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Mykhailo Mishchenko, deputy director of the Razumkov Centre Sociological Service

Vasyl Yurchyshyn, director of economic and social programs of Razumkov Centre

Today, when the first official statistical data on the development of the domestic economy began to appear, which testify to the improvement of performance in the first quarter of 2023, it makes sense to consistently monitor the components of the expected and desired economic and political strengthening of the country. Traditionally, when economic information is absent or limited, public and expert opinion polls acquire particular importance. The results of such polls cannot impartially represent the socio-economic dynamics. Likewise, they cannot claim to "visualize" the political environment that has a direct impact on growth and development. However, they can serve as a "hint" of positive changes and "bottlenecks", which create, respectively, incentives and barriers for the country development and its immediate prospects.

About the correctness of the country trajectory. First of all, we should note that Razumkov Centre has been conducting regular public opinion and expert polls on various aspects of the socio-economic and socio-political situation in Ukraine for years, the results of which are fully and openly presented on the Centre's website.

One of the central issues in the Razumkov Centre surveys is the question of the correctness of the country's movement. The distribution of answers to this question largely reflects the generalized current achievements and controversies of the country development.

Historically, the distribution of answers to this question demonstrated a very critical attitude of Ukrainians to the development of the situation in the country — in most cases, negative (that the country is moving in a wrong direction) answers significantly overwhelm positive (that the country is moving in the right direction). At the same time, once the negative trends started, they were quite stable (persisted for a long period of time), while the positive ones usually lasted only a few months after the next election of the country's leadership (and the structure of the answers quickly returned to the "usual"). Even in a rather calm year of 2021 (the coronavirus crisis is over, inflationary pressure is weak, the hryvnia is stable), the number of those who believed that events were developing in a wrong direction almost tripled the number of those who suggested that the country was moving in the right direction (table "Are the events in Ukraine developing in the right or wrong direction?").

However, everything changed radically in February 2022. After the beginning of resistance to the invasion of Russian troops in Ukraine, the share of those who believed that events were developing in the right direction was constantly growing. According to the September 2022 poll, 51% of respondents believed that events in Ukraine were developing in the right direction, and only 28% — in a wrong direction. According to the polls of the spring of 2023, the share of those who answered that events were developing in the right direction has become even larger (56–61%), and of those who held the opinion that events were developing in the wrong direction fell to 21–22%. However, in summer, there was a slight decrease in this indicator (to 52%, that is, to the level observed in the fall of 2022, when the mood and expectations of Ukrainians and their assessment of development, although very positive, still reflected high risks of escalation (similarly, 27% of respondents believed that events were developing in a wrong direction, and 21% were undecided).

Are the events in Ukraine developing in the right or wrong direction? % of responses

We will turn to a more detailed interpretation of these results later. Here we only note that the steady improvement in assessments (from summer 2022 to spring 2023), as indicated in our previous analytical publications, was caused by the fact that:

• society rallied to fight against an external enemy. Political confrontation formally disappeared from the agenda;
• a clear goal of society development and social action appeared, with the victory as the key concept. The victory is associated with the strength and heroism of the Armed Forces of Ukraine;
• society has clear terms of reference "friend or foe", both domestically and internationally, which produces a clear vision of who can help and what needs to be done in the first place.

Intermediate conclusion 1. After the beginning of the Russian invasion into Ukraine, according to the Razumkov Centre public opinion polls, the share of those who believed that events were developing in the right direction was steadily growing. Despite the current slight decrease in this indicator, the majority of respondents are convinced of the correctness of the country's trajectory, maintaining optimism and confidence in the correctness of the chosen path.

Assessment of wellbeing of business entities and households. Along with the Razumkov Centre's surveys, polls to assess the country's economic situation were conducted by other institutes, which are also publicly available (at the end of July — beginning of August). Of course, such surveys (including Razumkov Centre’s) are diverse, focus on different objects, use different methods. Their aggregation is not always rational, and perhaps even impractical. Meanwhile, they provide an opportunity to assess the current processes in the country from different standpoints. We shall take a look at three surveys that reflect the views of businesses and households.

In July, the National Bank of Ukraine published the results of its survey of business activity and expectations of domestic enterprises in the second quarter of 2023. The general conclusion was quite positive, namely:

• despite the hostilities, businesses expected an increase in business activity in the next 12 months for the first time since the beginning of the full-scale war;
• respondents expected an increase in production of goods and services, and were also positive about the development of their own enterprises;
• inflation and exchange rate expectations improved;
• business activity improved significantly, which was reflected in the growth of the index of business expectations;
• negative estimates regarding investment expenditures on construction works and the number of employees, etc. significantly eased.

