Optimism Despite Uncertainty: Results of First Monthly Survey of Ukrainian Enterprises

Assistants_and_George_Frederic_Watts_-_Hope_-_Google_Art_Project
George Frederick Watts "Hope" // Public domain

After the deterioration of all performance indicators and, sometimes, shutdowns in March and April 2022, Ukrainian manufacturing enterprises will resume production in the next 1-2 months. These are the results of the first monthly enterprise survey conducted by the Institute for Economic Research and Policy Consulting in May 2022.

The need for comprehensive information on the economic situation is important for economic policy during the full-scale Russian invasion of Ukraine, which led to the seizure of Ukrainian territories, terror against civilians, and destruction of industrial facilities and infrastructure in Ukraine.

Businesses Suffered from the War

The first survey results showed that Ukrainian businesses had suffered significantly from the war. One in three companies surveyed reported a reduction in production more than twice compared to the pre-war period, and 10% of respondents ceased their operations.

Negative trends have been going on for at least two months, with the situation worsening in April than in March. Enterprises reduced production and employment. The share of those enterprises where production decreased in April compared to March 2022 is more than six times higher than those where production increased (70.5% and 11.8%, respectively). And the balance indicator — the Index of changes in production — is equal to -0.55. The situation is similar to employment.

In comparison, the type of reaction of enterprises in the case of employment is somewhat different. The balance indicator is -0.54, but the nature of this balance is slightly different. The share of those who reported a reduction in employment is 57.8%. The percentage is less than those who reported a decrease in production.

At the same time, only 1.9% of respondents reported an increase in employment. This share is also less than the share of enterprises that said production growth. Such a difference means that enterprises are more conservative in their behavior in reducing work compared to the reduction of production.

Uncertainty Characterizes the Economic Situation

The survey results show that in addition to falling production, another critical indicator of the impact of the war on the economic situation in Ukraine is uncertainty. About half of the respondents could not predict changes in the financial and economic situation (45.0%) and the overall economic situation in the country (47.7%).

The respondents who could not forecast the next 1-2 months to change the primary production and financial indicators vary depending on the indicator, from 14.7% (number of employees) to 27.8% (receivables). There is also a high level of uncertainty regarding debts and inventories of finished products.

Small Businesses Have Less Margin of Safety

As with any crisis, small businesses are more responsive. In particular, the smallest values ​​of the Index of changes in production (-0.67) were recorded for small enterprises. Medium and large companies also reduced production, but at a slower pace (balance sheet values ​​of -0.59 and -0.45, respectively).

The same trends characterize employment, but the difference between small and large businesses is not so significant (-0.61 and -0.55). Among small enterprises, the share of those who could not forecast the changes in the general economic situation in the country in the next six months is 59.3%, and among large enterprises, such share is 50.7%.

Uncertainty on the financial and economic situation at the enterprise largely depends on the firm’s size. Among micro-enterprises, 56.2% could not forecast a change in this indicator in six months, small – 58.2%, among medium-size companies – 48.0%, and among large one – 42.9%

Expectations That Give Hope

Expectations for the six-month perspective are positive, although there is a high level of uncertainty, as noted above. The share of “optimists” (40%) prevails over the percentage of “pessimists” (30.6%); as a result, the Index of the expected financial and economic situation is 0.07. Forecasts for the next six months on the financial and economic situation of enterprises are also positive – the percentage of “optimists” (38.7%) exceeds the share of pessimists (35.9%).

Short-term expectations are also optimistic. Thus, the share of enterprises where production growth is planned exceeds those whose production is expected to decrease (32.2% and 17.9%, respectively). As a result, the value of the Index of expected changes in production is positive and is 0.12.

Employment expectations are more moderate (the Index of expected changes is 0.01), but after the previous fall, those give hope for future recovery. Most respondents do not plan to change employment (69.9%). The share of those who expect growth is slightly higher than the share of those who expect a decrease in employment – 15.9% and 14.1%, respectively.

About the Survey

To quickly collect information on the current state of the economy at the enterprise level, the Institute for Economic Research and Policy Consulting has launched a monthly survey of enterprises using the Business Tendency Survey (BTS) approach. The BTS methodology is designed to assess the “grass root ” situation based on the judgments and expectations of key economic agents – entrepreneurs and business leaders.

The field phase of the first survey took place from April 28 to May 7, 2022. Enterprises compared the situation in April 2022 with March 2022, or (where indicated) with the pre-war period (up to February 24, 2022). Respondents gave forecasts for the next 1-2 months of operation of enterprises.


Read full survey in Ukrainian: http://www.ier.com.ua/ua/institute/news?pid=6919


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Oksana Kuziakiv
The Institute for Economic Research and Policy Consulting - Kyiv