ResultsРезультати of surveys Business опитувань of VinnitsaOutlook керівників regionSurvey enterprises підприєм managersств м. of Києва Cherkasy regarding і Київської O blasttheir * 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 лише the opinions думки респондентівof respondents – inкерівників Cherkasy 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 Cherkasy Oblast Q2 2020

A survey of companies carried out in Cherkasy oblast in Q2 2020 showed that respondents had positive expectations for the growth of the Ukrainian economy and the performance of their companies over the next 12 months. Respondents reported moderate inflation and depreciation expectations.1

The top managers of companies said they expected that over the next 12 months:

. the output of Ukrainian goods and services would increase (this was expected by respondents from only one region): the balance of expectations was 10.5% compared to 15.8% in Q1 2020 (Figure 1). Respondents across Ukraine expected a drop in the output, the balance of responses being (-34.1%)

. prices for consumer goods and services would grow moderately: a total of 73.7% of respondents expected the inflation rate to be lower than 7.5% compared with 54.9% across Ukraine. Respondents referred to the hryvnia exchange rate as the main inflation drivers (Figure 2)

. the domestic currency would depreciate at a moderate pace: a total of 47.4% of respondents expected the hryvnia to weaken against the US dollar compared with 35.3% in the previous quarter, with the figure across Ukraine being 68.2%

. the financial and economic standings of their companies would improve: the balance of expectations was 16.7% compared with 11.8% in the previous quarter. 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 rise: the balance of responses was 15.8% compared with 10.5% in Q1 2020. External sales were expected to decrease (the balance of responses was (-14.3%) compared with 14.3% 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 would decrease: the balance of responses was (-5.9%) compared to 0.0% in the previous quarter. Investment in machinery, equipment and tools was expected to remain unchanged: the balance of responses was 0.0%. Across Ukraine, respondents expected investment spending to decrease, the balances of responses being (-16.1%) and (-10.5%), respectively

. staff numbers at their companies would decrease: the balance of responses was (-16.7%) compared with (-5.3%) in Q1 2020 and (-17.3%) across Ukraine (Figure 4)

. purchase prices would rise at a faster pace (the balance of responses was 52.6%) than selling prices (the balance of responses was 10.5%) (Figure 6). The growth in prices would decelerate. Raw material and supplies prices were cited as the main selling price driver (Figure 7). The respondents said that the impact of demand increased significantly

. per-unit production costs and wage costs per staff member would grow at a moderate pace: the balances of responses were 29.4% and 16.7%, respectively, compared with 38.9% and 63.2% in Q1 2020 (Figures 4 and 6). Raw material and supplies and weak demand were named as the main drag on the ability of companies to boost production (assessments of their impact increased) (Figure 5). The influence of the unstable political situation increased significantly. Respondents expected an increase in their borrowing needs in the near future (Figure 8). All of the respondents planning to take out corporate loans opted for the domestic currency ones. Respondents said that lending standards had tightened (Figure 9). Companies cited high loan rates as the main factor that deterred them from taking out corporate loans (Figure 10).

A total of 84.2% of respondents said 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 (-31.6%) compared with 5.6% in Q1 2020 and (-11.6%) across Ukraine. . Stocks of finished goods increased and were at a level higher than the normal one: the balance of responses was 8.3% compared with (-8.3%) in Q1 2020. . Companies in the region had a sufficient amount of unutilized production capacity to meet any unexpected rise in demand: the balance of responses was 29.4% compared with 22.2% in Q1 2020.

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

2 Business Outlook Survey of Cherkasy 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,%

Other Small (up to 50 Exporters only 15.8 Agriculture persons) Neither exporters 15.8 Large (more Transport and 26.3 15.8 nor importers than 250 communications 63.2 persons) 10.5 47.4 Both exporters and importers 21.1

Wholesale and retail trade 15.8 Energy and Manufacturing Medium (from 51 and up water supply 26.3 to 250 persons) 5.3 36.8 . Period: 5 May through 2 June 2020. . A total of 19 companies were polled. . A representative sample was generated on the basis of the following economic activities: agriculture and manufacturing industry. 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 Cherkasy 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 25.0 22.2 0.0 11.8 16.7

Total sales 21.1 11.1 -15.8 10.5 15.8

Investment in construction 0.0 12.5 0.0 0.0 -5.9

Investment in machinery, equipment and tools 14.3 12.5 17.6 7.7 0.0

Staff numbers -10.5 -16.7 -26.3 -5.3 -16.7

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 Cherkasy 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 60 100 100

80 80 Exchange rate

60 60 Production costs

40 40 Household income 20 20

0 0 Tax changes

-20 -20 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 Q2 20 Q1 20 Balance of expectations (right scale)

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 40 80 30

20 60

10 40 0

-10 20

-20 0 -30 -20 -40 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 Weak demand

High raw material and 80 supplies prices Political situation 60 Tax burden

Qualified staff shortage 40

High energy prices 20 Exchange rate fluctuations

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

4 Business Outlook Survey of Cherkasy Oblast Q2 2020

Figure 7 Figure 8

Expectations of borrowing needs and intentions to Assessment of selling price drivers, take out corporate loans in the near future, percentage of responses percentage of responses 0 20 40 60 80 75 75 Raw material and supplies prices 60 60 Energy prices 45 45 Demand

30 30 Wage costs

Exchange rate 15 15

Tax burden 0 0 Q2 19 Q3 19 Q4 19 Q1 20 Q2 20 Global prices Percentage of respondents who intend to take out loans Borrowing needs (balance of responses, right scale) Domestic competition Q2 20 Q1 20

Loan rates

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 50 0 20 40 60

40 High loan rates

30

Collateral requirements 20

Complicated paperwork 10

Uncertainty about ability to 0 meet debt obligations as Q2 19 Q3 19 Q4 19 Q1 20 Q2 20 they fall due *The dif f erence between the percentages of responses “tightened” and “eased” Q2 20 Exchange rate fluctuations Q1 20

Other funding sources

5