However, challenges such as slower growth in inflation and exchange rates remain. The National Bank of Ukraine (NBU) released a report based on a survey of 660 enterprises conducted in the fourth quarter of 2024, highlighting key trends and future projections.
Positive Trends in Business Activity
The Index of Business Enterprises (IDO) rose to 101.8% in the fourth quarter of 2024, up from 100.6% in the third quarter. This increase indicates a steady improvement in business confidence and activity. Participants in the study maintained positive assessments regarding their obligations to sell products and projected robust investments in machinery, equipment, and inventory. Additionally, there was a reduction in negative perceptions related to business operations.
Despite these positive indicators, respondents expressed concerns about the future financial and economic state of their enterprises. This pessimism is largely attributed to the ongoing military conflict, which imposes significant production obligations on businesses, further straining their resources and operations.
Macroeconomic Outlook
Businesses assessed the overall production of goods and services for the upcoming twelve months with a balance indicator of -1.4%, an improvement from -3.7% in the third quarter. Enterprises anticipate changes in production obligations, particularly within:
- Additional Industries: Including daily life essentials, trade, transport, and communications across ten regions.
- Small Businesses: Facing unique challenges in scaling and sustaining operations.
- Import-Only and Domestic-Only Enterprises: Struggling with limited market reach and resource allocation.
There is a noticeable increase in production obligations within the processing industry, rural governance, water supply, and energy sectors, especially among large and medium-sized enterprises involved in external operations.
Inflation and Exchange Rate Projections
Respondents forecast that inflation will rise to 10.3% in the next twelve months, up from 9.7% the previous year. Additionally, the exchange rate is expected to reach 44.42 UAH/USD, slightly adjusted from 43.72 UAH/USD.
Production and Development Challenges
While some sectors remain optimistic, others face significant hurdles:
- Construction, Trade, Transport, and Additional Industries: Experienced a decrease in production volumes due to economic uncertainties and logistical challenges.
- Processing Industry, Rural Governance, Energy, and Water Supply: Displayed more optimistic sentiments, with ongoing investments and development projects.
- Foreign Investment: Businesses receiving foreign investment are projected to increase their liabilities over the next year, reflecting both growth opportunities and financial commitments.
Employment and Financial Strategies
The survey revealed that businesses are increasingly allocating funds for permanent jobs and hiring more workers. However, there is a growing trend of increased expenses per hired employee, indicating rising labor costs. The percentage of businesses planning to take out bank loans remained stable at 35%, with a strong preference for loans denominated in hryvnia (84.8%) compared to 81.9% in the previous quarter.
Entrepreneurship and Market Dynamics
According to the State Statistics Service, as of June 1, 2025, the number of registered personal entrepreneurs (FOP) in Ukraine reached 1,707,000. This reflects a continued growth in entrepreneurial activities despite economic and geopolitical challenges.
Conclusion
Ukraine's business landscape exhibits a blend of optimism and caution. While there are positive signs of growth and increased investment, the persistent challenges of inflation, exchange rate volatility, and the ongoing conflict continue to impact the economic outlook. Businesses are adapting by seeking foreign investment, investing in workforce development, and preparing for future economic conditions. Strategic measures and continued support from both domestic and international partners will be crucial in sustaining this growth trajectory and overcoming the remaining obstacles.
About the National Bank of Ukraine (NBU):
The National Bank of Ukraine is the country's central bank, responsible for implementing monetary policy, ensuring financial stability, and overseeing the banking sector. It plays a pivotal role in shaping Ukraine's economic landscape through research, regulation, and strategic initiatives.
