Business Update: April 6 – Most businesses expect 50% reduction in revenue for 2020

A majority of businesses in Ukraine expect revenue drops of 50% in 2020 because of COVID-19, new research shows. A new Advanter Group survey – reported by Liga.net – has found that most businesses said they were experiencing severe difficulties, and foresee significant losses to their revenues this year because of the spread of coronavirus and quarantine measures implemented across the country. Most representatives of small and large businesses in Ukraine reported that, on average, they will see their incomes cut in half this year. 

The poll also reveals that 28% of enterprises expect revenue decreases over 60% this year. Many businesses said they may not be able to survive the economic pain of COVID-19, with some 38% of enterprises stating they are not able to hold out for more than two months under the current lockdown conditions. Retailers of non-food products, the hotel and tourism sector, education, and restaurants have the bleakest outlook for 2020, the survey shows.

Advanter Group surveyed 458 enterprises in total, including micro, small, medium and large enterprises. Ksenia Golubytska, the owner of Language Lab, a small language school teaching English, Ukrainian, Russian and Chinese, told the Kyiv Post how the COVID-19 lockdown was having an impact on her business.

In March, Ukrainians withdrew UAH 2.7 billion and $19 million worth of cash from the country’s banks.  The National Bank of Ukraine said on April 6 that this represented “significant nervousness” around the security of currency deposits. Large amounts of customers withdrew their cash in the second half of March as quarantine conditions were ramped up. The NBU said that pandemic lockdown measures and economic uncertainty had triggered a brief run on bank deposits. At the same time, however, the NBU says that this trend was weak and short-lived. The regulator has repeatedly stated that the banking sector and the NBU has enough liquidity to maintain economic stability in Ukraine. 

PrivatBank has filed a new lawsuit worth $5.5 billion against its former owners, this time in Cyprus. The new civil suit alleges that amount in damages due to fraud and money laundering, which, according to the bank, were committed by its former shareholders Ihor Kolomoisky and Hennadiy Boholyubov, as well as former first deputy chairman of the board Timur Novikov and two Cypriot companies, PrimeCap (Cyprus) Limited and Duxton Holdings Limited, the bank has reported. PrivatBank was taken over by the Ukrainian state in 2016. Forensic auditors found a $5.5 billion gap in its books, the alleged result of a decade of insider lending. The former owners deny all wrongdoing. 

PrivatBank filed the new lawsuit in Cyprus on April 3 after a Cypriot court issued a document preservation order against PrimeCap, Interfax-Ukraine reports. The bank stated that the lawsuit relates to two sets of operations that, according to the bank, were unlawfully carried out between 2013 and 2016 at the direction of its former owners with the assistance of other defendants and included significant amounts paid to the companies owned and/or controlled by Kolomoisky and Boholyubov. The bank claims that they were fictitious loan agreements, none of which were repaid. 

The combined civil claim for damages against Kolomoisky and Boholyubov has now exceeded $10 billion with interest and fees accruing on a daily basis. State-owned PrivatBank, nationalized by the NBU and Ministry of Finance in 2016, now technically owned by the Ukrainian Cabinet of Ministers, is filing simultaneous suits against its former owners that allege in the UK, US, Israel, and now Cyprus. 

Meanwhile, the Ukrainian parliament’s finance committee will begin considering at least 6,000 amendments to the so-called “anti-Kolomoisky” law.  The banking legislation which, among other things, prevents the return of nationalized banks such as PrivatBank to former owners, is encountering some challenges before its second reading. Lawmaker and finance committee member Yaroslav Zheleznyak writes on Facebook: “We already have about 6,000 amendments to banking law and judging by the pace, the final figure will reach 8,000-8500 amendments (although I still believe in the potential of my colleagues and the figure is more than 10,000).” 

More than 9,000 Ukrainians returned home in the last 24 hours, the State Border Service reported on the morning of Monday, April 6. Despite the coronavirus lockdown and the effective halting of most commercial air traffic, Ukrainian land borders that remain open are evidently still busy: “Over 9,000 citizens of Ukraine were checked-in for entering Ukraine. Over the past day, nearly 5,100 people arrived in Ukraine without their own transport. Vehicles provided by the local authorities and the State Emergency Service were used. In addition, 4,600 people left Ukraine in the past 24 hours, of which 1,400 are foreigners,” reads a report.

Border guards and medics are screening people for COVID-19 as they enter the country, the SBGS has said. Sanitary-quarantine units have been set up and officials are conducting temperature checks and using health questionnaires to look for possible cases of the novel coronavirus, Interfax reported. “Based on the results of… examination by doctors, there were no signs of COVID-19 disease. Informative self-isolation agreements were also drawn up in the prescribed manner… In addition, over the past day three quarantine violators were identified at the checkpoints, which was reported to police officers,” the SBGS stated in a report on April 6.