Along with this, the results of the Institute of Economic Research and Policy Consulting (IER) survey of the current state of Ukrainian enterprises in June 2023 (released at the beginning of August) in a way confirm said trends. In particular:

• in the short and medium run, business remains optimistic, although it refrains from making clear forecasts for the distant future, which indicates the growth of long-term uncertainty;
• the current situation is characterized as quite positive, the share of enterprises operating close to full capacity is the highest since the beginning of the war;
• assessments of the government's economic policy to support business have slightly deteriorated, but remain satisfactory.

That is, the results provided by businesses (during both of these studies) show that the economic standing of enterprises in the 2^nd quarter became a bit better than it was in the 1^st quarter of 2023. Such a positive shift can indicate the formation of a new basis for the socio-economic recovery of the country in the near future.

However, there are certain caveats regarding the confirmation of this thesis, as the results of other studies indicate worsening of the standing of domestic households. In particular, the Info Sapiens study "Consumer sentiments in Ukraine" in June 2023 recorded a drop in all components of the consumer sentiment indicator of Ukrainians — from personal financial situation to the state of the country's economy, from assessments of the current situation to expectations for the future.

This decrease occurred after the growth of the corresponding indicators in May. In June, the Consumer Sentiment Index (CSI) fell by 9.5 points and amounted to 82.5 points (in May, the CSI was 92 points, which was 7.4 points higher than the previous indicator), that is, it fell to the level of April. A similar decrease also applies to the other components of said survey.

That is, the country citizens are concerned about their wellbeing, and assessed the situation in the consumer markets both for the current period and the near future as risky. To some extent, this contradicts the results of the above-mentioned NBU survey (also for the 2^nd quarter of 2023), which may be interpreted as the time lag, when time is needed for positive changes in the production sector to "reach" the level of households.

Thus, the results of the Razumkov Centre poll held in May–July in a way echo the results of the National Statistical Institute and have a slightly different focus than the results of the NBU and IER business surveys.

So, there are reasons to state that in the early summer of 2023, domestic enterprises will consistently overcome the troubles caused by the war and gradually improve their production capacity. Along with this, the population's confidence in the correctness of the country's movement has decreased (slightly though), which may indicate the beginning of socio-political imbalances (more on that later).

Intermediate conclusion 2. Based on the results of surveys conducted by various think tanks, there are reasons to assert that the economic standing of enterprises in the 2^nd quarter was better than in the 1^st quarter of 2023. Citizens' assessment of the situation in consumer markets now and in the near future is accompanied with risky expectations. However, despite somewhat contradictory manifestations in the results, the most important conclusion of the survey is that despite all the trials, citizens and businesses quite rationally assess the current situation and developments, and continue to be optimistic about changes.

Gender distribution regarding the correctness of movement. Returning to the results of the Razumkov Centre’s poll, we point out that the gender aspect, that is, the distribution of answers to certain questions given by men and women, is important for citizens' assessment of the country's development trends. In general, men have a more rational mindset, while women are more sensitive and emotional.

The distribution of answers about the correctness of the country's movement shows only certain (due to the short period) features in the distribution of answers (table "Gender distribution of assessment of the correctness of movement"). At the same time, even a short-term distribution of answers indicates the psychological disposition of individual groups of citizens to their perception of events.

In particular, it can be noticed that:

• in a calm period (May 2021), women assessed the situation in the country more "calmly" — the number of both positive and negative answers given by women is less than that given by men ("in the right direction": men — 22.7%, women — 20.5%; "in a wrong direction": men — 61.2%, women — 58.3%). At the same time, women more tend to hesitate ("hard to say": men — 16%, women — 21%);
• a similar situation was observed in the period of heightened expectations (in particular, changes at the front) (February-March 2023). The fact that events are developing in the right direction is supported by 62% of men and 59% of women, in the wrong direction — 23% and 19%, respectively. At the same time, women are again more prone to hesitation ("hard to say": men — 15%, women — 22%);
• in other periods, categorical responses differ: in some cases, men (compared to women) are more inclined to consider the development of events as a positive process and are less categorical in providing negative assessments (November 2022), in others, the situation is just the opposite (July 2023). Meanwhile, in almost all cases, women are less inclined to unambiguously assess the directions of change.

