The worsening security situation and labor shortages are holding back business activity, leading to continued negative expectations, according to the National Bank of Ukraine (NBU).
In July 2024, the Business Activity Expectations Index (BAEI) rose to 44.4 from 43.6 in June. This increase was driven by improved adaptability to energy supply issues, stable operation of the maritime corridor, stable inflation expectations, and easing currency restrictions, the NBU stated.
However, key restraining factors include the risk of attacks on critical infrastructure, deteriorating currency expectations, and labor shortages.
The construction sector showed notable improvement in its economic outlook due to seasonal activity increases and budget funding for housing, infrastructure, roads, and highways, with the sector index rising to 49.6 in July from 43.0 in June.
Industrial enterprises maintained cautious expectations due to electricity shortages, intensified fighting, and a lack of skilled workers, with the sector index at 45.8 in July compared to 45.5 in June.
Service sector businesses moderated their negative assessments despite significant energy supply disruptions, reduced demand, and increased business expenses, with the sector index rising to 42.5 in July from 39.7 in June.
Trade sector expectations slightly worsened due to prolonged power outages and worsening currency expectations, with the sector index falling to 44.7 in July from 46.4 in June.
The labor market remains challenging. Only construction sector managers expected to maintain their workforce at previous levels. Respondents from industry and services anticipated a reduction in staff, although at slightly lower rates than the previous month. Retail sector managers provided the most pessimistic outlook.
