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Posted On

17
February
2023

SME sentiment worsens, but 76% plan to expand in 2023 – EBA survey

KYIV. Feb 17 (Interfax-Ukraine) – Although the sentiment of small and medium-sized enterprises (SMEs) has worsened, 76% of its representatives plan to expand this year, these are the results of the Small Business Sentiment Index survey for 2022, conducted by the European Business Association (EBA) as part of the Unlimit Ukraine project.

“The survey demonstrates further deterioration in SME sentiment. Thus, the Index fell to 2.4 points out of 5 which is the second lowest value in the history of the study. For comparison, the Index amounted to 2.6 points in 2021 and 2.2 points in 2020,” according to the results of the study, published on Thursday.

According to them, 58% of enterprises are still dissatisfied with the state of affairs in their business, this figure has slightly increased compared to 2021, when there were 52% of them. At the same time, the share of those who are satisfied has decreased – 24% versus 32% a year earlier.

The Association noted that the economic component of the index is estimated worse than all the others: 42% consider it unfavorable, and 29% catastrophic.

“These are the realities of wartime. However, it is worth noting that during the active phase of the coronavirus pandemic, these estimates were even worse – 44% of respondents rated the state of the economy as catastrophic,” the EBA survey noted.

For the second time in the six years of the survey, not only the sentiments but also the expectations among entrepreneurs have deteriorated. Currently, the share of those who forecast that the business situation will continue to deteriorate (38%) exceeds the number of those who expect the situation to improve (33%) in the next six months.

The following factors have the greatest negative impact on business valuations: active hostilities and proximity to the frontline, destruction, shelling, power and communication outages, inaccessible loans, falling consumer demand and decreased purchasing power, logistics challenges, inflation, and tax pressure.

Despite the difficulties, the majority of entrepreneurs, namely 76%, plan to expand their business in 2023. Of these, 28% plan to expand their geography, 26% plan to launch new products, 25% plan to enter foreign markets, and 21% plan to change the number of employees.

The EBA stressed that that the share of credit funds in the SME use has fallen by a factor of three compared to 2021, when 32% of companies relied on them. At the same time, 59% of respondents considered bank lending to be inaccessible or difficult to access, while in 2021 there were 40% of such people.

As for the problems with electricity, 8% of respondents completely stopped their operations due to the shelling, while another 20% temporarily suspended them. Most are adapting, for example, 45% of entrepreneurs change their work schedule and/or change the volume of production or services.

The Small Business Sentiment Index survey has been conducted by the EBA since 2017 as part of the Unlimit Ukraine project. The purpose of the study is cooperation with small and micro-sized businesses, as well as an analysis of growth points that will stimulate its development.

This study was conducted from December 8, 2022 to January 20, 2023, and some 325 individual entrepreneurs took part in it.