Transport and Energy and communications water supply 9.1 9.1 Wholesale and Construction Medium (from 51 and up retail trade 9.1 to 250 persons) 18.2 54.5 . Period: 5 through 28 May 2020. . A total of 11 companies were polled. . No economic activity was able to generate a representative sample.

Business outlook index for next 12 months in terms of regions,% Business Outlook Index for Next 12 Months in Terms of Oblasts4, %

Riv ne Oblast Voly n Oblast Chernihiv Oblast 103.1 90.5 Zhy tomyr 85.5 Sumy Oblast Oblast 87.1 125.7 Ky iv and Lv iv Oblast Ky iv Oblast Poltav a Oblast Kharkiv Oblast 105.0 Ternopil Oblast 92.4 81.4 92.1 97.8 Khmelny tskyi Cherkasy Luhansk Oblast Iv ano-Frankivsk Oblast Vinny tsia Oblast Zakarpattia Oblast 89.8 Oblast 102.0 Oblast 93.2 no data 70.9 Donetsk 99.5 Cherniv tsi Oblast Kirov ohrad Oblast Dnipropetrov sk Oblast Oblast 86.7 70.1 85.7 no data Zaporizhia My kolaiv Oblast Odesa 58.8 Oblast Oblast 95.6 88.9 Kherson Oblast 101.5 minimum 58.8 1 quartile 86.0 1 quarter 2 quartile (median) 91.3 Crimea 2 quarter 3 quartile 99.0 no data 3 quarter maximum 125.7 4 quarter Ukraine 90.8 *a quartile is the v alue of the BOI where an ordered sample is div ided into f our equal-sized subgroups **a median is the v alue of the BOI in the middle of an ordered sampled where the sample is div ided into two equal-sized subgroups

Table. The Business Outlook Index of Companies in Chernivtsi Oblast and Its Components

Balances of responses, % Expectations over next 12 months for Q2 19 Q3 19 Q4 19 Q1 20 Q2 20 Financial and economic standings 18.2 20.0 20.0 9.1 0.0

Total sales 22.2 20.0 9.1 9.1 -27.3

Investment in construction 0.0 22.2 0.0 10.0 -10.0

Investment in machinery, equipment and tools 10.0 11.1 -11.1 0.0 -20.0

Staff numbers -18.2 -22.2 -9.1 -20.0 -9.1

2 This sample was generated in proportion to the contribution of each oblast and each economic activity to Ukraine’s gross value added. 3 Data for totals and components may be subject to rounding effects. 4 The business outlook index (BOI) is an aggregate indicator for expected business performance over the next 12 months. It is calculated using the balances of respondents' responses regarding changes in the financial and economic standings of their companies and future economic activity.

3 Business Outlook Survey of Chernivtsi Oblast Q2 2020

Figure 1 Figure 2

Output expectations for next 12 months, Assessment of consumer price drivers, percentage of responses percentage of responses 0 20 40 60 80 100 100 100

80 80 Production costs

60 60 Exchange rate 40 40

20 20 Household income 0 0

-20 -20 Tax changes

-40 -40 Budgetary social Q2 19 Q3 19 Q4 19 Q1 20 Q2 20 spending Output will decrease Output will be unchanged Output will increase Global prices Balance of expectations (right scale) Q2 20 Q1 20

Supply (availability) of money

Figure 3 Figure 4

Economic activity as of the time of the survey, Staff level and wage cost expectations for next 12 balance of responses months, balance of responses 60 100 50

40 80

30 60 20 40 10

0 20 -10 0 -20

-30 -20 Q2 19 Q3 19 Q4 19 Q1 20 Q2 20 -40 Financial and economic standings Q2 19 Q3 19 Q4 19 Q1 20 Q2 20 Finished goods stocks Staff level expectations Wage costs per staff member Unutilized production capacity Figure 5 Figure 6

Assessment of factors that impede output Expectations of producer prices for next 12 growth, percentage of responses months, balance of responses 0 20 40 60 100 High raw material and supplies prices Tax burden 80

High energy prices 60 Exchange rate fluctuations

Qualified staff shortage 40

Weak demand 20 Lack of working assets

Political situation 0 Q2 19 Q3 19 Q4 19 Q1 20 Q2 20 Limited availability of loan Purchase prices Corruption Selling prices Per-unit production costs Regulatory burden Q2 20 Insufficient production Q1 20 capacity

4 Business Outlook Survey of Chernivtsi Oblast Q2 2020

Figure 7 Figure 8

Expectations of intentions to take out corporate Assessment of selling price drivers, loans in the near future, percentage of responses percentage of responses

0 20 40 60 80 100 50

Exchange rate 40 Raw material and supplies prices 30 Wage costs

20 Energy prices

Demand 10

Tax burden 0 Q2 19 Q3 19 Q4 19 Q1 20 Q2 20 Global prices Percentage of respondents who intend to take out loans

Loan rates Q2 20 Q1 20

Domestic competition

Figure 9 Figure 10

Expectations of lending conditions for next 12 Assessment of factors that could deter months, balance of responses* companies from taking out loans, percentage of responses 30 0 20 40 60

20 Other funding sources 10

0 High loan rates

-10 Collateral requirements -20

-30 Complicated paperwork Q2 19 Q3 19 Q4 19 Q1 20 Q2 20 *The dif f erence between the percentages of responses “tightened” and “eased” Q2 20 Exchange rate fluctuations Q1 20

Uncertainty about ability to meet debt obligations as they fall due

5