Business Update – March 11: Coronavirus measures, businesses prepare for 3-week slowdown

Ukraine is prepared for a financial crisis or a coronavirus epidemic, according to Ukrainian Prime Minister Denys Shmygal. In a televised statement on March 11, the new leader of Ukraine’s government outlined the measures that officials were taking to contain and combat both crises, which have dominated global headlines for weeks.

Businesses in Ukraine brace for three weeks of economic slowdown as the country introduces a nationwide quarantine, a set of emergency measures put into action by the government on March 11. Authorities are taking steps that will see millions of people stay home: starting on March 12, Ukraine closes all its schools, nurseries, colleges and universities and bans mass events to prevent the spread of COVID-19, which currently has one reported case in Ukraine. The closures are expected to have a knock-on effects across the Ukrainian economy.

All gatherings of over 200 people are prohibited. Until April 3, movie theaters and some other cultural venues will reportedly need to cancel screenings and exhibitions. Entertainment centers will be closed, and shopping malls are to implement tighter security and controls. However, during a press briefing on March 11, Ukrainian Prime Minister Denys Shmygal admitted that the government would be unable to prevent “spontaneous gatherings” of more than 200 people.

Public transport in Kyiv will work as usual, but will be treated with special disinfectants twice a day, officials have said. The first deputy head of the Kyiv city state administration, Mykola Povoroznyk, told Ukrainian media it would be business as usual, except for the more regular cleanings. Ukrainian cities are also heavily reliant on an extensive network of privately-owned hired cars operated by Uber, Uklon and Bolt, as well as taxi buses called marshrutkas. It is not clear if they will also be disinfected regularly by the authorities.

Uber has said it will pay compensation to any drivers infected with the novel coronavirus or suspected of being infected. The online taxi booking service committed to paying cash compensation for 14 days of quarantine for its drivers, the firm stated. Several Uber drivers in the U.S., the U.K. and Mexico have already received payments like this and the company is now rolling it out worldwide.

Ukraine has limited flights into and out of the country as a precautionary measure. Additionally, 170 of the country’s 219 border checkpoints have been closed. The 49 remaining crossings are now setting up quarantine facilities. The novel coronavirus has been detected in 119,000 people and killed 4,290 people worldwide. Governments have faced criticism for slow reaction times and weak preventative measures to hinder the epidemic.

Sporting events like soccer matches can take place in Ukraine, but without spectators, Ukrainian lawmakers said. The Kyiv Half Marathon race this week has been canceled, and some movie theaters expressed confusion to the Kyiv Post at the time of publication, saying they did not know whether they had to close their doors or not. Comments by the prime minister during his March 11 press briefing seemingly suggested that screenings with less than 200 viewers may be able to take place.

The government has not yet announced any specific economic stimulus or measures to protect the Ukrainian economy or its population. In comparison, the worst affected countries have slashed interest rates and provided debt and mortgage relief, loans to small companies and paid sick leave for affected workers. Three weeks of restricted closures and partial economic slowdown in Ukraine will likely mean lost wages for some Ukrainians, who only earn on average $460 per month. Parents will need to stay home with children or arrange for childcare. Many businesses expect less footfall because public gatherings are limited, while specific sectors are already complaining of losses.

PM Shmygal did say that he had a meeting with President Volodymyr Zelensky to discuss financial stability amid the crises. He admitted that measures in place would result in economic losses, but that the government would “count them later” while prioritizing public health. Ukraine is economically stronger now than it was in 2008, he said, hinting that another global economic crisis may be looming. The country is ready, the PM affirmed.

Hotel occupancy is down across Ukraine, insiders have told the Kyiv Post. There have been a significant amount of cancellations at hotels due to conferences being called off, with groups of international travelers staying home instead, hospitality executives said, adding that current crises will affect travel and leisure worldwide for the next six months.

Four major business conferences in Ukraine are being postponed because of health concerns. Dragon Capital has postponed its investor conference, scheduled for March 19, and three other major events in March and April for investment, IT, and space tech have been postponed until later in the year.

A predicted decline in worldwide GDP would seriously impact the leisure and tourism business, predicted Jesper Henrikson, former general manager of Radisson hotels in Ukraine, now an independent advisor. Billions have already been wiped off the balance sheets of airlines, hotel companies, cruise providers and other leisure sector companies. “But I will not give up – and will continue to push for investment into Ukrainian hospitality and tourism,” he said.

IT companies in Ukraine are worried but see an opportunity too. Startup CEO Lidiya Terpel told the Kyiv Post that some young companies are missing out on vital conferences, competitions and events abroad, canceled because of the virus. Andrey Kolodyuk, a founder of Aventures Capital, said there is a silver lining, and that coronavirus will push the global economy much faster toward automation. The IT sector, which thrives in Ukraine, can benefit.

The so-called stay-at-home economy is already weathering the storm better than some businesses. “Online and digital companies like DivanTV and Netflix will benefit as people switch from cinemas to online TV and entertainment,” Kolodyuk said, adding that grocery and goods delivery firms will prosper, as will online gaming, gambling, education and the providers of e-books.

Ukrainian firms have started asking their employees to work from home. “As this outbreak pushes more companies to work remotely, this could create more openness for running remote teams in a positive way,” said Andreas Flodstrom, CEO of the Swedish IT company Beetroot, which is highly active in Ukraine. Elsewhere, major companies are doing the same where possible, as a measure to protect their employees, maintain their work and prevent the virus’ spread.

International companies may begin looking to Ukraine for more cost-efficient solutions if a global economic downturn manifests, Flodstrom said. “Ukraine is very well positioned, these effects come with a bit of a delay though,” he said, referencing the effects of previous global market crises.

The National Bank of Ukraine (NBU) has sold a record high of $270 million on the interbank forex market. Following the events of Black Monday, the NBU had a sell-off worth $270 million on foreign exchange markets on March 10, responding to the high demand for currency, which is linked to worsening moods of financial market players over coronavirus and the Russia-Saudi oil dispute, the NBU stated on its Facebook page. “Almost the entire amount was sold in the morning (as of 13:00 on March 10 the NBU had sold $250 million), and after lunch, the situation on the foreign exchange market was relatively calm and did not require significant intervention from the NBU,” the central bank stated.

Ukraine also saw a near 16% decrease in foreign exchange earnings on ferrous metal exports in January-February, the State Fiscal Service has reported. Metal companies here saw a fall of 15.8% on foreign currency revenues from their exports, dropping to $1.4 billion in the two month period, lower than 2019. During the same period, imports of metal products grew by 14.2%, to $124 million.

The Ukrainian government has banned the export of medical masks, goggles and respirators, deputy minister Taras Kachka told Ukrainian reporters. Meanwhile, extra infrared screening equipment to measure the temperature of passengers has been deployed at Kyiv Boryspil International Airport.

Despite scenes of mass panic buying at many European, American and Australian supermarkets, Kyiv has so far remained calm. The Ministry of Economy has asked Ukrainians not to panic, Liga.net reports, and not to buy goods unnecessarily. Videos shared online in recent days show consumers in other countries buying toilet paper and bottled water in bulk, even before cases of coronavirus were reported in their regions.

Andriy Bohdan, former chief of staff to President Volodymyr Zelensky, has declared substantial assets in Ukraine and the EU, Interfax-Ukraine reports. The official declaration filed just before his recent dismissal from his official post includes significant amounts of cash in multiple bank accounts, ten large apartments in Kyiv and one in Lviv, another in Slovakia, a collection of Swiss watches, two Tesla cars and three Mercedes cars. Three large apartments and a 319-square-meter house are also registered to his four daughters.