Gender distribution of assessment of the correctness of development, % of responses

Intermediate conclusion 3. The results of surveys in most cases indicate that men tend to give somewhat more categorical answers regarding the correctness of the movement (assessing the trajectory as "correct" or "incorrect"). At the same time, in almost all cases, women more tend to hesitate and are less inclined to unambiguously assess the directions of change.

About trust in the President and the correctness of the movement. Here is another important conclusion regarding the "correctness of movement". Of course, the direction of the country's movement is largely determined by the country's political leadership. It should be admitted that the declarations and actions of the authorities are not always clear to the public, and even less often they are supported by civil society.

Therefore, many questions asked by Razumkov Centre are intended to assess the trust of citizens in state institutions. It should be noted that since the beginning of the invasion, society has maintained a high level of trust in the institutions of society. According to the results of the latest survey, the most trusted state and public institutions are the Armed Forces of Ukraine (they are trusted by 93% of respondents), volunteer units (87%), volunteer organizations (83%), the State Service for Emergency Situations (81%), the National Guard of Ukraine (81%), the President of Ukraine (80%), the State Border Service (78%), the Ministry of Defence of Ukraine (75%), the Security Service of Ukraine (67%) and so on.

While the trust in certain institutions (primarily, the Armed Forces of Ukraine, volunteer organizations) has always been high, in recent years, strong positive changes have taken place in relation to others. Thus, the change in the balance of answers regarding the trust in the country President turned out to be a record high — from minus 21 points (in the summer of 2021) to plus 70 points (in the summer of 2023) (table "Trust in the most important institutions").

Along with this, trust in a number of key institutions remains traditionally low. The majority of respondents distrust the courts (the judicial system in general — 70% do not trust it), political parties (68%), the state apparatus (officials) (67%), the Verkhovna Rada of Ukraine (56%), the Government (52%).

Trust in the key institutes

* aggregate of answers "don't trust at all" and "rather, don't trust"

** aggregate of answers "fully trust" and "rather, trust"

*** difference between the shares of those who trust and those who do not trust it

Therefore, by their trust in the President, people confirm their readiness to accept the direction of movement and the political course of the country, but only in conditions when they (citizens) have exemplary institutions (the level of trust in which exceeds 80%) that courageously and successfully defend the Homerland (diagram "Balances of answers about the correctness of the movement and trust in the President"). Noteworthy, the trust in the President in wartime is largely based on the trust in the Armed Forces and their ability to successfully defend the country. The growth of trust in the Head of State is possible only thanks to successful actions in other spheres of state building (to be reflected in the positive assessments of the respondents).

Therefore, the psychological acceptability of the correctness of the country's movement and political trust in the main institutes of governance are manifested in the relationship quite clearly. However, such a relationship should be backed with other socio-economic components.

Balances of answers about the correctness of the movement and trust in the President, % of answers

balance of assessments of the direction

balance of assessments of trust

Intermediate conclusion 4. An important conclusion is that the relationship between the results of the answers about the correctness of the movement and trust in the President shows the acceptability of the country's political course for society. Along with this, there are reasons to claim that the trust in the President is based on the high trust in the Armed Forces, thanks to which the country is being strengthened and united, including the strengthening of the state and its institutions.

About the ability to cope with difficulties. Another important result of the Razumkov Centre survey is that the unification of society and clarity of social goals contributed to the growth of social optimism and faith in the future, and thus to a significant improvement in expectations regarding Ukraine's ability to overcome the existing problems and difficulties.

According to the Razumkov Centre data, similarly to the confidence in the correctness of the movement, while before the large-scale war in Ukraine, critical assessments of the country's ability to overcome problems and difficulties prevailed, after the war started, citizens’ assessments surprisingly became much more optimistic. Probably, this is connected with the citizens' belief that the country that is defeating the bloody enemy will find the strength and mutual understanding of its citizens in creating a new state, free from corruption and arrogance, and with that — find rational solutions to the problems of democracy building.

Indeed, while in "calm" May of 2021 19% of respondents believed that Ukraine is capable of overcoming the existing problems and difficulties within the next few years, in September 2022 — 41%, and in the first quarter of 2023 — more than 49%. The share of those who believe that Ukraine is capable of doing this in a more distant future decreased from 47% to 43% in September 2022 and to 36% at the end of the first quarter of 2023, and the share of those who believe that it cannot overcome problems and difficulties at all fell from 23% to 3–5% in the winter and spring of 2023. A similar distribution is observed in the summer period (table "About Ukraine overcoming problems and difficulties").

