Nearly 66% of Ukrainian businesses have already felt a moderate to significant impact from the recent surge in fuel prices, according to a special survey conducted by the European Business Association (EBA) in March.
The survey gathered insights from 107 CEOs across a few sectors such as logistics, agriculture, and manufacturing. It demonstrates a growing strain on the country’s private sector. Among respondents, 32% described the impact as significant, while 34% characterized it as moderate. Only 9% of the surveyed companies reported no impact from the price hikes that began in late February and intensified throughout March.
The primary driver of this pressure is the spike in transportation costs because of the ongoing Middle East war, with 76% of companies reporting increased logistics and transport expenses. Of the respondents, 45% noted a rise in the cost of goods and services, while 30% were forced to revise their budgets or operational plans.
Consumer prices may rise due to the fuel situation
The EBA report showed the surge in operational costs is being passed on to consumers. According to the results of EBA’s survey on the website, 20% of member companies have already raised their prices, while an additional 37% are currently considering such a move.
While some businesses managed to absorb the extra costs so far, their financial buffers are starting to erode. The survey found that 48% of companies can hold their current price levels for no more than two months, with 23% stating they have less than a month before a price hike becomes inevitable. Only 10% of businesses believe they can maintain current prices for longer than six months.
The scale of the cost increases varies across the board, EBA states:
- 21% reported a cost increase of up to 5%
- 24% saw a rise of 5-10%
- 27% experienced a jump of 10-20%
- 4% reported that costs skyrocketed by over 20%
Despite these challenges, the EBA noted that 53% of companies maintain operational resilience, reporting no major disruptions to their workflow yet.
The business community is calling for more proactive state support in response to the volatility. Key expectations include a flexible tax and excise policy, particularly temporary measures during periods of sharp price fluctuations. Businesses are also urging the government to ensure market transparency and provide targeted support for critical industries where fuel represents a dominant share of total expenditures.
Ukraine’s Ministry of Economy, Environment and Agriculture announced a fuel cashback, a program that has been operating in Ukraine since March 20. Under the program, depending on the type of fuel, 5-15% of the funds will be refunded.
However, since the day the program started, fuel prices have been growing even more.
Aligning with NBU’s warnings
The EBA’s findings underscore the warnings recently issued by the National Bank of Ukraine (NBU). As Kyiv Post previously reported, the NBU held its key policy rate at 15% on March 19. During a briefing, NBU Governor Andriy Pyshny warned that the balance of inflation risks has shifted upward due to the conflict in the Middle East and its impact on energy prices.
NBU Deputy Governor Volodymyr Lepushynsky noted that fuel prices jumped by 12.5% in March alone, with the potential to hit 16%. The NBU estimates that the direct contribution of rising fuel prices to annual inflation will be approximately 0.45 percentage points, though secondary effects, as fuel costs are factored into final products, could be twice as large.
The NBU preliminary estimate suggests that if oil prices remain between $80 and $100 per barrel, Ukraine’s overall import volumes will rise by $1.5 billion to $3 billion.