Within global financial recession domestic financial institutions are unable to meet full business needs. Ukrainian banks got the opportunity to give loans only of the funds available.
As it is, banks are almost completely cut down all lending programs. If some small loan applications they can still comply, large loans they could not give. In addition to extending of prohibition for giving the deposits NBU obliged banks to revalue the mortgages and elaborate the plans on increase of banks capitalization. Small and medium banks unable to do so will be merged by larger competitors.
So, the only alternative for Ukrainian market becomes foreign borrowing. However, foreign funds and investment banks have strict requirements for potential projects. The Customer must provide detailed business plan. Moreover, if investment fund is not venture it won’t finance the company established less than 3 years ago. These requirements to Ukrainian business are unacceptable in most cases due to inability and unwillingness to perform them. As a rule Ukrainian banks and borrowers gave funds based on ordinary calculations (shaped in business plan) and the mortgages which for today practically were depreciated.
As a result, the crisis mostly hit the spheres of economy considered six months ago as the most profitable for investment using cheap and easy loans. Firstly it’s building, metallurgy and chemical industries. To attract financing in these fields will be difficult because their products demand decreased and their capitalization were overestimated due to huge speculative capital. The main target of these companies is refinancing of previously received credits. For today foreign investors do not see the prospects for investing in these sectors but some foreign companies are preparing for cheap buyup.
Today, as a rule Ukrainian projects are interesting for strategic investor who invest without hopes for quick profits but more interested in domestic assets or long-term penetration of Ukrainian market.
In future the hard time will come for big business. If smaller companies in a rather short time can adapt to the crisis conditions, for large one it would be harder to do so. Many of these companies will not bear competition and will go bankrupt or will be merged by more successful foreign and domestic competitors.
Step-by-step speculative capital will be take out from real estate and stock assets leading to further price break and reduce the companies’ capitalization. Released capital will begin to seek free niches that do not bring desired high profits but remain risk free.
These niches can be the companies having even in the crisis times stable marketing outlets. These could be energy and food industry companies. Eurasian Bank of Development, as example, stated that the priority sectors of investing in Ukraine is power industry, water-power complex, transport infrastructure, high-tech and innovative industries. These spheres are likely despite the crisis will show a small growth.
Agriculture occupies special place among the branches of Ukrainian economy. Last year it showed the growth of 17.5% which is one of the best industry rates. The demand for these production is inextensible and not influenced much by the crisis, so till the end of this year the growth in this field is expected.