ResultsРезультати of surve Business опитуваньys of VinnitsaOutlook керівників regionSurvey enterprises підприємств managers м.of ChernivtsiКиєва regarding і Київської Oblast their * області щодоbusiness їх ділових expecta очікувань*tions * Q4 2020 I квартал 2018Q2 2018року

*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 Q4 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 Q4 2020

A survey of companies carried out in Chernivtsi oblast in Q4 2020 showed that respondents expected that the output of Ukrainian goods and services would decrease at a faster pace over the next 12 months on the back of a tighter quarantine. At the same time, they had positive expectations for the performance of their companies. Respondents reported moderate inflation expectations and higher depreciation expectations. The top managers of companies said they expected that over the next 12 months:

. the output of Ukrainian goods and services would drop significantly: the balance of expectations was (-36.4%) compared with (-9.1%) in Q3 2020 and (-24.4%) across Ukraine (Figure 1)

. prices for consumer goods and services would grow at a faster pace: a total of 60.0% of respondents expected that inflation would not exceed 7.5% compared with 81.8% in the previous quarter and 49.2% across Ukraine. Respondents referred to the exchange rate and production costs as the main inflation drivers (Figure 2)

. the domestic currency would depreciate at a fast pace: 80.0% of respondents (compared with 90.0% in the previous quarter) expected the hryvnia to weaken against the US dollar, the figure across Ukraine being 87.1%

. the financial and economic standings of their companies would improve: the balance of expectations was 9.1% (as in the previous quarter). Companies across Ukraine expected their financial and economic standings to improve slightly (1.3%) (see Table)

. total sales would decrease: the balance of responses was (-18.2%) compared with 9.1% in Q3 2020. Respondents also expected a decrease in external sales, the balance of responses being (-50.0%) compared with 0.0% in Q3 2020. Overall, companies across Ukraine expected sales to increase moderately, the balances of responses being 7.1% and 3.8% respectively

. investment both in construction and in machinery, equipment, and tools would remain unchanged: the balances of responses were 0.0% for each (compared to 0.0% and (-10.0%) in Q3 2020). Across Ukraine, the balances of responses were (-4.5%) and 3.8% respectively

. staff numbers would decrease at a faster pace: the balance of responses was (-18.2%) compared to (-10.0%) in Q3 2020 and (-9.9%) across Ukraine (Figure 4)

. the growth in purchase and selling prices would accelerate significantly: the balances of responses were 81.8% and 72.7% respectively (compared with 45.5% and 36.4% respectively in Q3 2020) (Figure 6). Energy prices and raw material and supplies prices were referred to as the main selling price drivers (Figure 7)

. per-unit production costs and wage costs per staff member would grow rapidly: the balances of responses were 80.0% and 90.9% respectively, compared with 54.5% and 81.8% in Q3 2020 (Figures 4 and 6). Respondents referred to high energy prices as the main drag on the ability of their companies to boost production (the impact of these factor was reported to have increased) (Figure 5). The companies that planned to take out corporate loans opted for domestic currency loans only. High interest rates and collateral requirements were cited as the main deterrents to taking out corporate loans (Figure 9). All of the respondents said that they had encountered no difficulties in effecting transactions with funds deposited in bank accounts (96.9% 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 0.0% in the previous quarter and (-3.2%) across Ukraine. . Finished goods stocks were assessed at a level higher than the normal one: the balance of responses was 20.0% compared with 0.0% in Q3 2020

. Companies had a sufficient amount of unutilized production capacity to meet any unexpected rise in demand: the balance of responses was 10.0% compared to 27.3% in Q3 2020.

2 Business Outlook Survey of Chernivtsi Oblast Q4 2020

Survey Details1,2

Respondents in terms of business Respondents in terms of main economic Respondents in terms of company size based on activities,% activities, % staff number, % Exporters only Other Small (up to 50 9.1 18.2 Large (more persons) Neither exporters Agriculture Imports only than 250 18.2 nor importers 18.2 9.1 Transport and persons) 72.7 communications 18.2 9.1 Both exporters Manufacturing and importers 18.2 9.1

Wholesale and retail trade Energy and Medium (from 51 and up 18.2 Construction water supply to 250 persons) 9.1 9.1 63.6 . Period: 5 November through 24 November 2020. . A total of 11 companies were polled. . No economic activity was able to generate a representative sample.