About Ukraine overcoming problems and difficulties, % of answers

Regarding the gender distribution of answers about the ability to overcome difficulties, only a slight difference is observed (table "Gender distribution of overcoming difficulties"). Despite this insignificance, we note that men are less confident in the ability to overcome difficulties in general (the number of answers "it cannot" among men is slightly higher than among women), and women are generally more hesitant (the number of answers "hard to say" for women exceeds the corresponding number for men).

Regarding expectations of overcoming economic difficulties, while citizens are confident in the country's ability to overcome difficulties within a few years, a certain increase in anxiety is felt in the coming months (table "How will the economic situation in Ukraine change in the next three months"). In summer, expectations of changes in the economic situation in the country deteriorated — there was an increase in the negative difference in the numbers of those who believe in changes for the better and those who expect deterioration (up to -27 percentage points, i.e. to the level observed in the fall of 2022, when the sentiments and expectations of Ukrainians and their assessments of developments, although very positive, reflected high risks of escalation. 14% of respondents were hesitant).

Gender distribution of overcoming difficulties, % of answers

How will the economic situation in Ukraine change in the next three months, % of answers

Interim conclusion 5. Clear goals of society and confidence in the correctness of the country's movement contributed to the growth of social optimism and faith in the future, and thus to a significant improvement in expectations regarding Ukraine's ability to overcome existing problems and difficulties (see Interim conclusion 1). The peculiarity of expectations regarding overcoming economic difficulties is that while citizens remain confident in the country's ability to overcome difficulties in the next several years, there is a certain increase in anxiety and worsening of expectations regarding changes in the economic situation in the country in the coming months.

In search of an economic component. These questions, as the survey components, make the basis for the structural components of the Index of economic capacity and wellbeing of households introduced by Razumkov Centre. Of course, such an Index also rests on the State Statistics Service economic data.

As we said, before the war, Razumkov Centre conducted regular research on various aspects of the socio-economic and socio-political situation in Ukraine. The experience shows that public opinion polls, as a personalised view of the country development, are an important factor supplementing objective statistical economic indicators (box "Correlation of objective and subjective indicators of the country development").

Unfortunately, the war destroyed, among other things, all data (with statistical information missing), and the continuity of research within the framework of the Economic Capability Index was interrupted by Russian aggression in February 2022. Moreover, "peacetime" approaches to the study of subjective and objective interrelationships cannot be acceptable under force majeure, and the methodology of the peace period cannot be applied to the state of war. Therefore, other model approaches will be required in the post-war period.

Intermediate conclusion 6. A significant role in the psychological perception of the "correctness" of the country development belongs to the current economic situation (family wellbeing) and economic stability of households, as well as the so-called confidence in "tomorrow" — if a respondent sees the development in the right direction, in most cases it means that he has positive current and distant expectations of his own wellbeing. However, economic improvement cannot "compensate" for losses, omissions, deficiencies in other public, social and humanitarian spheres. Therefore, the growing gap between the dynamics of (improving) wellbeing and (deteriorating) socio-political atmosphere is evidence of growing public dissatisfaction with the actions of the authorities.

Current state of the economic component of the wellbeing of Ukrainians. The decisive components of the socio-economic environment — economic growth, wellbeing, decent, well-paid work, balanced development of regions — are interconnected, which requires systematic and comprehensive measures and actions to maintain the appropriate level of wages and employment, to reduce internal migration, outflow of labour force, and to minimize flight of human capital.

The war strongly affected the wellbeing of households, including due to the death of family members, destruction of housing, production losses, with resultant employment, etc. Along with this, as indicated by the above-mentioned sociological surveys, production is gradually beginning to recover, as a result of which the demand for labour is increasing, and with it — the tendency to raise wages.

According to the calculations of the Pension Fund (for calculating pension payments in 2023), the average nominal salary has been gradually increasing since the year beginning (diagram "Average nominal salary", the latest data — March 2023).

Along with this, in August, the average salary may exceed UAH 17.5 thousand — the median salary according to the data of more than 176 thousand vacancies posted on the Work.ua website for the last 3 months, which means an increase in real wages (with account of inflation) by 57% (compared to the same period of the previous year). Of course, this becomes possible thanks to the readiness of domestic businesses to resume operations on a competitive basis (as enterprises of a candidate country for the EU membership).

Average nominal salary, UAH/month

Another important indicator of the financial standing of the country's population is the availability of foreign currency. Since the population traditionally considers cash dollars as a reliable resource for long-term savings (which creates a significant demand for them), in the conditions of current risks associated with a possible further military escalation, the purchase of cash currency becomes a characteristic behaviour of households. This demand of the population is largely satisfied through the NBU policy.

