NBU names riskiest sectors of Ukraine`s economy

Construction, real estate transactions, and utilities are the riskiest and most financially unstable sectors of the Ukrainian economy, according to a financial stability report published by the National Bank of Ukraine (NBU).
”The biggest solvency risks are inherent to the construction, real estate and machine building where the highest debt load and relatively low profitability are observed, or loss. Financially unstable are also companies with a high share of government regulation – the production and supply of energy and gas utilities,” the NBU report says.
According to National Bank, construction and real estate rank second by the volume of debt on loans to the Ukrainian banks – about UAH 120 billion. The share of negative loans is 44%.
The report says the largest increase of operating loss in 2014-2015 was recorded in real estate and construction – over nine months of 2015 it was at almost 30%.
”Companies in these sectors have the highest credit load, at the same time their ability to pay is weak because of the specific industry regulation, which does not stimulate the efficiency of operations, as well as because to the low quality of management of many companies,” says the regulator.
In addition, the NBU suggests that the increase in 2015-2016 of utility rates and energy prices can have a short-term negative impact on the profitability of the companies of a corresponding sector due to the possible deterioration of consumers` payment discipline.
The controller also allows for growth in the number of unfinished and frozen construction objects given the negative circumstances remain in the real estate market in coming years.
”Given the maintained pace of construction, a significant imbalance between supply and demand will form in the primary housing market. In 2015, high level of competition and the fall in effective demand forced the capital`s real estate developers to offer discounts and installment programs. In 2016, the trend is maintained. Under adverse circumstances, the number of unfinished projects and frozen objects will increase,” says the National Bank.
As UNIAN reported earlier with reference to the State Statistics Service, in 2015 the volume of completed housing projects, excluding the temporarily occupied territory of the Autonomous Republic of Crimea and Sevastopol, increased by 13.4% compared to 2014 – up to 11 million square meters.

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