Business Business Outlook outlook Index index for for Next next 12 12 Months months in in Termsterms of of regions,% Oblasts3, %

Riv ne Oblast Voly n Oblast Chernihiv Oblast 106.9 103.7 Zhy tomyr 92.2 Sumy Oblast Oblast 98.8 106.2 Ky iv and Lv iv Oblast Ky iv Oblast 100.6 Poltav a Oblast Kharkiv Oblast Ternopil Oblast 107.7 95.4 97.2 114.7 Khmelny tskyi Cherkasy Luhansk Oblast Iv ano-Frankivsk Oblast Vinny tsia Oblast Zakarpattia Oblast 89.2 Oblast 98.9 Oblast 105.3 no data 106.5 Donetsk 84 Cherniv tsi Oblast Kirov ohrad Oblast Dnipropetrov sk Oblast Oblast 94.5 79.9 92.5 no data Zaporizhia My kolaiv Oblast Odesa 87.3 Oblast Oblast 102.2 80.8 Kherson Oblast 104.7 minimum 79.9 1 quartile 92.3 1 quarter 2 quartile (median) 98.8 Crimea 2 quarter 3 quartile 105.2 no data 3 quarter maximum 114.7 4 quarter Ukraine 99.6

*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 Q4 19 Q1 20 Q2 20 Q3 20 Q4 20

Financial and economic standings 20.0 9.1 0.0 9.1 9.1

Total sales 9.1 9.1 -27.3 9.1 -18.2

Investment in construction 0.0 10.0 -10.0 0.0 0.0

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

Staff numbers -9.1 -20.0 -9.1 -10.0 -18.2

1 This sample was generated in proportion to the contribution of each oblast and each economic activity to Ukraine’s gross value added. 2 Data for totals and components may be subject to rounding effects. 3 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 Q4 2020

Figure 1 Figure 2

Output expectations for next 12 months, Assessment of consumer price drivers, percentage of responses percentage of responses

100 100 0 20 40 60 80 100

80 80 Exchange rate

60 60 Production costs 40 40

20 20 Tax changes 0 0

-20 -20 Global prices

-40 -40 Q4 19 Q1 20 Q2 20 Q3 20 Q4 20 Household income Output will decrease Output will be unchanged Output will increase Supply (availability) of Balance of expectations (right-hand scale) money Q4 20 Q3 20

Budgetary social spending

Figure 3 Figure 4

Companies' economic activity as of the time of the Staff level and wage cost expectations for next 12 survey, balance of responses months, balance of responses 60 100 45 80

30 60

15 40

0 20

0 -15 -20 -30 Q4 19 Q1 20 Q2 20 Q3 20 Q4 20 -40 Q4 19 Q1 20 Q2 20 Q3 20 Q4 20 Financial and economic standings Staff level expectations Wage costs per staff member Finished goods stocks 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 80 100 High energy prices

Exchange rate fluctuations 80

Lack of working assets 60 Weak demand

Tax burden 40

Qualified staff shortages 20 High raw material and supplies prices Political situation 0 Q4 19 Q1 20 Q2 20 Q3 20 Q4 20 Regulatory burden Purchase prices Selling prices Limited availability of loan Per-unit production costs Corruption Q4 20 Insufficient production Q3 20 capacity

4 Business Outlook Survey of Chernivtsi Oblast Q4 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 60 Energy prices

Raw material and supplies 45 prices

Exchange rate 30 Wage costs

Global prices 15

Tax burden 0 Demand Q4 19 Q1 20 Q2 20 Q3 20 Q4 20

Domestic competition Percentage of respondents who intend to take out loans, % Q4 20 Q3 20 Loan rates

Figure 9 Figure 10

Assessment of factors that could deter companies from taking out loans, percentage of responses 0 20 40 60

Collateral requirements

High loan rates

Other funding sources

Uncertainty about ability to meet debt obligations as they fall due

Q4 20 Exchange rate fluctuations Q3 20

Complicated paperwork

5