Purchase/sale of cash foreign currency by the population, UAH billion

Even in such a sensitive segment as operations of the sale of cash foreign currency to the public, the NBU expanded the opportunities for the public to purchase foreign currency as early as in 2022 (as the situation at the front improved). And in recent months, the population even buys more currency than sells by about 20% (diagram "Purchase/sale of cash foreign currency by the population").

Today, there is reason to believe that the larger part of Ukraine’s territory will be liberated, and more households will need funds for reconstruction. One of the indicators that serves as an economic parameter is the answers to the question of for how long the households live can with the available savings. The July survey by Razumkov Centre points to significant time constraints. More than half of the respondents will be able to live no more than 1 month (table "The time for which households have enough savings"). Of course, this is a low indicator that shows the level of survival of households, but by no means their involvement in recovery or competition.

The time for which households have enough savings, % of answers

Interim conclusion 7. As indicated above, the economic standing of domestic enterprises is consistently improving (Interim conclusion 2), production is gradually beginning to recover, as a result of which the demand for labour increases and the economic basis for wage increases is created. Citizens' assessment of the situation in the consumer markets now and in the near future is accompanied with risky expectations regarding the real wellbeing of households. The larger territory of Ukraine will be liberated from the invaders, the more households will need funds for reconstruction, which requires consistent governmental actions aimed at citizens earning (not receiving as aid) monetary resources as a reward for productive work.

Conclusions for recovery policy and its public support. Analysis of the results of individual public opinion polls, in conditions of the absence or extremely limited economic information, acquires special importance, as it can serve as a "hint" of positive changes and bottlenecks, which create, respectively, incentives and barriers for the country development and its future. One of the key factors in such an analysis is the answer to the question of the correctness of the country's movement. With all the partiality of citizens' feelings about "correctness", the dynamics of assessments can be an important synergistic indicator of the direction of the country's development.

After the start of the large-scale war, citizens' assessments of the correctness of the country's movement became noticeably more optimistic than they were in the pre-war period, and today confirm optimism and confidence in the correctness of the chosen path. This reflects the citizens' belief that the country that defeats a bloody enemy will find the capacity and mutual understanding of its citizens to create a new state free from corruption and arrogance, and find rational solutions to the problems of democracy building (Interim Conclusion 1). At the same time, men are more categorical compared to women, assessing the correctness of the movement (Interim conclusion 3).

A significant role in the psychological perception of the "correctness" of the developments in the country belongs to the current economic situation (family wellbeing) and economic stability of households, as well as the so-called confidence in "tomorrow" — if a respondent sees the development of events in the right direction, in most cases it means that he has positive current and distant expectations of his own wellbeing. Keeping a positive attitude towards changes, households need effective help and assistance to improve their socio-economic standing (Interim conclusions 6 and 7).

At the same time, research results indicate that the economic standing of enterprises is steadily (albeit slowly) improving, and business, rationally evaluating the current situation and its development, remains optimistic about changes (Interim conclusion 2). Therefore, strengthening of business makes the basis of effective support, and sustainable balanced growth and development should rest on the creation of a strong competitive economic environment that will provide citizens with highly productive, well-paid jobs. The key such directions of action include (but are not limited to):

• maintaining a stimulating fiscal policy (in particular, tax benefits) for accelerated recovery and implementation of new projects in the fields of security and defence agreed with NATO;
• introduction of tools for insurance of business activity against military and political risks in cooperation with partner countries;
• creation of special rehabilitation and employment programs for war veterans, their involvement not only in production processes but also in state and regional administration, building a system of social protection for persons physically and psychologically affected by the war, etc. with the help of partner countries.

One important conclusion is that the current high level of trust in the President is based on the high trust in the Armed Forces, thanks to which the country is being strengthened and united (Interim conclusion 4). Such trust should be backed with positive changes in other spheres of socio-economic and socio-political life of the country, which will be witnessed by answers about the correctness of its movement, and by assessment of the authorities’ activity.

We emphasize that clearly set society goals and confidence in the correctness of the country's movement will contribute to social optimism and confidence in the future, and therefore, to a significant improvement in expectations regarding Ukraine's ability to overcome the existing problems and difficulties (Interim conclusion 5). And the positive results in the respondents' answers regarding both the correctness of movement and the trust in the President have a synergistic effect and serve to strengthen and unite society for the sake of development and improvement of wellbeing.

https://razumkov.org.ua/statti/superechnosti-ochikuvannia-zmin